Thinking Like A Wealthy Person

Those who grow up poor but become wealthy as adults have unique insight into the process of wealth accumulation. They understand how both poor and rich people think and what it takes to make the transition from debt to wealth. Many self-made millionaires share similar ways of thinking about money and similar habits that helped them along the path from rags to riches.

First, those who succeed at becoming wealthy on their own believed it was possible beforehand. The road to wealth is one of self-discipline and deliberate choices that are not easy. Unless you believe you can become financially independent while you are still young enough to enjoy it, you will not be willing to make the sacrifices necessary to achieve it. If you don’t believe it is possible for you, it may be because you don’t understand the process. To change your thinking, you must learn key financial principles behind wealth accumulation. Only once you believe you can achieve wealth will it be possible.

Second, wealthy people understand that wealth is money you keep, not money you spend. Those who never achieve financial independence often mistake consumption for wealth. They view their employment income as the means to pay for personal entertainment and consumption today. They believe that living in a big house, having newish cars and expensive toys mean they are wealthy. More often, such big spending means big debt, making the accumulation of wealth impossible.

Wealthy people differentiate between wealth and consumption. They focus on saving and investing to build their wealth while being careful and deliberate about their spending. Wealthy people look for value, preferring fewer quality items that will last over cheap excess. They appreciate a simpler lifestyle, believe that less is more and find creative ways to meet their needs beyond spending money.

So to become wealthy, you must believe it is possible and understand that wealth is the money you keep. How you think is the precursor to how you behave. Grasping these two key ideas, the following three habits will help you along your path to wealth.

Habit 1: Educate Yourself!

Those who are self-made millionaires did not get there by playing video games or watching TV in their spare time. They invested a significant portion of their non-work hours to learning about money. This doesn’t mean signing up for an expensive get-rich-quick seminar. It does mean reading quality non-fiction books and magazines about personal finance, business and investing.   If you are not sure financial independence is possible for you, this is how to change your thinking.

Habit 2: Live Frugally

A key reason many people fail to achieve significant wealth is that they are unable to delay gratification. If you believe wealth is consumption, you mistake the ability to obtain the good life today for being wealthy. It takes tremendous self-discipline to live a simple life and be satisfied with what you have so you can save. Yet nearly all self-made millionaires did this. In a society that constantly bombards us with advertisements for products that would make life better, it takes a purposeful person to choose to live with less.

Living frugally requires great self-confidence. We all judge each other on appearances and having less sends the message that you are not successful. Some people simply cannot handle this and will spend money on clothes, cars and more creating an appearance of wealth to make up for their own insecurities. The irony of the path to wealth is that you must be prepared to appear to have less if you wish to achieve true financial independence.

Habit 3: Get A Side Income

In The Wealthy Barber, David Chilton taught us a powerful truth that regular saving will lead even those with a modest income to a secure retirement after a lifetime of work. For those who wish to become wealthy earlier however, simply working one middle-income job and saving 10% is not enough.

Wealthy people view their job as the springboard for their extracurricular wealth building activities. Initially, a job provides a steady paycheque to cover basic needs and build savings. It also makes it possible to qualify for credit which, used wisely, can vastly accelerate wealth accumulation. But it is what you do with your time outside your job that will determine if you become wealthy.

People on the path to wealth often build a side job or business to bring in extra income in addition to their main employment or business. This may be something related to a unique skill you have, or a hobby you turn into a service you provide for a fee. Even better is building a business that will ultimately generate income without continuous effort. Having a side income is a great way to keep you out of the stores and instead focused on building your wealth. Eventually your side thing may one day replace your job or it may just give you something lucrative and satisfying to do to earn income in your spare time.

Summary

Those who fail to achieve financial independence share some common traits. They don’t believe that they can accumulate enough wealth to retire early so they buy whatever they desire as soon as they have the money or can qualify for the loan. Rather than saving significantly, they spend their employment income on living the good life today, guaranteeing they will have to go to work tomorrow to continue to cover their lifestyle expenses. They feel that working one job is enough and they deserve to reward themselves with entertainment and shopping in their spare time. They fear others will not like them if they don’t appear to be successful so they spend money to create an upscale image.

Wealthy people believe that early retirement is possible and recognize that wealth is the money they keep, not spend.   They educate themselves on how money works and learn the path to wealth accumulation. Self-made millionaires often live frugally and delay gratification to save money early on. They are self-confident and do not need to impress others with a high-end lifestyle. The wealthy use their spare time to build their wealth through side businesses, tapping in to their unique skills. Their ultimate goal is to build sufficient wealth to create a reliable, self-sustaining flow of income that will allow them to follow their dreams.

Margot Bai’s new eBook is Rent Smart: Buy Profitable Rental Properties, Create Quality Apartments and Place Great Tenants (2015). Also newly revised and updated in eBook format for 2015 is her first title Spend Smarter Save Bigger: Finding BIG Savings in your Home, Mortgage, Vehicles, Insurance and Investments. Download free samples or buy the complete ebooks at www.margotbai.com.