These rules can make all the difference when it comes to wealth building.
- Most wealthy people treat spending, debt, and other aspects of money management differently from others.
- Adopting wealthy people’s financial philosophies can help you grow your own wealth.
When you get rich and know that you can feed yourself and your loved ones, you can enjoy peace of mind and security. But getting rich means more than just making a lot of money. If you want to build wealth, think and act like rich people when it comes to managing your finances.
The sooner you stick to certain monetary rules, the easier it will be to join the ranks of financially independent people who are not concerned about cost recovery. There are three main rules that you should absolutely keep in mind when making decisions about borrowing, spending, and saving.
1. Maximize the value of your money
Many rich people are notoriously thrifty – especially in contrast to lottery winners, for example, who often go bankrupt a few years after winning millions. Billionaire investor Warren Buffett, for example, has owned the same house since 1958 and typically buys inexpensive vehicles.
Wealthy people know that buying expensive luxury goods can be a huge waste as they lose value and often cost a lot of money to maintain. That doesn’t mean they don’t stand up for things that are important to them. They are just careful about financial decisions, making sure they don’t make too many expensive commitments, live beyond their means, or spend money just to impress others.
By spending only on the essentials while living thriftily otherwise, you can free up money to buy assets that build your wealth while still enjoying the money you make.
Contrary to what some people believe, borrowing isn’t always a bad thing – and it’s not necessarily something wealthy people stay away from. Instead, most of the wealthy use debt as a tool. You can take out loans to buy a home at a low interest rate, for example to have more money to invest. Or they take out loans to start a business or use credit cards to earn rewards (by paying them off in full each month, they effectively create very short-term debt with no interest).
If you’re hoping to get rich, don’t be afraid to take on debt when it makes sense – for example, using a personal loan to pay off high-interest credit card debt to lower the interest rate and get out of debt faster. However, you should avoid taking out loans that do not improve your financial situation.
3. Think long term
Finally, if you are looking to get rich, you are making important financial decisions by considering the long-term effects of your choices rather than focusing on short-term gratification.
For example, instead of spending yourself on a fancy car, think about how much you could build your net worth by buying a cheap used vehicle and investing the difference. While this is a short-term sacrifice – and one of many that you can make – it can be worthwhile if your decisions help you become financially independent and free from money worries.
If your focus is on getting the most for your money, using debt as a tool, and looking at the bigger picture of your finances then you should be well on your way to getting rich.
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