Things The Truly Affluent Do Differently with Their Money
Before you have a lot of money, you probably wonder how some people acquired so much wealth. Then, when you achieve greater prosperity than you probably ever imagined, it may not always seem real.
A majority of the affluent are self-made. They’ve worked relentlessly at a goal or to execute on a vision, and it’s been rewarded handsomely. Calculated risk, hard work, and drive have led to a different financial reality than they grew up knowing.
Building prosperity and maintaining it are two different disciplines, though. So, what exactly do the affluent do differently with their money to keep it growing, protected, and preserved?
Here are five practices that the truly affluent do with their money that may not seem so different at all.
Money Moves The Affluent Make With Their Money
1. They know what their goals are and stay focused on them.
One of the reining truths about self-made affluent is they are tremendously goals-oriented. They define their goals clearly and have specific motivations behind achieving them. More than that, they write them down.
Goals that we keep in our heads rarely become a reality. In your head, a goal is a dream. Written down, now it’s real. It’s something that needs to get done. That’s how a millionaire thinks about her goals.
From there, the affluent make sure that their actions align with their goals and measure their progress along the way. You see, when you detail out a goal, for example, growing a business by 50% in the next 12-18 months, that’s tangible. Where is that growth going to come from? Analyzing your business financials will help clarify the highest revenue-generating activities and how much of those activities result in how much business. Growing a business by x% and what that translates into in terms of other goals like personal income or impact gives these goals even more purpose. 2. 2.
2. They spend well below their means and invest the rest.
You may not even realize that the affluent are wealthy because their lifestyle may not mirror what culture suggests. Even if they can afford all the latest and greatest things, they tend to be very conscientious about their spending, knowing that the money they have amassed can disappear if they aren’t careful.
The affluent believe in investing in themselves and their businesses more than having the latest and greatest or the best of all things.
Some interesting facts collected about them by Thomas Stanley, author of the now-famous book, “The Millionaire Next Door” are:
- Many do not drive luxury cars. Ford is the second most popular car brand behind Mercedes, but ahead of BMW. In addition, cars are typically not a current model year and are rarely leased.
- 97% are homeowners and have (on average) lived in the same home for more than 20 years.
- They save/invest 20% of their realized household income on average.
- They have more than six and one-half times the level of wealth of their nonmillionaire neighbors, but, in their neighborhood, these nonmillionaires outnumber us better than three to one.
- You can read more about the profile of a millionaire as discovered by Thomas Stanely here.
3. They create multiple streams of income.
One of the quickest ways to build sustainable wealth is to create more than one stream of income. If you are only ever collecting a paycheck, building wealth is a much slower process. However, when you have more income coming in from different sources, it’s that much more money you can invest and put to work to grow for you. This is what the affluent understand, and creating more sources of income is something that comes naturally to entrepreneurial-minded individuals.
Among my clients, almost all of them have at least two different sources of income, and many of them have upwards of four or five. From businesses, real estate, investments, and other projects, they have income from various places.
“Rich Habits” author Rich Corely found that multimillionaires have multiple streams of income:
- 65% of self-made millionaires had three streams of income.
- 45% of self-made millionaires had four streams of income.
- 29% of self-made millionaires had five or more streams of income.
4. They are not afraid to take risks and know how to manage and protect against too much risk.
Millionaires understand that risk equals reward. Therefore, they are willing to take on a certain level of risk to achieve higher levels of return. However, they don’t assume risk blindly. They watch how much overall risk they are taking and find ways to protect against or hedge against it.
That means that their risk is diversified. That way, if one venture underperforms or fails, the whole ship doesn’t sink with it. This makes them excellent, steady long-term investors because they aren’t reactive to how the market performs on any given day. They are strategic, and they are steady. They assess, reevaluate, and adjust if needed. They also understand that the level of risk required to maintain their prosperity is very different from the level of risk required to initially build their prosperity.
5. They look at their finances and life from a 10,000-foot view and ensure that all aspects of their lives work towards common goals.
Money isn’t just a number in a bank account for the multimillionaire. Finances are something viewed from the bigger perspective – what their financial situation means and whether or not it’s working to support specific goals (the ones we talked about writing down above), life vision, and legacy.
A lens that the affluent look through allows them to see how everything they do, all their hard work, is carefully weaving together a meaningful present and lasting future. This perspective often prevents them from feeling “wealthy,” even if that’s precisely what they are.
The genuinely affluent among us don’t necessarily show it or even act like it. They are hiding in plain sight because even though they have achieved financial prosperity, they are still working and living just like the rest of hard-working Americans. My clients have achieved remarkable financial success in their lives, yet they still feel guilty buying something they don’t need or aren’t willing to pay full price for anything. Saving money is a mindset that leads to good financial habits not easily broken even when financial resources become more abundant.