Think rich to get rich: 10 money lessons from the super-wealthy
HEED THESE 10 MONEY LESSONS FROM THE SUPERWEALTHY TO HELP YOU ON YOUR ROAD TO RICHES.
AS Coco Chanel once said, ‘There are people who have money, and there are people who are rich.’ While the concept of being rich doesn’t guarantee happiness, life can be far more pleasant – and easier – if you don’t have to worry about money.
But how do you get to that point?
Doing the grind from payday to payday won’t necessarily get you there. You need to do something different: your behaviour is what will determine whether you remain trapped in mediocrity or flourish in financial abundance.
Getting on track is easy if you know how – and there are some super-wealthy people who do. There are many valuable lessons we can learn from them…
1 USE YOUR MONEY TO MAKE MONEY
A crucial aspect is actually having money to invest, and this is what separates the rich from the poor. Thomas C Corley, author of Rich Habits: The Daily Success Habits of Wealthy Individuals, spent five years studying the habits of more than 200 self-made millionaires.
‘Money may be easy to make, but can be very hard to keep.’
He found that the wealthy find money to invest by forcing themselves to survive off 80–90% of their net income, thereby setting aside 10–20% of their income for investing.
You could scoff and think that’s easy when they’re earning seven figures, but this is a habit that they cultivated from the get-go, when they had little money. It’s how they got to be wealthy.
2 PAY YOURSELF FIRST
This habit is within reach of all individuals, according to Magda Wierzycka, CEO at Sygnia and one of the wealthiest women in South Africa. ‘As soon as you start earning a regular income, deduct 20% of it and invest via an employer-sponsored retirement fund or a retirement annuity,’ she says. ‘Invest in highest-growth products and forget about it. Think about your salary as being 80% of what it actually is. It is a mindset, but that one decision will make a massive difference between wealth accumulation and a future struggle.’
So pay yourself first every month – it’s what the super-rich do.
3 OWN YOUR BUDGET
Your budget is your best friend when it comes to getting rich. Knowing where your money is going allows you to make proper decisions. If you’re overspending, you’re on the path to poverty. If you have debt, get rid of it first. If your budget doesn’t balance, cut back on expenses, or find a second income.
As a rule of thumb, allocate between 10% and 20% of your net income towards investing, and don’t forget an emergency fund. You don’t want to be dipping into long-term investments if you face a crisis.
4 KNOW YOUR WHY
Set realistic, achievable goals. Corley found that 67% of the wealthy people he surveyed wrote down their goals, and 81% kept a to-do list.
Setting goals is easy, but staying focused may be a challenge, especially when life throws you curveballs. ‘Money may be easy to make, but can be very hard to keep,’ says Margaret Hirsch, executive director at Hirsch’s, a highly successful business that she and her husband Allan built from scratch. ‘But knowing your why will keep you focused. It’s easy to be distracted by things happening around you. But if you understand why you want to achieve your goals, you will stay on track and be successful.’
5 INVEST WISELY
There are a number of asset classes you can invest in: cash, bonds, equities and property. Cash is generally for short-term saving, and the others are long-term investments. There is so much choice around as to where to invest that it may be wise to enlist the help of a professional financial planner who can work out your financial plan based on your goals, and advise you in terms of where and how would be best for you. It will cost you some money, but can prevent you from making expensive mistakes.
6 TIME, NOT TIMING
Human beings are impatient by nature, and we live in an instant society – we want everything to happen fast. Growing wealth is not a quick process, and it will take years to achieve.
Many people have tried to time the market – buy low and sell high. Whether you’re investing in property or the financial markets, time spent in the market, and not timing, is what will make you rich.
Margaret Hirsch has accumulated a formidable property portfolio over the years, which started with the purchase of one small house in
Durban in the 1970s. ‘A few years later I bought a bigger house in a better area, rented it out, then bought another, building up my portfolio from there,’ she says. ‘It’s about being patient and making your money work for you, not the other way around.’
So be prepared to be in it for the long haul. Get-rich-quick schemes that promise overnight wealth usually collapse.
7 INVEST IN WHAT YOU KNOW AND UNDERSTAND
Warren Buffett is one of the world’s most successful investors. Worth about US$36 billion, he’s been investing since 1942 when, at the age of 11, he bought his first shares. ‘Never invest in a business you cannot understand,’ is one of his famous investment tips. While we can’t be expected to be experts in all industries, you should invest in an industry that you understand, and know how they make their money.
You may choose to be actively involved in your investment decisions (buying investment property or shares) or passively involved (investing in unit trusts or tracker funds), but either way make sure you’re comfortable with the process. Don’t be embarrassed to ask questions, Wierzycka says. ‘Be fearless, because if you don’t ask you won’t receive.’
8 START AS EARLY AS POSSIBLE
The longer you delay, the more you need to invest to achieve your goal. Let’s say you wanted to accumulate R5 million by the age of 55. If you start investing at 25, assuming a 10% average growth rate per year, you’d need to put away R2 423 per month over the 30 years. If you delayed starting till age 30, you’d have to invest R4 054 per month. It definitely pays to start early. So just get started, even if it’s R1 000 a month into a high-growth unit trust investment.
9 DON’T LET EMOTIONS GET IN THE WAY
One of the biggest mistakes people make is to run scared when the markets dip. Investing is a long-term process, and markets will rise and fall along the way. Stay the course, keep focused and keep investing. And on the flip side, when markets are down, it’s bargain time. As Buffett says, ‘Be fearful when others are greedy, and be greedy when others are fearful.’
10 GET MOVING
Remember, starting today is better than starting tomorrow or next month. Every day counts on your road to riches!
I wanna be a billionaire so freakin’ bad Buy all of the things I never had I wanna be on the cover of Forbes magazine Smiling next to Oprah and the Queen – FROM THE TRAVIE MCCOY AND BRUNO MARS SONG ‘BILLIONAIRE’