The rich folks in the world think and act differently than everyone else. The thing is, a lot of the wealthiest people not only had to earn their wealth, but now they also have to add to it and maintain it. If you ever wanted to know how they achieved that sort of financial success, you have to start with what the rich know about money.
Here are seven things that the world’s richest people know about money.
1. Money equals freedom.
Kevin O’Leary, the successful Canadian businessman and investor on Shark Tank, once said that “Money equals freedom.” That’s something that the rich realize. While money can’t buy freedom, having enough money to not only meet your basic needs, like food or shelter, it gives you the freedom to choose what you want to do, when you want to do it.
Tired of your boss or job? You’ll have the freedom to quit, if you want, which makes any job more palatable. Want to plan a vacation to Hawaii? No problem, you are personally choosing your hours and how early or late you will work. Want to launch a new business venture? You have the means and networking contacts to pursue this dream. What happens when you get sick? You can afford the best doctors and medical care.
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2. Look for investments every day.
The rich are always thinking about the future, which is why they are constantly on the lookout for new investment opportunities in everyday life. Whether it’s their teenager informing them about the latest social media platform or finding a new food item in the grocery store, the rich how to spot ways to increase their wealth, no matter where they are. They always listen, even if they don’t like what they are hearing about an investment.
3. Stay away from complex investments.
The rich know to stay away from complex investments like hedge funds and mortgage-backed securities. Why? Because these types of investments present a number of problems that include not having any control about the risks involved. The rich stay aware of getting hit with expensive fees, and these type of investments are usually sold to investors who don’t understand them. If the rich don’t understand the investment, they don’t buy it.
4. Not spending is the same as making money.
This doesn’t mean that you always have to cut back or become a penny pincher. It means that if you make sacrifices in one area, you can use that money for an investment. For example, if you’re flying from New York to Chicago and a first class plane ticket costs more than $3,000, do you think that you could take a seat in business class because it’s $1,000 less? In a way, you may have just earned $1,000, which could be used for acquiring assets that bring in additional funds. Money working by itself is money you don’t have to earn again.
5. Invest in appreciating assets.
The rich keep their wealth by not wasting all of their funds on items like clothing and vehicles. Instead, they wisely invest in appreciating assets. Tatiana Morales defines appreciating assets on CBS as “Assets that have the potential to increase in value and/or produce income.” This include liquid assets like cash, investments like stocks and bonds, and property.
6. Don’t put all your eggs in one basket.
The wealthy never put all of their money into one or two stocks. As Investopedia clearly states, “it is foolish to invest all your money in one investment.” That’s why it’s important to have a diversified portfolio that includes a variety of investments, stocks, bonds and mutual funds. Your portfolio could also include business investments, real estate and collectibles.
Remember, diversification isn’t just investing in different companies. It’s investing in different types of companies. For example, you wouldn’t invest your money in four different fast food companies. You would invest in one fast food company and the rest in companies in the oil, retail or tech industries. If something fails, you are still protected with your other investments.
7. Net worth isn’t self-worth.
The rich are well aware that money can’t buy you love, respect, friends or happiness. They realize that their self-worth can’t be measured by their financial success. As author Ken Solin points out in the Huffington Post, who do you think has more self-worth? The isolated man with a billion dollars in his bank account or the man who listens to his wife, spends quality time with his children, has authentic friendships and is a volunteer?