Five Rules Wealthy People Live By

Here is The Big Secret: there is no secret! People who accumulate wealth and enjoy a life of financial security tend to share certain, well-documented behaviors. The behaviors (‘rules’) are there for anyone to see and learn from: you simply need to be serious about your financial goals and pay a bit of attention.

So, throw away those lottery tickets and start doing the things that are virtually guaranteed to transform your financial life and help you reach your financial goals instead.

Know Where Your Money Goes

Busy professionals and business owners will control millions and millions of dollars over the course of their lives. Yet very few of them know exactly how much they currently control, and even fewer actually make conscious decisions about how they want to direct and shape this precious resource. Why is that? Probably because they think that knowing is difficult or tedious to do. Or perhaps because they’re so busy that it’s simply easier to let friends, family, and the billions of dollars spent on marketing guide their choices.

I suggest, however, that paying attention to your money is easier and less tedious than trying to retire on Social Security. What’s more, whose life is it anyway? Most Americans end up with a house full of stuff they don’t need and hadn’t really intended to buy. The first step in building a life of financial freedom is simply deciding to pay attention to the difference between what you truly want versus what is easy to spend your money on.

Focus on The Things That Matter Most

People who build wealth not only work hard; they work hard on the things that matter most. They start saving early, because early savings give them the best financial leverage. They avoid debt as much as possible, because no one ever got rich by owing other people money for things that lose value over time. And delaying expensive purchases early in life makes it easier to accumulate income- and wealth-generating assets for the long term.

They are open to opportunities, but also aware that things don’t always go as they planned. So, they build contingencies into their plans, and keep a strategic reserve to see them through the unexpected crises that can wipe out the unprepared.

They have the confidence to stick with a well-reasoned long-term strategy through short-term upheavals. Yet they are flexible enough to change direction in the face of new information, new circumstances, or a change in their own goals. They keep their eyes on the prize.

Know the Difference Between Cost and Value

Wealthy individuals – and those who want to build wealth – have a knack for spending their money wisely. They do not deny themselves life’s pleasures, but they do tend to look for value when they buy things.

As a result, they buy things to please themselves, and not just to impress others. Warren Buffett, one of the world’s wealthiest men, loves to eat simple hamburgers and drink Coke at a local Omaha restaurant. He drives a mid-priced American car rather than an expensive sports car. He doesn’t need to throw his wealth around to impress people.

Learn to Leverage Other People

If you try to do everything yourself, then you are limited by yourself. The lifestyle of people who rely solely on themselves seems harsh to most of us moderns. Can you imagine a life where you only eat what you can grow yourself, build your own shelter, provide your own transportation (probably by walking!) and – well, by then you’ve run out of time and have to go back to the business of subsistence. No electric lights, no internet, no movies or even books! It might seem romantic at first, but I’d wager that few of us would adopt such a way of life if given the chance.

The modern world has given us the means to exchange our own expertise and labor for the greater expertise and more efficient labor of others. What a marvel that is! We live in houses that we couldn’t possibly build ourselves; we eat food grown efficiently by people all around the world and flown into our local markets; we travel the world in cars and trains and airplanes; and when we’re sick we consult with professionals who spend their lives learning about and curing illness. Our lives are transformed by the expertise of others when it comes to these basics.

Wealthy people learn to apply this principle to their money as well. They don’t trust blindly, but they do seek out financial experts and counselors and use them wisely. By doing so they extend their own expertise and capabilities. They find solutions to problems that confound the masses. They get things done rather than letting them linger. They give themselves the opportunity to do more and better with less – just as we do when we buy a loaf of bread rather than growing the wheat, grinding it into flour, and baking the bread ourselves.

Understand the Value of Intangible Things

Not everything of value to us can be touched, felt, or measured. Probably the most important of these are our personal and family relationships. And while the life value of personal relationships extends far, far beyond the merely financial, they also have a profound impact on our financial lives. Individuals with strong personal and family relationships tend to be happier, healthier, and live longer. Aren’t those the primary things that we spend our money on in the first place? In the extreme, divorce is typically a devastating financial experience for the individuals involved. Authors Stanley and Danko[1] have even documented the fact that the majority of American millionaires are in stable, long-term relationships.

The value of a good education is another intangible that cannot be overlooked. That doesn’t, however, only refer to a high-priced formal education. It means that wealthy people tend to be lifelong learners. They read, they listed to others, they seek experiences that push them out of their comfort zones. They may not always know exactly there the value in these activities will lie, but they have learned that they will almost certainly be valuable to them.

Finally, wealthy people understand the value of time. They are willing to spend their money to get back more time, because time is the one thing that all of us will eventually run out of. Having enough money to simply walk away from a job you hate may not only keep you sane; it may also afford you time emotional and creative space to reinvent your life at a critical juncture in your career. It could literally save your life. Time also lets you pursue activities that you will value long after you’ve tired of the fancy shoes or the hot car. (If not, go ahead and buy the shoes and the car!)

So, remember, wealth is a choice. And now you know the secret.
[1]  From “The Millionaire Next Door” by Thomas J. Stanley and William D. Danko 
Image by Dragon Images on Shutterstock

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While the holiday season is ideally a time for family and friends, it is also a good time to review tax strategies for the current as well as the coming year. Tax planning includes possibilities such as tax-loss harvesting, choices of investment vehicles, order withdrawal optimization, and many others. Given the complexity of these considerations, it’s important to work with a trusted financial professional to best understand each approach and its implications. It’s also important to understand the economic climate’s effect on taxes, especially the impact of inflation. What should investors know as they plan for 2024?
You’ve probably done it all your life. First you (or your parents) enrolled you in a good kindergarten. From there, you ‘graduated’ to a solid grade school. Then came an excellent high school, after which you were lucky (and hard-working) enough to be admitted to a top-notch university. It’s been a step-by-step – and well laid-out – progression your whole life. Isn’t that how careers (and lives) are supposed to work? All nicely laid out with one pre-ordained step after the other?

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