Aristotle said that “We are what we repeatedly do. Excellence, then, is not an act, but a habit.”
Being rich (having wealth, anyway) is not about having a lot of money or making a lot of money.
It’s about building wealth, keeping your money, and spending it wisely.
Here are the 7 best ways that rich people build wealth and keep it.
1. Learn the difference between an asset and a liability.
This is the most fundamental aspect to build wealth, yet most people have no idea what the real difference is.
A car, unless it’s a real collector’s item, is not an asset. It costs you money no matter how you look at it – it’s maintenance, upkeep, depreciation, etc. all mean you’re losing money.
A house can be either an asset or a liability, depending on its potential. The home you live in is probably not an asset, though you may have heard otherwise.
Most homes are no longer gaining value, so they are no longer assets. A home that you rent out for more than you pay in upkeep and mortgage, however, is an asset.
Learn the difference between the two fundamentals of wealth and you’ll understand that most Americans either purchase junk, spend their money on liabilities they mistakenly think of as assets, or they get wealthy by putting their money to work in things that make more money. To start making your money work for you save your money with the best bank rates.
2. Work hard and be diligent about your finances.
Don’t splurge on something you don’t need just because after months of saving you “deserve it.”
Nothing destroys good habits faster than going off the wagon. Why spend six months working hard to save up $1,500 if you’re just going to spend $800 of it on a “weekend getaway” to reward yourself?
3. Live beneath your means and look poorer than you are.
If your income is $100,000 a year, live like you make $60,000 and save the rest or invest in things that will raise your income to $150,000 a year.
Living well beneath your means doesn’t mean living “poorly,” it just means you’re always prepared for when your $100,000 income suddenly drops to $65,000 because the market changed or your employer goes belly up.
Think of what that two years of $40,000 in savings would mean when your income disappears for a few months..
4. Have patience with your growth.
Most people do not make a fortune overnight and those that do often squander it the next day.
Building a fortune slowly, however, usually means that the person doing it has patience and perseverance and is willing to work hard and knows the difference between spending and investing.
5. Keep on learning and never get comfortable with your income.
In number 3, you were told to live beneath your means. Doing so gives you a feeling of comfort and stability, but also puts you in the habit of being frugal and aware of your spending.
Continue your education, whether it’s formal or informal, and keep building valuable skills you can use to build wealth. Learn to do your own auto mechanics, clean your own pool, wash your own cars, do your own handyman work, garden, or whatever else you might have an interest in learning.
Build skills and learn to whittle away at your expenses. The fewer expenses you have, the more money you’ll have to invest to make even more money. This is building wealth.
[Side Note from Jason: We need to be careful of the delicate balance that exists with being content with what God provides and also looking to steward our time, money and talents to the best of our abilities to make additional income.]
6. Live a balanced life and realize that gadgets and trinkets do not make you happy.
Truly wealthy people rarely have all of the latest gadgets and the gaudiest trinkets. In fact, the poorer a person is, the more likely they are to have a house full of dime store trinkets and baubles.
If you were to survey people who have built their own wealth and are truly balanced, happy, and wealthy, you’ll see that these rich people are rich because their lives are rich, not because they have a lot of shiny things to show off their wealth. The millionaire next door is never ostentatious.
7. Become happy and learn to only worry about what’s truly important.
Sure, getting bilked for $1,000 on a car purchase is not good. But can you do anything about it, and is it really worth the headache to?
If you need the car and it’s a good purchase regardless of the padded price tag, maybe the headache isn’t worth the trouble of making a scene. Perhaps a calm letter to the business owner explaining that you won’t be back there again and your friends won’t shop there either will be enough to both vent your frustration and get results in your favor. But obsessing over the lost thousand does no one any good. Least of all yourself.
These simple habits, which are more a lifestyle change than they are habits, are what set apart those who build wealth and those who just appear wealthy.
Paris Hilton is wealthy because of her father, not herself, and she shows off her riches because she truly doesn’t understand them. Her father, however, is not so flashy because he knows where the money comes from and how to keep it in his own hands.
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