I live in a part of the country where there is a lot of new and old money. There are people from all walks of life but the dominant industries in this area, as well as some elite educational institutions has made it a magnet for wealth and success. Although Boston isn’t NYC, there are a lot of opportunities here. And because we are a much smaller city located in a much smaller state, I have had the opportunity to observe some of the habits of very successful people.
We all know that the rich, middle class and poor live very different lives and most of the time, have very different backgrounds and habits. Of course we can always find anecdotal evidence of a really hardworking poor person or a lazy do-nothing rich kid who inherited all his wealth. However, that is not always the case as many rich/wealthy individuals are self-made. So how do they earn the millions and how do they keep what they earn? Here are some of the things that I’ve observed:
- They keep an eye on their money. When you don’t have much money, you tend to know where every dollar goes because you can’t afford to be wasteful. You might also mistakenly believe that this is a “poor person habit” as the rich do not care about such insignificant things. However, they do. They might not necessarily track every $5 latte they purchase, but they know overall where their money is going, what it’s being invested in and what things cost.
- They love other people’s money. They didn’t become rich by being completely risk adverse. While a loan is a risk and can potentially jeopardize your asset through a foreclosure, you can do much more by leveraging your net worth and borrowing at a low rate than you can by buying cash. I could buy 1 house with $200k or I could buy 5 houses with $40k down and 5 mortgages.
- They don’t shop, they invest. This doesn’t mean they never buy anything, but they understand what is an asset and what is a liability and they spend accordingly. They tend to direct most their money towards goods that can give them a return, either through an increase in value, generating income or both.
- They have multiple streams of income. I’ve already discussed the importance of having multiple sources of revenue here and here . Whether it is 2 jobs, investment properties, high dividend stocks, you should maximize all of your earning potential. The wealthy rarely rely on just once source of income. It goes against diversification which is one of the basics concepts in investing. Whether we’re talking billionaires like Oprah or the local real estate investor, they all know the importance of diversifying and increasing income streams.
- They are goal oriented. Having a goal helps you have something to strive for. Whether it’s to be the richest guy or gal in town, be able to travel the world, retire early or donate to the less fortunate, setting goals gives you purpose and becomes a measurable tool for your progress.
This list is a very short list of a few habits of some wealthy people. It is by no means a comprehensive list, nor does it necessarily apply to everyone. So, take a moment to think about your own observations.