4 Secrets Wealthy Individuals Use to Build Wealth
Are you tired of living paycheck to paycheck? Do you dream of achieving financial freedom and building lasting wealth?
Although many wealthy individuals appear to live lavishly, they often live by a disciplined set of principles that allows them to build financial success and maintain their wealth.
Through strategic money management, calculated investments, continuous learning, and building successful networks, the rich provide an outline that anyone can follow to help achieve similar success.
Let’s explore several insights and strategies the rich use to be financially successful and provide you with the tools and knowledge to build wealth for yourself and your family.
1. Wealthy People Live Below Their Means
Some of the ultra-rich may zoom around in private jets or own multiple mansions; nevertheless, most wealthy individuals still live below their means and thereby save and invest more than they spend. Living below their means is a common strategy implemented by most common millionaires as a way to build and maintain their wealth.
Warren Buffet, the billionaire founder of Berkshire Hathaway, lives in a simple house in his hometown of Omaha, which he bought for $31,500 in 1958, and is currently worth $652,619.
Rather than overspending on luxuries and unnecessary expenses, the wealthy prioritize saving as much as possible by making smart choices when it comes to spending.
One common rule that some wealthy people live by is the 50-30-20 budgeting. It dictates that you spend 50% of your after-tax income on necessities, 30% on things you don’t desire, and 20% on paying off debts or saving.
This lifestyle requires discipline and sacrifice in the short term, but can lead to significant financial rewards in the long run.
While there might be different approaches to optimizing your income, the key takeaway is that you only live within your means. You don’t have to live a frugal lifestyle to achieve this objective, but rather set a smart budget, avoid lifestyle inflation, and don’t spend money on excessive luxuries.
2. The Rich Understand Networking and Building Relationships
Networking and building relationships is a second key strategy wealthy individuals employ to achieve financial freedom and success. People and connections can be valuable assets in an individual’s journey to build wealth or a successful enterprise.
By building strong relationships with like-minded individuals or counterparts, you can learn from their experiences and gain insights into investment opportunities, new businesses, or other financial endeavors.
Wealthy individuals prioritize building and maintaining these relationships by attending networking events, joining professional organizations, and making an effort to stay in touch with their contacts and colleagues over time.
Even if you are happily employed, there might be a better job fit for you with higher wages or future opportunities. You might never be aware of or considered for such jobs if you don’t network. Try to branch out, as opportunities don’t present themselves to those who are reclusive.
Ultimately there are several ways that networking can help achieve greater financial success than you might have otherwise.
3. The Rich Take Calculated Risks
Successful individuals understand there is always a degree of risk involved in any financial endeavor.
Taking risks is a part of the game, but you can take steps to minimize risks or choose investments that offer an outsized potential reward. Whereas less successful people sometimes take gambles with symmetric risk vs. reward, the wealthy often have significantly more upside in their risk analysis.
Bill Gates and Mark Zuckerberg both dropped out of Harvard to pursue their dreams of building a tech company. Both individuals created wildly successful tech giants and became billionaires in the process. Similarly, both Gates and Zuckerberg saw tremendous opportunities and determined their opportunity cost of staying in school could cost them the necessary timing and edge to pursue these larger opportunities.
When it comes to investments, increased returns can be accomplished by conducting research and analysis before making any investment or business decisions. Additionally, the rich tend to work with other experts to assist them in making informed decisions and better assessing risks.
Furthermore, the rich also diversify their investments and spread money across multiple assets and businesses to minimize the impact of any individual loss.
Always make sure to calculate or consider any risk you take and weigh the potential reward against the potential risk, and ensure the decision is justified.
4. Always Keep Learning
Most wealthy people believe in education, both formal and informal. It opens you up to new ideas and perspectives and allows you to continuously evolve. This can be beneficial when it comes to staying competitive in business or even when considering various opportunities or trends for investments.
Education doesn’t need to be time-consuming. You can learn about different topics on the go through podcasts, e-books, or online articles and publications. Another benefit of being well-informed and educated is that you know what’s going on in the world, which can lead to uncovering new ideas and technologies necessary to stay at the forefront.
A well-learned individual also knows how to communicate eloquently and effectively. This goes a long way when networking and building relationships, as humans always tend to have a positive attitude toward well-informed and well-spoken people.
Learning about new topics shouldn’t be considered a chore. On the contrary, learning about different cultures, stories, myths, legends, and ways of life will be fun. Educating yourself about a particular topic or industry might help you to find solutions or more competitive advantages in your professional career.
The Bottom Line
Most wealthy individuals have gone through many trials and tribulations to get to where they are today. They had to sacrifice a lot through self-discipline and effective routines, but inevitably they found wealth and success.
If you’re willing to get out of your comfort zone, these tactics will help you go a long way toward achieving financial success and freedom. They are tried and tested by some of the wealthiest people out there. The only thing keeping you from building wealth and success is yourself.
Josh is a financial expert with 15+ years on Wall Street as a senior market strategist and trader. Josh graduated from Cornell University with a business degree in Applied Economics and has held numerous U.S. and European securities and brokerage licenses including FINRA Series 3, 7, 24, & 55. In addition to running an investment and trading firm, Josh is the founder and CEO of Top Dollar, where he teaches others how to build 6-figure passive income with smart money strategies that he uses himself.