THIS POST MAY CONTAIN AFFILIATE LINKS. PLEASE READ MY DISCLOSURE FOR MORE INFO.
I love the show Shark Tank. If you’re not familiar with it, there is a panel of five investors (“sharks”). Each week, they give entrepreneurs an opportunity to pitch why these sharks should invest in their companies.
Needless to say, during the pitches, the sharks make many pithy and funny comments, whether it’s Kevin O’Leary touting his knowledge of expensive wine, Robert Hershovic discussing his love of fast cars, or even Mark Cuban emphasizing his ownership of the National Basketball Association (NBA)’s Dallas Mavericks. It’s fascinating to hear their unique perspectives and business acumen. Mark Cuban refers to the show as the “New Age lemonade stand”.
Each week, I tune in to learn a little about business and also, of course, for entertainment. Truthfully, I also like to hear what very rich and successful people decide to spend their money on. So today, I thought I’d share the ten money principles many rich people live by. I have also incorporated these principles into my Reaching FIRE course, so click on over to sign up!
1. Rich people don’t spend everything they make.
When I teach Reaching FIRE, I come across people that really struggle to save for their future. Oftentimes, they do not like their current jobs. Their only outlet for happiness may be spending on themselves. In turn, that creates a vicious cycle of dependency on an unenjoyable job to fund a lifestyle to forget about that terrible job. This is a miserable existence. It often leads to spending all of their earnings each month.
Successful people, on the other hand, often times obtain jobs that they love. So in contrast, they may not feel the need to overspend in order to bring joy in their lives.
But, what if you don’t love your job?
You can still bring happiness to your life without spending money. Seek out activities and hobbies that don’t involve large expenses. You can hike in the great outdoors, play board games with friends, or even curl up to read a good book from the library.
With the money you save, you increase your savings so that you can hit your retirement goals later in life.
2. Rich people don’t squander opportunities to increase their wealth.
When rich people become wealthy, they don’t stop at their well-paying jobs. They are on the lookout to improve themselves, including increasing their financial status. From looking for ways to receive a promotion to creating side businesses, they strive to increase their income at a rate higher than their lifestyle expenses.
Where can you begin if you want to increase your wealth?
Start reading. Rich people are constantly reading to improve their acumen. According to research, 85% of rich people read two or more educational, career-related, or self-improvement books per month. Benjamin Franklin was known for saying, “An investment in yourself pays the best interest.”
Did you know that:
Elon Musk was raised on books.
Mark Cuban reads three hours a day.
Bill Gates reads 50 books a year.
These are just a couple examples of rich people who see the value in reading to further improve themselves.
3. Rich people don’t buy shoddy quality.
Warren Buffett said it best: “Price is what you pay. Value is what you get.” Years ago, a friend of mine bought a Daewoo car. He bragged about the great deal he got on his brand-new vehicle.
He was convinced that brand-new cars were the only way to go and scoffed at my 10-year-old Mazda. His thought was there was no way that my Mazda could be as reliable as his new car. However, soon after purchasing it, his Daewoo basically lived in the mechanic’s shop. He ended up selling the Daewoo for a massive loss shortly after college. Meanwhile, my Mazda lasted me another five years. I easily beat him when it came to cost-per-mile value in that instance.
4. Rich People find ways to make money work for them.
“How many millionaires do you know who have become wealthy by investing in a savings account? I rest my case.”
— Robert G. Allen, author
Have you ever noticed that investment opportunities seem to fall into the laps of rich people all the time? Every time I watch Shark Tank, there is always one deal that seems like a no-brainer to me. I always think to myself, I wish I was in the position to be able to invest in one of these products or services. Since I’m not quite in that position yet, one way that I am able to deploy my cash is through investing.
One of my favorite things about owning stocks in the stock market is receiving quarterly dividends. Since I own a couple of ETFs and a small number of other companies, within 10% of my portfolio, I basically receive a dividend every single month. For the month of December, we made $600, simply because we own some stock. My hope is that these dividends continue to increase. In 2017, my portfolio was up almost 7% from the previous year. Eventually, I hope to live off my dividend income one day.
5. Rich people live within their means.
Sure, it may seem glamorous to spend a ton of money from time to time. Everyone has seen the Oscars, when actresses are dripping with diamonds and designers. But what you may not see is the security guard in the background since many of the pieces are actually borrowed and not purchased.
The only way that rich people stay rich is by living within their means. They must stay within their budget and know when to say “no” to certain items.
Actress Sofia Vergara seems to be handling her finances well: “I like business, and the truth is I save way more than I spend. I invest. I plan for the future. I have a special eye for opportunities and work harder than anyone might expect.”
6. Rich people do their homework.
“Rule number one is never lose money, rule number two is never forget rule number one.”
-Warren Buffett
Rich people oftentimes avoid get-rich-quick schemes because they know that it if sounds too good to be true, it probably is. They do their homework and research the ins and outs before investing. They realize how precious their money is and don’t throw it away on unwise investments. Their investment decisions take into consideration the calculated risks involved.
On top of that, they spread out their risk. They have the right automobile, home, and even life insurances so that they have proper protection in case of an unfortunate event.
7. Rich people don’t ignore their financial situation.
A lot of people are content staying in the dark about their finances. What they don’t know can’t hurt them, right? Wrong. Most wealthy people really understand their financial situation. They review their accounts on a weekly basis including their investments, credit cards, and bank accounts, to ensure that there aren’t any errors or omissions. This is a great habit. You can greatly reduce any fraud and challenge any surprising fees in your statements.
