Introduction: How to Build Wealth
The increasing gap between high and low-wage households is now a familiar news topic.
Current US census data shows that as three-figure salaries have risen to meet inflation and beyond, the income from households that gross $60,000 and under per year has remained much the same since 1967.
Even if you’ve placed little emphasis on how to build wealth in the past, there are increasingly concrete reasons beyond material gain to pay attention to the habits of wealthy people.
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Direct links have been made between income inequality and longevity, access to and completion of college education, and the psychological and cultural disadvantages of being poor.
Evidence suggests that how rich people think impacts their health and wellness. A quick Google search of “ways to become wealthy” reveals endless articles that fall into two main categories—either financial or lifestyle tips of wealthy people.
We are, it seems, fascinated by how rich people live, think, and make decisions. The keys for how to build wealth are not secret. And the financial and lifestyle habits are not as separate as you might assume.
The following tips are combined lifestyle and financial habits of wealthy people:
1. Start Early
What is the best way to create the ideal circumstance surrounding your own wealth? Start as soon as possible. The earlier you invest in high-interest savings, the more time this money has to work for you. Building wealth means having a longstanding vision. Think of saving for your future when making your financial decisions and make short-term lifestyle sacrifices to accomplish long-term financial freedom.
In terms of day-to-day wealthy people habits, starting early literally means getting out of bed at an early hour. How does this lifestyle choice help build wealth? Most wealthy people adopt this habit, not with the intention of starting work early but to have some personal time before beginning their workday.
They will often use the time to exercise, read or do other morning rituals and, for the most part, avoid checking their email or social media. However, reviewing your to-do list from the night before in the morning will help in setting priorities, both personal and work-related. You can save time and energy by helping identify the most pressing tasks at hand.
2. Be Realistic
Steps to becoming wealthy tell us that one of the ways to build wealth is to abide by the 70/30 rule. Ideally, you should be able to live off 70% of your net income after taxes. This amount includes all the necessities and luxuries you purchase. Of the remaining 30% of your money:
- One third (or 10% of your total gross after tax income) should be devoted to building wealth. This could mean investing in construction or house maintenance, purchasing equipment to help with a profit-gaining enterprise or high-yield investments.
- One third (or 10% of your total gross after tax income) should be allocated to savings—one of the most crucial steps to becoming wealthy. The difference between rich people and low-wage earners, when it comes to money, is that wealthy people save their money and spend the leftovers while those with fewer assets spend first and save later.
If you are serious about saving, realize that small efforts will result in small gains. If you are starting to save later in life, the larger your contribution, the further you will progress toward your goal of building wealth. One of the most effective strategies toward making consistent savings is to automate your payments on a regular schedule. Setting up regular withdrawals from your checking account to your savings, retirement fund or investments will allow you to avoid spending this money allocated to saving.
Above all, having a cushion of savings in the bank will provide peace of mind, attribute to your health and well-being, and help you to understand the question, “How do wealthy people think?”
- Finally, one third (or 10% of your total gross after tax income) should be spent on charitable giving.
In terms of lifestyle, making realistic decisions boils down to living within your means and maintaining willpower. By paying your future self before spending, you can build wealth by keeping your spending within your financial means. Here, budgeting is one of the most important habits of wealthy people.
Instead of letting luck guide their finances, wealthy people create the circumstances for their own monetary gains. It is alluring to live beyond our financial means, but the pressure to spend can lead to debt accumulation and financial insecurity.
The first step to wealth, according to the habits of wealthy people, is to be able to talk yourself out of overspending and negative balances as often as possible. This may mean avoiding situations or locations in which you will be tempted to spend money. For example, you may find it helpful to avoid malls or casinos.
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3. Live Simply
The minimalist vs. maximalist concept applies to both finances and lifestyle. Many wealthy people habitually minimize their expenses by living beneath their means and saving more money than they spend.
