It’s easy to assume that everyone thinks the same way you do. Obviously there are those that have radically different viewpoints, but during your day to day existence you rarely come across people that completely challenge your thinking. Your environment, your family and friends generally support your view of The Way Things Are.
If you even given them a moment’s thought, your beliefs about money are one of the things that are rarely questioned. They were picked up somewhere along the way, then strengthened and shaped by your life experience. If you happen to bring them up in conversation, few will challenge them, even if their view is different to yours. In fact, you might be shocked to know that not everyone thinks the same way as you. About anything really, but let’s talk about money.
I’d always assumed that everyone thought about money the way I do. Mostly, my thinking just seemed like boring old common sense. Which led me to wonder why everyone around me wasn’t getting as extraordinarily wealthy as I felt I was. As my sister used to say, from my point of view, I’m normal.
Turns out the wealthy actually think differently about money than the…not wealthy.
Wealthy people spend time thinking about money
The average adult spends 2-3 hours each month thinking about their money, usually when they are paying bills. In contrast, wealthy people invest 10 times as much time each month thinking, studying and planning their finances. By investing this time in planning and learning about their finances, wealthy people generally make better decisions and get better results.
Wealthy people live within their means
There are four ways to become wealthy, but only one is guaranteed. Wealth takes time and effort to accumulate and wealthy people understand they must live within their means to build their net worth. Spending in excess of what you earn, using credit cards or finance to buy desirable things all reduce net worth and therefore wealth.
Wealthy people focus on net worth, not income
Financially speaking, net worth is the only thing that counts when it comes to wealth. You either have assets or you don’t. Income can be spent and it can also disappear the moment you stop trading your time for money for example as a result of job loss, the birth of a child or health issues. Assets are tangible, they aren’t dependant on your income producing efforts. Net worth is therefore the focus of the wealthy, not just income.
Wealthy people can’t afford to buy cheap things
Quality pays for itself over time. A higher upfront investment can pay off in the long run, especially if there are ongoing running costs such as with appliances. Wealthy people can’t afford to buy cheap things because over the long term they may require more financial input and earlier replacement. It can feel like you’re winning when you buy cheap things because you can accumulate stuff quicker. But many cheap things add up to a lot of money and suddenly you’re no longer financially ahead.
Wealthy people don’t attribute success to luck
The financial success of wealthy people isn’t down to luck. It takes time and effort to amass a high net worth and it doesn’t happen by accident. Mostly it’s down to mindset, planning and perseverance. Simply put, it’s down to actions and how you take advantage of the situation you are in. Wealthy people don’t attribute their success to luck because luck isn’t something that they can control, the way that putting a good plan to action can be controlled.
Wealthy people understand that not spending money is the same as making money
There are opportunities everywhere to save money by spending money. Think 2-for-1 deals, buying in bulk or upgrades. These seem like a good deal, except that you still have to buy something in order to take advantage of the offer. Something you wouldn’t have necessarily bought if it wasn’t for the offer. Wealthy people understand that not spending money in the first place is the best deal. It’s the same as making money, because spent money carries an opportunity cost with it. Not only is the money gone, the potential to make more money by investing it is also gone.
Wealthy people get tremendous satisfaction from not wasting things
Building net worth takes time, effort and sacrifice. Waste, whether in the form of food waste, or cheap stuff that breaks or just excess stuff that doesn’t get used undermines the effort that went into creating the wealth in the first place. That’s why wealthy people get tremendous satisfaction from not wasting things.
Wealthy people accept risk in order to achieve success
Taking risk is essential to success. Stepping outside your comfort zone is the only way to move beyond it. Financial success is no different. In order to make your money work for you, calculated risks are necessary. Buying an investment property, opening a share portfolio or investing in a business are all forms of risk taking. Wealthy people are prepared to take these risks in order to achieve financial success.
Wealthy people don’t flaunt their net worth
The really wealthy aren’t the ones with fancy cars and expensive clothes. Wealthy people are less focused on status and the appearance of wealth than on their net worth. In fact you might already know a millionaire or two, but you’d never know it. You might also know a person or two who look like millionaires, but are in fact drowning in debt.
Wealthy people focus on value for money
Just because they have money, doesn’t mean wealthy people want to spend it. In fact the opposite is true. Focussing on value for money is in part the way that wealthy people get wealthy in the first place. Given what you need to trade in order to earn money, wealthy people are very value conscious. In order to live within their means, expenditures need to be kept in check. In contrast to the image of extravagant spending, wealthy people carefully consider every expenditure and ensure they are getting value for money. And sometimes the value for money proposition may point to not spending in the first place.
Focus on abundance
Rather than approaching life with a scarcity mindset where everything is limited, the wealthy focus on abundance. They believe there is plenty for everyone. This breeds a certain optimism about the future that means their decisions are based on the needs of today and tomorrow.
Do all wealthy people think like this? I don’t think so. None of these are absolutes. Most people (myself included) think like this some of the time but can be completely driven by emotion on certain occasions. Still, it’s always useful to realise that there are other ways of thinking.
Do you think like the wealthy?