Editor’s note: This article was first published in August 2013. Its statement that the number of millionaires has grown worldwide during this crisis refers to the post-2008 financial crisis, as of 2013.
If we sum up, very briefly, what building personal wealth consists of, it basically comes down to earning money, saving as much as possible and investing it wisely so that it multiplies. There are no other secrets.
Of course, we can always expand on these points, since there are other details we are not usually taught. We previously talked about 8 habits common among millionaires. Let’s look at what else is done by people with more than a million euros in liquid assets, who might even be some of your neighbors, given that the number of millionaires has grown worldwide during this crisis.
1. They always spend less than they earn
Some of you will think this is obvious, but I don’t think it is that obvious, since most people spend more than they earn. What’s more, they have already spent what they are going to earn over the next 5 or 10 years.
2. They understand the importance of patience
As a rule, people don’t get rich overnight, even though most are looking for the kind of quick windfall someone else has pulled off. The millionaire knew that building wealth is a long-term process in which we save, invest and keep adding the returns we earn to new investments.
3. They know how to manage their money and understand financial literacy
Millionaires knew that money is like a small child. It doesn’t guide us; we are the ones who must guide it so that it earns us a return. As we have said on other occasions, the rich are aware of the importance of devoting time to financial education. What everyone else finds so boring, they usually find quite enjoyable.
4. They know credit cards have to be paid off every month
In financial education we usually teach two things: first, if you can’t pay for something in cash, you can’t afford it; second, don’t carry much cash and you’ll avoid spending it. There is nothing wrong with using a credit card, as long as you can pay it off in full at the end of the month. Credit cards are among the serious personal finance mistakes.
5. They know money doesn’t buy happiness
The poor don’t need to remind the rich that money doesn’t buy happiness. They know it, just as they know that money is not a goal but a reward for their work. And as a rule, their work isn’t a job but a way of life they enjoy. (Read: The rich don’t want to retire young and rich.) Even so, the claim that money doesn’t help you be happier is utter nonsense, usually said by way of consolation.
6. Stay away from debt early in life
All rich people agree on this piece of advice. If you take on debt when you are very young, you end up burying your chances of building wealth, because you can forget about saving and investing. Of course, once we realize the mistake we made by taking on too much debt, the good news is that it can be reversed, for some with more difficulty and for others with less.
7. Diversify your income
A single salary isn’t enough. Besides, depending on one source of income is dangerous. If you have one source of income, you should look for ways to earn other kinds of income. Find a way.
8. They know that having no plan is like planning to fail
While most people believe in luck, they believe in proper planning. Not having a clear, well-defined strategy for reaching a goal is like having a plan that leads you straight to failure.
9. They know the value of hard work and perseverance
None of them thought the road would be easy; quite the opposite. It takes a lot of hard work and, above all, smart work, and consistency in what we do will be our greatest ally in reaching the goal.
10. They protect themselves against risks
Risks are there for everyone, and many of them come without warning, although we should already have planned for them and protected ourselves in advance. We can go broke for many reasons, whether it’s losing a job, a divorce or failing to reinvent ourselves in our professional field. We have to assume that any scenario is possible.
11. Time is your ally
The sooner you start your financial plan, the better. If we begin a savings and investment strategy at 20, we give compound interest time to do its work, and by avoiding many of the mistakes you should already know about, by 30 you could have a far from negligible fortune, especially if you don’t take on debt.
12. They aren’t easily impressed by other people’s luxuries
Once you acquire a solid foundation in financial education, you’ll start looking differently at people who drive €40,000 cars, because as a rule they don’t have a better car than you, just a lot more debt than you, plus the higher running costs that come with the vehicle itself. One of the differences between millionaires and poor people is that the millionaire prefers to be an anonymous millionaire, while the poor person wants to show off “fake wealth”. (Read: The first step to getting rich: don’t live like a millionaire.)
But above all, remember that you will never manage to build wealth if you don’t understand how money works, because, as the saying goes: “A fool and his money are soon parted.“
Further reading
