Wealth Secrets the Rich Don’t Want You to Know
One thing that most middle-class people don’t know is that many wealthy people started out just like them. Most of them worked hard at a job they probably didn’t like, to make ends meet. It was through this hard work along with smart decisions that most made their wealth. For many in the middle-class, the thought that they too could be wealthy has never occurred to them. We often get so caught up in life that our perception becomes our reality. Today, I am going to show you wealth secrets that the rich don’t want you to know. Now, in all honesty, they probably don’t care that you know. Some of them are so simple that you might already know them. Knowing their importance is the next step.
Keep a journal
Now, why would something like this be important? The answer is simple: accountability. When I go over my fact-finding questions with a prospective client I always delve into what their short, medium and long-term goals are. Often, they have never thought about them. For many, it never occurs to them that they should have goals. These can include family, financial, career or personal goals. Having them is the first step, writing them done is the second. Keeping track of them is important because as time goes on you will push them to the side, or even forget about them. You absolutely can’t do that. You don’t want to be 80 years old thinking about them and not be able to do anything about it.
Your money should be working for you, not the other way around
Conventional wisdom says that you must get a job and work hard to build wealth. There’s truth in that, but if your only means of income involves trading time for money, then your income potential is limited by the number of hours in a work week. The wealthy know that making money doesn’t always require hard work, and they take every opportunity to generate new sources of passive income.
Passive income can come from several sources, including rental properties, royalties on creative works, or investing. You don’t need a lot of money to start investing, but it’s important to keep your portfolio diversified so you don’t expose yourself to too much risk. Don’t try to time the market by selling when you think it’s at a peak or buying when you think it’s at rock-bottom. That approach is almost guaranteed to lose you money. You’re better off buying quality investments and holding them for the long term.
It’s important to understand the costs associated with all of your passive income streams. For example, if you run several rental properties, there may be maintenance costs that eat into your profit. Similarly, when you invest, there may be costs associated with your investment products, like fees for each trade or expense ratios on mutual funds. Try to keep these low to help maximize your profits. Index funds are a great choice for investors who want a cheap way to diversify their portfolio and earn substantial returns.
Value trumps cost
The middle-class often worry about the cost of an item or service, and rightfully so. The problem lies when you worry about cost so much that you forget about the value aspect of any transaction. If I told you that you had to give me $500 and in a few weeks, I will give you $2000, would you do it? Hell yes, you would do it! What if I was an accountant? You see, wealthy people understand that hiring professionals saves you money. Seeking the advice of those in the know may cost money, but ultimately is a bargain at the end. The poor always focus on sticker shock for items that cost a good amount of money, often neglecting that there is probably a reason they cost that much money. Meanwhile, they are bled dry by small transactions. Always analyze the value, not cost.
Keeping up with the Joneses will cost you every time
Most people think the rich live lavish lifestyles, and while some of them do, many of the wealthy got where they are by living frugally and investing a big portion of their earnings. Oracle of Omaha Warren Buffett still lives in the home he bought in 1958 for $31,500, and Amazon CEO Jeff Bezos — currently the richest man in the world — still drove his old Honda Accord for years after becoming a billionaire. It can be difficult to avoid the temptation to spend beyond your means, but it’s crucial that you resist. Otherwise, you could find yourself in debt, which will hamper your ability to save for the future even more.
Set a budget for yourself, if you haven’t already, and strive to set aside at least 20% of your income for savings whenever possible. When you get a raise, raise your monthly savings amount before doing anything else. And if you’re already in debt, take steps to pay it down. A balance transfer card is a nice option for tackling credit card debt. You could also try a personal loan.
Time trumps money
Nothing, I mean nothing, is more valuable than time. The reason that is so is that time cannot be replaced, almost everything else can be. When I look back at my 20’s I think of all the bad money decisions I made, and it definitely bothers me. What bothers me the most, however, is the amount of time I wasted. I cannot make up those years. I can, and will, make up the money, but I can’t make up the time. One thing people need to understand is that every day you waste is one less day you are wealthy. The rich understand this, which is why they have extreme urgency when it comes to goal-obtainment. I hear it all the time. I will pay that off when I get a better job. Or I will start saving when the summer is over. I am sure you are reading this now and thinking about things you are putting off. When you put things off you have discounted your time, and your time is the most valuable thing you own.
Time is your most valuable currency
When it comes to investing, your most valuable asset is time. The money you contribute earlier in your life is more valuable than the money you contribute later, thanks to compound interest. At first, you’ll just earn interest on your initial contributions, but over time, you’ll also begin to earn interest on your interest, helping your balance grow much faster. Consider this: If you invested $10,000 when you were 25, it would be worth over $217,000 by the time you turned 65, assuming an 8% annual rate of return. But if you waited 10 years to invest that $10,000, it would only be worth $101,000 in the end.
Even if you can’t afford to invest much money today, your small contributions could still grow into a large sum over time, so you’re better off starting now rather than waiting until later. Automate your investments whenever possible so that you don’t have to worry about remembering to set aside the money on your own every month.
Trading time for money
One thing the wealthy the wealthy understand is that you will never become rich if your only method of making money is trading your time for money. What that means is that you must have passive forms of income to create wealth. What are passive forms of income? These include investment income, rental property income, ownership income and anything that makes you money without using your time and effort. What’s better than 1 million in the bank? The 70K a year in interest a year you could earn would be far better in my opinion. If you focus efforts on creating a passive income stream, you will be wealthy. Even something as small as $500 a month can really add up.