If you want to follow the steps to becoming wealthy, identify the essential items in your home from the luxuries and make decisions about what you value.
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Avoid having credit card balances as well as extra fees (only spend what you have) while, at the same time, taking advantage of rewards and points programs.
Have you ever wondered how rich people live? Simplifying also extends to lifestyle choices of the wealthy. Financially successful people are known to avoid “toxic” people, who will drain your time and financial or emotional resources.
Simplifying also extends to how rich people think. Wealthy people often outsource work to others in order to limit their decision-making to the most important ones, delegating the more mundane choices we have to make within a day.
Related: How to Budget Your Money – 10 Top Budgeting Tips
4. Get Informed
This is perhaps the most important tip for gaining wealth. Educating yourself in money literacy is crucial for successful finances. Wealthy people know how to diversify their financial portfolio, spreading their resources through a variety of investments. This way, if one investment fails, you still have a cushion to fall back on.
Getting and staying informed on supplementary topics is also a habit of wealthy people, who report spending very little time watching TV and engaging in social media but stress the importance of daily reading.
Making good use of reading time can also help you increase your communication skills and sharpen your critical thinking skills, which will make you more valuable to your clients and colleagues.
In this way, reading can be considered both personal and professional development. Among the steps to becoming wealthy, getting and staying informed will separate you from your competitors.
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5. Be Active
While taking steps to gain wealth, don’t forget to maintain and develop your ties to the community. Wealthy people seldom become rich without the support of others or their products. Give back to your community in an active way by volunteering or donating.
This active involvement may even help you build a valuable relationship, resulting in a larger client base. Don’t forget, the boards of not for profits often include wealthy, successful people.
Business relationships are often formed through these connections. Most tellingly, among the steps to becoming wealthy, using your spare time to network, volunteer, and stay active within your personal and professional communities has been identified by many wealthy people as a key to their own success.
Another tactic of becoming active in your community (personally and financially) is to consider getting a mentor. Many wealthy people attribute the first steps to wealth and success to a mentor—a trusted advisor who offers advice and actively participates in the mentee’s personal and professional growth.
If you’re shy about approaching someone you admire, remember that it is significantly flattering to be asked by a more junior member of your profession to offer guidance. Accepting advice is key to understanding how rich people think.
One key to staying active is to set specific goals. Goals offer motivation and encouragement. Financial goals could include purchasing a house, paying off debt or retiring by a certain age. Keeping goals in the forefront is crucial in understanding how to build wealth. If you let your goals dim to a temporary preoccupation, taking even small steps toward them will seem daunting.
Remember, every goal is achieved piece by piece. To make your objectives realistic, prioritize them by thinking about them in stages. This may mean that you take small steps each day toward achieving them or save a small amount from every paycheck in order to realize your benchmarks.
Some financially successful people keep notes in places they regularly see for inspiration—a way of reinforcing how rich people think.
Achievement is rarely based on luck; set active yardsticks for yourself and stay determined. Setting goals and then taking active steps to become wealthy will create for you what seems like good luck to others.
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6. Stay Healthy
It sounds obvious, but maintaining and working toward good health will help you save money and is a crucial step to building wealth.
Not having enough time is the most common excuse for not being physically active. However, exercising is one of the key habits of the wealthy. Although it takes some time, daily exercise helps keep cardiovascular health and energy high, allowing you to maximize your work hours without feeling too tired or unmotivated.
The cost of health care is a key reason for debt accumulation. Due to this concern, making sure your body is in top shape is one of the best investments for your future. Eat plenty of fresh produce to maintain a balanced diet. The extra cost will still be more cost-effective than a hospital bill and should be considered a key component in understanding how rich people live.
The challenges of maintaining health are, of course, more difficult for those with less financial resources. However, as the connection between health and wealth grows stronger, this may be the most convincing reason for building wealth as a main lifestyle and financial goal. For this reason, concerns over how to build wealth are worthy of your consideration.
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