Firstly, we all perceive wealth differently. But one thing we can agree on, is that wealth gives us more freedom to do what we really want.
You are just as likely to become as wealthy as anyone else. It might have just never occurred to you.
Recognize that you can be wealthy and then take the necessary steps to make it a reality.
To get you started, here are 8 things rich people do differently with their money, that most of us can learn from.
So, what exactly do rich people do differently with their money that most of us don’t?
The simple answer is;
They make it, they keep it and they grow it.
The biggest difference is that the rich are in control of their money. Money does not control them. They know how to manage their money successfully. And they’re not afraid of taking risks.
1. The Rich Track Their Bank Statements
What does your bank statement tell you about how you spend your money?
It is difficult to be wealthy if money keeps leaving your wallet. Most of us aren’t numbers people, but that doesn’t mean we should ignore our bank statements.
That’s a big no-no.
Our bank statements tell juicy stories about our spending habits. We can track your daily expenses. And cut costs where necessary.
When we don’t listen to our bank statements, we end up landing in debt and we make poor investment decisions.
So, how do we prevent that from happening?
Let’s start with the basics. Our salary.
How much do you earn? And what are your expenses each month? Measure whether your financial position is getting better or worse over time. Only once you have a clear picture of your financial position, can you start making strategic decisions that will help you grow your money.
If you can, hire a financial advisor that will push you to be where you want to be.
2. The Rich Live Below Their Means
Even with a decent budget plan, most of us still find it difficult to keep our spending on a leash. So, what do we do?
Play the budgeting game.
Challenge yourself to bring your total spending down every week or month. Before going on your next grocery trip, see what you can cook up with what you have in the kitchen.
The trick is to find a system that works for you. Set goals that are realistic but challenging. And don’t be afraid to think big and push yourself beyond your comfort zone.
3. The Rich Don’t Fall for Lifestyle Inflation
Most people spend more than what they earn. To keep things simple. Spend less than what you earn. The lower your spending each month, the faster you’ll grow your wealth.
So, what is lifestyle inflation?
If you’ve been given a 10% raise, the natural thing to do is to add it your spending. Increasing your quality of life when you can’t afford to.
Instead, use that extra 10% to pay off your debt or find a way to invest it.
4. The Rich Automate, Automate, Automate
Wealthy people don’t miss payments and they don’t have high-interest credit cards. The bottom line is, they don’t like wasting money and neither should you.
Pay your bills before you have a chance to spend your money. Missing those monthly debit orders will add up and become difficult to settle in full.
Automate those payments. And don’t risk losing your money unnecessarily with overdue payments and interest on accounts.
5. The Rich Prioritise Their Debt
Rank your debt in order of interest rate, high to low. Remember, the higher your balance, the higher the interest. Start by paying off your debt with the lowest interest rate.
The idea is that you start building momentum with your lower interest rate accounts. Once that account has been settled, move to the next big one. Use the same amount you started out with, plus a little more. And tackle that debt.
The longer you have debt, and the more debt you have, the more you’ll end up paying in the long run.
So get that debt paid off as quickly as possible.
6. The Rich Always Work on Increasing Their Income
Wealthy people are always on the lookout for an additional source of income. Cutting your bills by a few hundred Rand is great. But earning an additional thousand Rand is better.
Start with your salary.
If you know you’re adding value to the company that you work for, schedule a meeting and state your case. Fight for that raise.
Start brainstorming ideas that will earn you more. Even a hobby can make you some extra cash on the side…
And remember, every little bit helps. You might only earn a small amount in the beginning. But you’re developing your money-making skills, and that’s the main point.
The better you become, the more value you add and the more you can charge for that skill.
7. The Rich Invest Their Money
Wealthy people invest their money, they don’t spend it all. People think they need a lot of money to start. The truth is, you don’t. You can even start putting away your loose change.
There are even apps available that can help you invest. No matter what your bank balance is.
Here are a couple of investment apps to get you started. Choose the right app for you and invest what suits your pocket.
Make a habit of investing small amounts when you can. And start investing as soon as possible. Take advantage of that compound interest. Which means your investment will keep increasing, even if you just leave it.
Ditch those small, unnecessary purchases. And put that money to good use.
Let’s talk about fruit salad for a moment.
Let’s say you enjoy eating a Woolworths fruit salad for lunch.
The fruit salad costs R40. If you purchase a fruit salad every day, you’ll spend R200 a week. That is R800 a month. And R9 600 a year.
What if you invested that R9 600 into a savings account instead? And earned 10% interest annually for 40 years?
By cutting back on the R40 fruit salad, just for one year, and investing your money in a savings account, you would earn close to a whopping R400 000.
We used an online calculator for illustrative purposes to help us calculate this investment. This calculation does not include any additional costs like tax or bank charges.
So, stop making unnecessary daily purchases. And start thinking about the future.
8. The Rich Spend Their Money Wisely
Rich people buy assets and poor people buy liabilities.
Let’s take a car for example…
The rich know that a car is depreciating asset. Meaning, it loses value over time.
They would rather buy a second hand car that’s 3 to 4 years old, than a brand-new car that’s going to cost them twice as much a month. A car is a liability.
The rich understand that they will lose money on liability investments.
A car is a requirement for most of us. The difference between the poor and rich is that they make their purchase decisions wisely. A second hand car that has been regularly serviced, is light on fuel and is cheap on insurance will offer just as much functionality as a new car.
The rich know they will benefit more from having extra money in their pocket every month. Rather than spending it on a new car that loses value as soon as it drives out of the dealership.
Join the rich…
If you want to join the rich, you need to get rid of your bad debt. Start investing in your finances and take control of your money. Debt will drag down your efforts and stop you from fulfilling your financial goals.
Debt Rescue has helped thousands of South African’s become debt free.
If you feel you are unable to cope with your debt and you struggle to make ends meet on your monthly repayments every month, get in touch with us today.