Have you ever noticed that the rich just keep on getting richer and the poor even poorer? It’s easy to assume that this pattern is a direct reflection of income, and while income certainly plays into wealth, it is not the sole determining factor in whether a person is rich or poor.
Rich people who stay rich (as opposed to certain celebrities we read about who lose millions and end up bankrupt) keep tabs on their money. If we want to live like the rich, we first need to learn to budget like the rich.
1. Rich people don’t have consumer debt.
Hold on! You’re thinking that every rich person you’ve ever seen carries around enough plastic to make a rain poncho. Yes, they probably do. The difference lies in the way rich people use their credit cards.
Poor people use credit cards as loans – borrowed money that, ever so slowly, gets repaid. Rich people use credit cards as cash. On any given day of the month, rich people have enough cash to fully pay off the balance on a card. And they do (pay it off monthly).
2. Rich people spend every penny every month.
Another little-known secret of the rich is how they plan their monthly budget. Poor and middle-class people draw up a budget to figure out if they have enough money to pay for everything. Rich people draw up a budget as a plan to ensure that all of their money is allotted to a specific purpose.
3. Rich people live below their means.
Sure, it’s easier for the rich to live below their means. But that doesn’t mean it’s impossible for the rest of us! Living below your means is, in essence, rearranging your spending habits so that you have money left at the end of the month. For people with lesser means, this could look like cutting down on the “extras” for a couple years.
However you slice it, you can never get ahead if you’re always living behind. Live below your means long enough and you’ll begin to see your means grow.
4. Rich people give generously.
Call it Karma, a blessing from God, the Good Samaritan principle, or whatever you like, the fact is that we get back what we give. Even those of us with small means can afford to be generous – giving your last $10 to a homeless man is just as (if not more) generous as the millionaire who writes a $1000 cheque. And don’t forget about all the tax write-offs that come hand in hand with generosity!
5. Rich people plan ahead.
You’ve probably been told at one time or another that you need an emergency fund, you should be saving for retirement or your kids’ education, and you ought to have life insurance. This is the kind of advice that rich people listen to. It’s the kind of advice they took to heart even before they were rich. Flying by the seat of your pants, with no plan for the future, is a quick way to get (or stay) poor.
6. Rich people take risks.
We all want to see our money grow, right? But how much does it really grow when we park it in a savings account? It’s easy to live in fear of losing what little we have, but if we let that fear rule all of our decision-making, we become trapped.
Sometimes, we need to take a risk in order to get results. Investing is a little like falling in love – you’ll never find true love if you aren’t willing to risk a broken heart.
7. Rich people are cautious.
Even though they’re willing to take risks, rich people are also cautious with their money. There are never any guarantees of investing in a “sure thing,” but the rich are seldom seen putting their money behind deals that sound too good to be true. Rather, they do their homework and weigh their financial decisions carefully.
You’ll find the same to be true of their spending habits. Of course, those who are rich have more to spend and can buy bigger, better, and more toys than the other kids on the playground. But they don’t buy every toy every time; they choose carefully based on their own wants and needs. (Not every wealthy man has a yacht or a Corvette.)
8. Rich people help those who come behind them.
The greatest secret of rich people who stay rich is that they never forget where they came from. Those who made their millions as entrepreneurs notice the entrepreneurial spirit in others, and they foster and encourage them in their endeavours. Those with a “rags to riches” story take it upon themselves to offer a hand up to those in need.
Successful people recognize the mentors in their lives, and they commit to doing the same for the next generation.
So, you want to be rich? Start managing your money the way the rich manage theirs and watch your bank account (and attitude) transform before your very eyes!
Ally is part of the team that manages Australian Credit Cards, a blog that wrote about making budgets work. Before joining ACC, Ally was a Media Planner with McCann Worldgroup Philippines, Inc., with award-winning executions, including the Levi’s 501 “Live Unbuttoned” global campaign.