Money Habits: Why Are The Rich So Rich?

It’s easy to think that people with money got lucky, inherited it or just got famous somehow. But the truth might be different.

Sure, some people do get lucky but the vast majority of people with money got there the old-fashioned way.  Take the chairman of Harvey Norman, Gerry Harvey. He’s worth $3 billion but he says he stopped counting after the first billion.  “I try to lead somewhere between a simple life and a normal life. I don’t think there’d be a person as wealthy as me in Australia that would live a more simple life than I do,” he said recently.  This includes flying economy, despite being able to fly ‘up the front’.

Then there’s Elle MacPherson, worth over $100 million, but insists on recycling everything, including her handbags when she buys a new one.

And, Dick Smith who refuses to buy bottled water, because “tap water is free”.

So, if we are looking for a theme here, perhaps some of Australia’s richest people got there through old fashioned thrift.

The research bears this out.  The popular image of the millionaire normally includes all the trappings – fast cars, luxury homes and an A-list lifestyle, but the majority of people who are real millionaires are those who got there by living within their means, saving carefully, paying off their debts and living pretty normal lives.

One of the biggest hurdles to gaining wealth is not worrying about the appearance of social status, particularly in this social-media-crazy world.  After all, what matters more, the appearance of affluence, or real money in the bank?  The sad paradox is, the more committed you are to appearing wealthy, the less likely you are to achieve the real thing.

So here’s six tips to help you out. You are more likely to be wealthy if you:

  1. Plan ahead, and set meaningful goals;
  2. Have a spending plan or budget that ensures you live well below your means, and so have savings left over;
  3. Use your time, energy and money in ways that are more likely to build wealth;
  4. Only borrow money for a productive purpose, like buying a home, but never for just buying stuff;
  5. Value financial independence above your social image;
  6. Make sure your kids learn the value of financial independence. That way you’ll get them off your payroll…eventually!

Money isn’t everything but having enough sure helps. Financial independence and wealth is a choice and it pays to start as early as possible. Having conversations with your family about how you manage your wealth is the first step in creating your own positive financial story. If you would like help starting this conversation… contact Capital Partners Private Wealth Advisers.

My book Wealth with Purpose: A common sense guide to wealth, investing and an inspiring life offers more detailed insights into managing your personal wealth.

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