Becoming wealthy is one thing. What’s more important is understanding what you can do in order to stay that way. After all, there are many people who gained a lot of money but due to how they managed it, they were left with almost nothing after a while. Proper money management and developing healthy spending habits is the key to securing your financial future.
Most millionaires and billionaires use the services of financial advisors so that they can take care of their wealth in the best way possible. However, this is by no means a requirement, and you can manage your money the way wealthy people do even without the “-onaire” status.
So, what are some of the financial habits of the rich that allow them to stay that way? This article will explore this topic.
#1 Setting a Budget
You might be surprised at that, but many millionaires and billionaires have a set budget of how much they can spend per month, and they stick to it. Most importantly, many of them live below their means so that instead of spending money on things just because they are more luxurious or more expensive, they invest it and grow their wealth.
It’s not uncommon for wealthy people to choose used cars instead of the newest models of sports cars – after all, both of them offer the same services but come at a significantly lower cost. Not to mention that contrary to other investments, the value of a car drops the more you use it. The same goes for their living arrangement – many of them live in a regular flat rather than a big mansion.
They prefer to save money they would spend on those things and reinvest it again and again – it’s a never-ending circle of gaining money and investing it.
#2 Prioritize Paying Off Debt
This might sound like a no-brainer, but it still should be talked about. Most wealthy people either don’t go into debt at all or, if they have a credit card, they never allow themselves to carry a balance. They understand that although strategic debt, like business loans or mortgages, can serve as a tool for wealth expansion, uncontrolled debt can quickly erode wealth, which is why they avoid it as much as they can.
In a situation where they have to choose to pay upfront for something versus paying for it with a credit card or taking out a loan for it, they most often than not choose to pay upfront so that they can avoid paying interest, and, as a result, paying two to three times more for what they purchased.
#3 Letting the Money Work for Them
Wealthy individuals don’t let their money be idle. Instead, they make sure to put their money into several different investments – they don’t focus on one thing. Instead, they diversify their income streams, with many of them investing in stocks, real estate (including rental properties), commodities, and more.
They also make sure to have at least some investments that generate passive income. The aforementioned real estate is a great example of that. Many rich people put their time into finding properties in several attractive parts of the world so that they can convert them into rental properties, either short-term or long-term.
#4 Constantly Educating Themselves
The financial market is always changing, which is why in order to stay on top of their game they make sure to continue educating themselves on any significant changes that happen that might affect their investments and/or their wealth. They dedicate time and resources to expand their knowledge about various aspects of finance, including investment strategies, market trends, economic indicators, and tax regulations.
Many millionaires are still slightly old-fashioned if you will, absorbing most of their information from newspapers – they appreciate the depth and credibility that these publications offer. That’s also part of the reason why one of the best ways of reaching wealthy individuals if they are your target audience, is through means like the press.
Of course, they also have at least one certified financial planner on speed dial, with many of them having a whole team of them available when they need financial advice, for example when making investment decisions.
#5 Taking Educated Risks
Although for most people the term ‘risk’ has a rather negative association, many don’t see it that way – quite the opposite. For them, a more accurate way to describe it would be an opportunity. They often see what others don’t, and understand that usually, sizable returns go hand in hand with substantial risk.
That’s why one of the things that wealthy people learn in order to make better decisions in regard to their financial situation is understanding their risk tolerance, and not being afraid to take educated risks. In many cases, it’s actually this ability to properly assess whether a decision they are considering making will be a good one in the long run is what allowed them to accumulate as much wealth as they have.
#6 Avoiding Lifestyle Creep
Lifestyle creep, also sometimes called lifestyle inflation, is a phenomenon that occurs when you start spending more money on non-essential products (often luxurious ones) as your income and standard of living increase.
This is related to what we already mentioned, about how many wealthy people avoid buying things that they don’t necessarily need, and if they do need them, they go for products that serve the same purpose without costing an arm and a leg.
Instead of spending their money on luxurious goods, many millionaires prioritize getting good health insurance, as well as having an emergency fund with significant savings and, if they have kids, setting aside enough money to get them through college. Only once they’ve taken care of this stuff, they might consider splurging on something.
#7 Not Focusing on Their Mistakes
Mistakes happen, and that’s a given – there’s no way to get through life without making a single mistake, and the same goes for building wealth and maintaining it. Most rich people, if not all of them, have made bad financial decisions at some point, which is why that’s not something that you should focus on.
Instead of dwelling on what happened, and losing your energy to what could’ve been, dedicate this time to educating yourself, so that you won’t make the same mistake in the future. You can’t change the past, so why let it affect your present and future?
#8 Regularly Reviewing Their Financial Situation
Wealthy people understand that in order to make the best decision regarding your assets, you need to know how the situation looks at the present moment.
They dedicate their time and effort to gathering the most recent financial details, including any income, living expenses, debts, and more. They also check up on their investment account (or accounts) regularly, so that they can assess whether it is working in their favor or it’s time to move on to something else.
There’s a good reason behind it. After all, you can’t make a fully educated choice when you don’t have up-to-date information to work with. You wouldn’t decide what to wear tomorrow based on forecasts from a month ago, would you? And it’s the same for financial matters, which is why it’s important to conduct regular reviews and make adjustments to your financial plans based on what you find out.
#9 Thinking Through Their Purchases
Although it might be surprising, considering people with a high net worth have more purchasing power than an average person, most wealthy individuals are not as keen on spending money as you would imagine (which we already talked about). However, if they do decide to spend it on material goods, they put a lot of thought into it.
This is the main reason why targeting the rich requires more dedication than marketing to “normal” people – the process of building enough trust for them to decide to purchase from you is usually a lot longer.
Another thing is that in most cases, they’re looking to purchase items of high quality and long-lasting value. They’re not the ones to follow trends – instead, they prefer things they buy to offer them long-term utility and stand the test of time.
They also assess how the value of an item will look a few years down the drain – they prefer to make purchases that will more than likely notice an increase in value (such as artwork, vintage cars, limited edition designer items, etc.), as they see it as an investment.
The Bottom Line
As you can see, the financial and spending habits of the rich quite differ from what the general public does in terms of their finances. Still, if you want to, there’s nothing stopping you from managing your assets in the same way you would as a millionaire or a billionaire. Even though your gains might not be as significant, they’re still a gain at the end of the day.
Money habits of wealthy individuals are a huge reason why, in order to successfully target them with your marketing campaign, you need a different approach – what you know from carrying out a marketing strategy for the general public will more than likely not be enough.
At Luxe Communications, we understand the importance of personalizing your marketing efforts so that your desired target audience of HNWIs (high-net-worth individuals) is reached. Get in touch with us today, and take advantage of our multi-platform marketing strategies that deliver world-class ROI.