The things we can learn from rich people
When it comes to money, what better way to improve your financial literacy than to learn from the wealthy? Take a second and think of someone you really admire. Chances are that nine out of ten of us would have chosen someone successful and wealthy.
The wealthy are different.
Not only do they have cash the likes of which most could never realistically dream of, they also have a different mentality.
While you might think, “Well yes, being worth a few million would make me see the world through different eyes”, it goes deeper than that. Whether you admire rich people or not, copying some of their habits could help you become more successful – and wealthier too.
Throughout the rest of this article, we highlight what wealthy people do that sets them apart.
What can we learn from the wealthy?
First of all, let’s quickly summarise the six key things we can learn from the wealthy:
- Putting their money to work: They make wise investments as opposed to spending on depreciating assets
- Only ever borrowing to invest: Wealthy people know how to leverage debt to their financial gain
- Being tax-clever: Planning for taxes and reducing or avoiding them legally is a skill wealthy people possess
- Retaining control of their funds: You don’t build wealth by constant spending. Prudence is key
- Mixing in the right circles: Money, mixing with money makes more money. Your network is your net worth
- Being perceived as shrewd, not tight: Wealthy people are generous but respect the value of money
Now let’s look at the things rich people do differently.
1: They put their money to work
Although we all understand the concept of working for money, not many of us understand the concept of where money works for us. The wealthy get their money to work for them by investing. Whether in their education, in property, or investing in the markets; the wealthy are good at putting their money to work.
Expanding on the concept of making money work, rich people are informed about a broad range of asset classes and investment opportunities. Furthermore, they understand risk and diversification. At some point, many would have asked themselves ‘Do I need a wealth manager‘ and have probably invested in their services.
Affluent people don’t just park their funds; they actively seek opportunities across a spectrum of assets. This diversified approach helps maximise potential gains but also spreads risk.
2: They only ever borrow to invest
Whilst one should avoid borrowing to invest in anything high risk, good borrowing would include property purchase or, investing in your education or own business. Borrowing money for luxuries such as holidays, cars or fancy clothes is to be avoided especially via high interest credit cards and personal loans.
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Rich people understand the power of leveraging debt to amplify their wealth, particularly through investments that offer returns exceeding the cost of borrowing.
They are not afraid to use debt to finance large investments such as injecting capital into business opportunities or startups. However, those with wealth are not reckless.
Lastly, wealthy people understand the value of using debt such as a mortgage to fund the purchase of a long term appreciating asset.
3: They are tax-clever
There are many opportunities and tax efficient investments available to UK tax payers but many people don’t know about them and how they work.
This is where engaging the services of a good financial adviser and or accountant would make sense. As a first step, use your pension and ISA allowances.
Once those are exhausted, boxing clever with how you manage your taxes could make an enormous difference to your wealth. This applies even after you are dead!
That’s where your financial adviser plays a continued role in protecting your wealth and assets from taxes. Experienced financial advisers are well-versed in the different ways to avoid inheritance tax and offer estate planning services to ensure your financial wishes and legacy are carried out and preserved.
4: They are in control of their funds
The smart, or long-term wealthy, don’t throw away cash like the proverbial footballer’s wife on yet another shopping spree. They watch their money carefully and treat every penny as if it were their last. And that’s how they stay wealthy.
There are plenty of super-wealthy (inherited and self-made) who drive old bangers, live in modest homes and send their kids to state schools. Throwing your money away is a fool’s game and only leads to one thing – you get poorer whilst others get richer.
To summarise, wealthy people have respect for money. Often, rich people have earned and built their fortune from the ground up. They know it takes hard work, discipline, and sacrifice to accrue wealth.
Many are just grateful for the options it provides. And, that’s why they don’t fritter it away.
5: They mix in the right circles
Wealthy and successful people (who are, after all, often the same) mix in circles that benefit them. Opportunities come their way, because of who they are, where they are, or who they know. Either way, it’s easier for them to come across the kind of opportunities most of us would die for.
In these networks, affluent individuals rub shoulders well off people who may present them with financial opportunities. They socialise together, play golf together, their kids probably play sports together. It’s almost natural this occurs.
It’s almost a form of social compound interest. Just by mixing in the right circles, they are exposed to opportunity. Now that’s certainly something you can learn from rich people.
6: They are perceived as shrewd, not tight
Tight and shrewd are not the same thing.
Shrewd people have respect for money, whilst tight people are just mean. Take advice and act with caution, whether you’re spending, or investing. Money doesn’t grow on trees. It’s hard to come by and even harder to hold on to – unless you follow the wealthy and handle what you’ve got with supreme care.
Related reading: The secret of being an effective saver
For me, these people are shrewd because they:
- Avoid impulse buys – they resist spontaneous purchases, focusing on what is needed not simply wanted
- Seek value for money – finding a good deal is not tight, it is sensible. Why waste money? It all adds up
- Do not spend to impress – money is not used to look good. It is to be respected and never wasted
- Buy ordinary clothes – many affluent people are not kitted out in designer labels. Utility over luxury
- Look after things – taking care of your purchases makes them last longer without the need for replacement
Do you have an affluent friend? Maybe ask them what they do to take care of their spending.
Things we can learn from the wealthy – a quick summary
And there we have it – six things we can learn from the wealthy. If you want what they have, the simplest advice we can offer is to copy their behaviours.
Hopefully, you are now well versed in what the wealthy do differently. Maybe, you’ve been surprised by some of the things you’ve learned?
Learning from the wealthy teaches valuable financial and lifestyle strategies. Mindful spending, investing wisely, and cultivating powerful networks are keys to their financial success.
Through understanding and building these practices into your life, you can push forward on your journey toward wealth and financial freedom.
Be shrewd, be tax-savvy, only borrow to invest, and mix in the right circles.
And, good luck.
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