There’s nothing wrong with copying the things rich people do. As George Bernard Shaw said, “Imitation is not just the sincerest form of flattery – it’s the sincerest form of learning.”
We live in such a competitive world that sometimes we can’t help getting caught up in the “keep up with the Joneses” type lifestyle.
Isn’t it uncanny though, that many people who live in the fanciest homes in the most upmarket suburbs and drive the most luxurious cars have very little net worth whilst many people who have a great deal of wealth live in modest neighborhoods?
Some of us just can’t see the wood from the trees.
If you spend everything you earn you’re not going to get any wealthier. All you’re doing is living the high life.
Wealth and income are not the same thing.
Wealth is what you amass, not what you squander!
The good news is: You don’t have to earn a mega income to become wealthy.
Some of the wealthiest people come from paid employment and earn modest salaries.
With discipline and the right mindset, use this checklist to copy the things rich people do and you’ll be well on your way to becoming truly well off.
1. Rich People Live Well Below Their Means
How do you identify a millionaire?
Truth is, it’s pretty difficult to distinguish your average millionaire from a motor mechanic or government clerk. And they look no different to you and I.
But unlike the high income spendthrifts who max out multiple credit cards and spend more than they earn, high net worth people spend way less than they earn.
2. Rich People Invest Vigorously
There’s a huge divide between saving and investing.
Fixed interest investments such as cash and cash equivalents (e.g. money market accounts, savings accounts, treasury bills and negotiable certificates of deposit) are not the flavor of the month for wealthy people.
Whilst they’re good for short term saving and most certainly have their place in investment portfolios, they don’t make the best investments.
Besides interest earned being taxable, in the long term interest rates provide a pretty weak rate of return.
3. They Invest Mainly In Stocks
Did you know that as of 2016, the wealthiest 10% of American households owned approximately 84% of all stocks? (National Bureau of Economic Research).
Besides being very liquid investments, stocks are also afforded a more favorable tax treatment than income earned, with long term capital gains and dividend income attracting tax rates of 15% and 20% respectively.
Favorable tax treatment of stocks applies in most developed countries.
4. They Don't Trade Trade Stocks Regularly
In most developed countries, short term stock trading can lead to profits being taxed as revenue and not as capital.
But more importantly, wealthy people know that time in the market, not timing the market, is the key to achieving the best possible long term capital growth.
5. Wealthy People Don't Let Emotions Control Investment Decisions
Rich people ride through short term volatility.
Their decisions are based on sound principles of passive investment.
They’re acutely aware that markets rise and fall, but over the long term, markets always grow.
6. They Manage Their Own Investments
Rich people take the time to learn the skills necessary to manage their own investments.
In the long run, they know that they are the only people who have their own best interests at heart.
They also land up saving an enormous amount of brokerage fees and commissions which stock brokers and investment advisers generate through short term trading.
7. They Start Investing Early
One of the most important things rich people do is they start investing early in life.
They know that the power of compound interest is dependent on time. The longer one participates in the market, the more exponential the investment returns.
8. They Learn From Mentors
Rich people recognize that they can learn an amazing amount from the good and bad experiences that other wealthy people have endured.
They do things for themselves but not by themselves.
9. Rich People Look For Ways To Make More Money
Like many others, wealthy people look for ways to earn more money.
But they do so not to support a lavish lifestyle of hyper-consumption but to invest and build more wealth for their financial well being.
10. Rich People Have More Than One Source Of Income
High net worth individuals recognize the importance of multiple sources of income.
They may earn income by way of annuities, dividends, real estate rental income and by way of passive income streams generated from online businesses.
11. Rich People Are Mostly Self Employed
12. Rich People Are Debt Averse
Whilst most rich people do have credit cards, they use them for convenience and not to extend lines of credit.
They usually pay outstanding balances at month end or statement date.
13. Rich People Avoid Paying Interest
By making outright purchases, wealthy people automatically avoid unnecessary interest payments normally associated with outstanding loan balances.
14. They Are Not Penny Pinchers
Being penny wise and pound foolish is not a trait of wealthy people.
They don’t skimp on the small things that give them pleasure and spend unwisely on larger purchases.
They’re consistent when it comes to spending decisions.
15. They Live In Functional Homes
Most wealthy people live in functional homes in normal middle class neighborhoods, yet they have multiple times the net worth of high income earners who own expensive homes.
They don’t believe in keeping up with the Joneses (who spend all of their income) and therefore have no desire to live in expensive suburbs simply to perpetuate lavish lifestyles.
16. They Don't Purchase Homes In Expensive Suburbs
High net worth individuals don’t believe in paying a premium price in an expensive neighborhood for the same accommodation they can find in a middle class suburb.
They know that they can create similar internal finishes in a more modest neighborhood whilst saving a ton unnecessary expense.
17. They Purchase Investment Properties Wisely
When it comes to investment property, wealthy people avoid emotional decisions. They never purchase property at premium prices.
They recognize that rental yields is a numbers only game and when they purchase real estate they do so at very attractive prices.
18. Rich People Don't Buy New Cars
Did you know that you don’t have to drive a new car off the showroom floor for it lose an immediate 20% of it’s value?
It depreciates the moment it’s registered in your name!
What’s more is a new car loses 60% to 70% of it’s retail price in the first few years.
Rich people buy reliable, low mileage, used cars that have already depreciated and offer good value for money.
19. They Don't Buy Luxury Cars
According to a study done by Experian Automotive at the request of Forbes, 61% of people who earn over $250,000 a year drive Hondas, Toyotas and Fords.
Whilst luxury cars took the first 4 spots out of the 10 most popular cars among this group of people, the next 6 spots were assigned to:
- Hondas (3 spots).
- Toyotas (1 spot).
- Acuras (1 spot).
- Volkswagens (1 spot).
20. They Buy Cars For Cash
Rich people don’t finance vehicles.
They prefer to purchase low mileage cars (typically around 30,000 km) that are a few years old.
As an example, a $40,000 car that they can buy for $16,000 offers great value.
21. They Don't Buy Designer Name Clothing And Watches
The same applies here as it does for homes and luxury cars. See the pattern?
Most millionaires don’t pay premium prices for designer brand clothing and accessories when they can buy comparable clothing at far lower prices.
22. They Don't Pay High Membership Fees To Exclusive Clubs
Play golf? No problem.
Rich people play golf too. But the majority don’t generally belong to exclusive “upper echelon” clubs that charge three times the price of a regular golf club.
23. Rich People Teach Their Children To Be Financially Independent
Rich people don’t believe in gifting money to their adult children.
Not only does it create adult child dependency but it’s also a huge drain on one’s finances.
As Maimonides said, “Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime.”
24. They Believe In Lifelong Learning
Rich people invest heavily in themselves and their belief systems.
According a study of over 1200 of the world’s wealthiest people done by Steve Siebold, a self made millionaire and author of “How Rich People Think”, the wealthy are more concerned about acquiring specific knowledge.
They don’t believe that higher education is critical.
What Do We Learn From All Of This?
In his book “Think and Grow Rich”, Napoleon Hill believes that becoming wealthy is dependent on how you think.
Wallace D. Wattles, in his book entitled “The Science Of Getting Rich”, believes that getting rich is based on doing things in a certain way.
By combining the two though processes, I’m pretty convinced that doing things in a certain way (actions) can also lead to thinking in a certain way (thoughts).
So if you do the things rich people do, you should start to think like a rich person.
And that will lead to a very positive snowball effect.
What do you think? Leave me a comment.