Be your own boss
There is a fear of going out on your own. The fear is often justified but what needs to be known is that you will never earn your full worth unless you work for yourself. The reason is simple, capitalism isn’t structured for paying people their full worth. If everyone got paid their full worth, then no one would own anything, because there would be no point. While it is impossible for everyone to be self-employed, understanding worth and potential are important. If you work at a job where you know for a fact that you are severely underpaid, you must address that. If you work at a job where you know for a fact that you have reached your earnings potential and it is capped, you must address that. Owners do what they must do to stay in business and turn a profit. You must do the same except for your goals and dreams. Make sure your potential is never capped.
Rapper Drake said, “You Only Live Once, YOLO,” and people took it and ran with it. In fact, it got said so much it lost its meaning. Drake can say YOLO for one simple reason, he’s rich. YOLO has been used to justify being an idiot whereas it should be used as it was intended, to live a better life. While you might die tomorrow, chances are you will live a long time. What that means is that you must have a long-term outlook when it comes to life. Living life in the now is for rich people and hippies. You must make decisions based on what will better your life in the long-term. This includes saving and investing your money. Thinking long-term will help your money grow and enable you to achieve major goals like retiring wealthy. If all the choices you make are to get through the month, all you will ever do is get through the month.
Another important topic is panic. People have lost more money panicking throughout history than in any other way. I have a few clients that were paid extra compensation from their employers with stock options. Every payday they would buy a share of their company’s stock and the employer would match that share and give them one for free. Over the past 20 years, there have been 2 major stock market declines, the dot.com bubble in the early 2000’s and the crash of 2008. Each time, people with company stocks got hit hard and lost much of the value of their portfolio. Those that sold missed out on a huge windfall, whereas those that held on made all their money back and much, much more. There are no absolutes in investing, but one thing is tried and tested. You never make money by buying high and selling low. Panic will destroy your bottom line and even prevent you from obtaining your goals. It could be the difference between retiring early, or not at all.
While I appreciate the concept behind the “Latte Effect,” (the Latte Effect states that if you save small amounts consistently you will become wealthy over time) I believe it is not the greatest problem. We live in a throwaway society and sadly one of those things we throw away is our money. There are certain establishments that destroy your bottom-line with markup. The leading culprit is restaurants. Think about it, they buy a beer for $1.50 and sell it to you for $5. They buy a chicken breast for $1.00, cook it, and sell it to you for $12. The wealthy know that spending too much time dining out will crush your bottom-line. Treating yourself with a $5 latte here and there is nothing compared to $100 nights out, once a week. Remember that if you spend more money every month on pizza and wings than you save, you have messed up. Big time.
Ignore the bullshit
There is a whole industry of bullshit that exists. Much of it is contained with the media we consume. Here is a list of things that don’t matter:
- What celebrities do, ever
- What politicians are doing, for the most part
- What some “expert” thinks about any subject
- What the people who don’t live in your home think
- What is on the news, for the most part
The reason these things are not important is that they don’t better your life at all. Celebrities do not care about you and by paying attention to them you are indirectly making them richer. Politicians are not in the business of saving you. It is idiotic to think they will ever make your life better. What they can do is try to not make your life worse and institute programs that help those who need it. Experts are important when it comes to planning, not when it comes to predictions, like how the stock market will fair. If an expert could consistently predict the market you would never know, because they would never tell anyone. People outside your door will think what they want about you, just like you do about them. We all have biases, so it is important to understand other people’s opinions are meaningless to your life. Lastly, the news is in the business of staying in business. They stay in business by getting you to watch. They get you to watch by sensationalizing almost everything. If we all focused on what was important to us and our families as much as we did about everything is, the world would be a better place. The wealthy focus on the things that matter to them, the poor focus on what everyone else is doing.
It’s best not to go it alone
Wealthy people don’t always know the most about finances or investing, but they do understand the value of expert advice from a professional. While some people might balk at the cost of hiring a financial adviser to manage their money, the wealthy understand that, with an adviser’s help, their money could grow faster than it would if they were managing it on their own.
A financial adviser may be able to suggest investments and strategies that you hadn’t considered to achieve your financial goals more quickly. It’s crucial that you choose a fee-only adviser, though. Unlike fee-based advisers, fee-only advisers don’t earn commissions on the investment products they sell to you, so you don’t have to worry about any potential conflicts of interest.
Wealth rarely comes overnight, but by being responsible with your money, seeking out new and greater sources of income, and asking for help when you need it, you can steadily grow your net worth over time.
A tried and tested strategy to obtain wealth is to focus on efficiency. The wealthy know that there are obstacles in their way as they attempt to obtain wealth. These obstacles are taxes, interest rates, fees, and their own habits. As a rule, they try to pay as little tax as possible, eliminate high-interest debt, save on fees, and develop wealthy habits. Many people complain about taxes and yet never do anything to lower their taxable burden. Many more complain about the wealth of large institutions yet make them richer by paying absurd interest rates on debt. Even more, still complain the world is out the get them and yet it is their habits that ultimately do them in. Eliminate debt, save your money, invest for the future and pay as little tax as you can along the way. That is an efficient machine that will lead to wealth. It is not brain surgery, it is common sense. The wealthy use this only a daily basis and it dictates how they run their lives.
As you probably realize, these secrets aren’t secrets at all. They are a simple, straight-forward approach to becoming wealthy. If you apply them, the possibilities are endless. The wealthy attempt daily to lessen the effects of the things they can’t control and magnify the things that they can. At that point, it is all about making sound decisions. Do that, and you will be wealthy indeed.
“The only question with wealth is, what do you do with it?” – John D. Rockefeller