Source: MSN Money
Ask most personal finance experts
and they'll tell you the secret to becoming rich is no secret at all: Work
hard, live below your means and save every dime. The nation's One Percenters,
however, might disagree.
There's no shame in a modest lifestyle -- even Warren Buffett
lives frugally. But if your goal is to get rich, it's helpful to know these
seven secrets the ultra-wealthy aren't likely to share.
1. Salary
isn't the whole story
Climbing
the corporate ladder will only get you so far; at some point, you reach your
earning potential and plateau. The rich know that in order to grow wealth, it's
important to make your money work hard for you -- not the other way around. In
fact, Robert Kiyosaki, author of the No. 1 best-selling personal finance book
"Rich Dad, Poor Dad," built his entire money philosophy around this
concept.
Generating income from passive, rather than active, income sources
is the best way to do this. Investments that yield passive income include
dividend-paying securities, rental properties, profits from a business you do
not directly manage on a daily basis -- even royalties on creative work or
inventions.
2. Take advantage of time, not timing
If the
recent Dow Jones crash proves anything, it's that no one can predict what the
market will do tomorrow. The wealthy know this and make no attempt to moonlight
as day traders.
"Time is more important to investment success than
timing," explained Peter Lazaroff, a certified financial planner who
manages portfolios upwards of $10 million for Plancorp, LLC. "Most of the
population believes that timing the market's moves is the key to growing rich
through the stock market. The wealthy, however, understand that time and compound
returns are the most important factor in growing wealth."
Though it might seem counterintuitive, getting rich requires
investors to adopt an unsexy buy-and-hold strategy, ride out market
fluctuations and ignore speculation.
3. Put it in writing
The difference between having an idea and putting it on paper is
often what separates the uber-successful from average folks. And if you equate
success with wealth, it might be time to start writing down your goals, both
large and small, in order to become rich.
Thomas Corley, author of "Rich Habits: The Daily Success
Habits Of Wealthy Individuals," noted that 67 percent of the wealthy
people he surveyed wrote down their goals, while 81 percent kept a to-do list. If
your goal is to become a multimillionaire, write it down along with an action
plan for making it happen.
4. Understand value over cost
According to Justin J. Kumar, senior portfolio manager at
Arlington Capital Management, "The wealthy person has three best friends:
her attorney, her accountant and her advisor. The wealthy tend to use the law
and tax code to their advantage when figuring out how to maximize their wealth,
especially over multiple generations, and they are not afraid to spend money up
front for counsel to get these answers."
Kumar explained it's common for middle-income Americans to cut
corners in order to save money, yet ultimately find the results lacking.
"The wealthy look at value over cost, but they are still prudent in their
decisions," he said.
5. Eat out less
People who are concerned with saving money often skip the daily
latte. The rich enjoy small splurges such as Starbucks whenever they want and
instead look at saving from a bigger picture.
Author Paul Sullivan and colleague Brad Klontz, a clinical
psychologist with an academic appointment at Kansas State University, conducted
research on the difference in spending habits of the 1 percent and the 5
percent. The 1 percent spent 30 percent less on eating out and saved it for
retirement instead. "And that, more than the cost of a Starbuck's latte,
is what, over time, separates the wealthy from everyone else on the wrong side
of the thin green line," Sullivan wrote in Fortune.
6. Be your own boss
Employees work to make their bosses rich. If you're aiming for
true wealth, consider starting your own business. According to Forbes, nearly all of the 1,426 people
on its list of billionaires made their fortunes through a business they or a
family member had a hand in creating.
"Many middle class workers think that starting a business is
too risky," noted Robert Wilson, a financial advisor and frequent
contributor to CNN, NBC and CBS. "The wealthy understand that what's risky
is allowing your time and earnings to be dictated by a boss who couldn't care less
about whether you get what you want for your life."
7. Use other people's money
To the average person, "it takes money to make money"
might sound like a tired cliche used to justify irrational spending. For the
rich, it's a golden rule of wealth. The key is leveraging other people's money to increase your own
wealth.
"Trading time for dollars is a losers' game, especially as
technology destroys many jobs that don't require a highly skilled human
being," said Wilson. "Using money from banks/investors and hiring
people to work for you is a time-tested formula for building wealth, not to
mention the tax laws, which heavily favour businesses."
Whether you're fundraising to start a business
or flipping real estate for a profit, relying on other people's money to do the
heavy lifting greatly increases the return. Of course, it's also riskier than
relying on your own funds. But if you follow the sage words of the great Warren
Buffett, consider that "risk comes from not knowing what you're
doing."
Post a Comment