8. Rich people know what they know and get advice when they don’t.
Do you know who is the worst at stock-picking? Doctors. Doctors are notoriously bad investors due to their over-confidence in their abilities (aside from medicine).
Most rich people acknowledge that they don’t know everything in all fields, so they seek others who are more qualified than themselves. Even Warren Buffett has a right-hand man who he consults with before he makes large purchases at Berkshire Hathaway. Anybody that thinks they can do it alone without needing help is a fool.
9. Rich people take responsibility for their actions.
While rich people seek out others for advice, they don’t cede full control over to them. They take responsibility for the decisions that they make after receiving the outside help or advice. They realize that nobody cares about their money more than themselves.
10. Rich people figure out ways to get it done.
Rich people don’t dwell on excuses. Instead they find creative ways to be resourceful. I am in the middle of reading Shoe Dog by Nike founder Phil Knight. He writes about how he was running a company called Blue Ribbon when his supplier, Tiger Shoes, decided to renege on his deal. He decided that he had come such a long way in the shoe business and wouldn’t turn back. So, he created his own brand, Nike, and the rest is history. Moral of the story? Never give up.
I agree there are a lot of good examples in that list, and I’m happy that I do most of them, although maybe not as well as I should.
However it is a bit simplistic, and doesn’t take account of the barriers (real or perceived) that many people face.
Ms ZiYou recently posted…Fulfilled and frugal with a 80% savings rate
Thanks for stopping by Ms. ZiYou!!! Those are great points about the number of barriers that some people face and not always reflective of all the challenges. Thanks for sharing!!!
So true, Rob. I have almost always found that learning from and emulating people who have achieved what you want to achieve is a great path to follow. Tom
Tom @ Dividends Diversify recently posted…My Only Regret In Life: Speed To A Million
Thanks for sharing Tom!!! I’m right there with you, why try to figure out how to do things on your own when there are so many “mentors” that you can emulate along the way 🙂
Great list! There’s so much we can learn from rich and successful people.
I have to admit that I still buy shoddy quality stuff. I’m kinda blinded by the good prices hehe. I bought $10 jeans from Forever 21 and $15 ballerina flats from Pay less. The quality is not too notch, but they still last me for years (true story).
Ms. Frugal Asian Finance recently posted…3 Youtuber Lifestyles I Want To Adopt When Financially Free
That’s awesome that you’re able to get them to last so long!!! I haven’t had the same luck and cheap items normally fall apart within the year for me 🙁
Yes!! Definitely agree that acquiring knowledge through books is such a positive in life.
I never really thought about the perspective of hating your job, that was a great insight.
Thanks for stopping by Chris!!! After reading that statement, I have been trying to read a little bit each night in order to broaden my acumen 🙂 It’ll be interesting to see how many books I read this year and what insights I glean 🙂
That’s great man !
Love the list!!
I was going to add that Buffett reads about 500-1000 pages per day. He spends 80% of his time reading each day!
Love your car example. Does your friend know you wrote this? Lol
fin$avvy panda @ finsavvypanda.com recently posted…5 Reasons Why Starting a Blog Will Change Your Life Financially
Wow I had no idea he read almost a 1000 pages a day. That is some serious reading. I feel good if I can get 30 pages in 🙂
I like to use the term “wealthy” instead of “rich” when talking about financially independent people – assuming that is what you mean here too. Rich is lavish in my mind, wealthy is high net worth.
You mention budget briefly under another point, but I’ll say that for myself (wealthy, not rich) living by a budget to tell my money specifically where I want it to go, is key to our success. We’ve been budgeting since 2003 and can’t imagine ever stopping.
Brad – MaximizeYourMoney.com recently posted…Why You Need To Understand How Mortgages Work
Thanks for sharing Brad!!! I remember Dave Ramsey saying the same thing. You have to know where your money is going at all times, otherwise you become a leaky ship 🙂
I read Shoe Dog last January and loved it! We’ll have to compare notes.
This list is great, and something we all should try to incorporate into our lives.
Can’t wait to chat tonight!!!!
Erik @ The Mastermind Within recently posted…Give and You Shall Receive: Live with an Abundance Mindset
Hhahaa…I actually started reading the book based off your recommendation 🙂
Every time I’ve read a book, it has resulted in at least one useful thing I can implement into my own life. That itself is the motivation to continue to absorb more books.
SMM recently posted…Save Over $5,000 Per Year Easily
Thanks for sharing SMM!!! I tend to agree with you, when I read for purpose I tend to be able to pull out nuggets of wisdom. I really need to read more often 🙂
No free lunch. Every self made millionaire/billionaire has a story. We generally tend to look at their wealth and forget the sacrifices / decisions / hard work they made to get there. Nice article Rob.
dividendgeek recently posted…International Investing with funds (VGTSX, VEIEX, VDVIX, VFSVX, VFWIX, VXC, VEE)
I’m glad you enjoyed the article. It’s amazing all the sacrifices that people make along the way. Definitely shows a level of discipline that I need to instill myself 🙂
The emphasis on reading really stands out to me. I had no idea Mark Cuban reads 3 hours/day. It’s an art to effectively manage your time in today’s world, especially with multiple jobs and a blog. Prioritizing input and output is a dance worth improving on. I’ll work on that now. One question: do you consider reading blogs the same as reading books (assuming equal quality content). Thanks for another great article!
Mike @MikedUp recently posted…Mike’s top 5 podcasts of 2017 (and how it compares with 2016)
Hahaha…if reading blogs count than I definitely read at least 3 hours a day 🙂
What really stood out was how much reading all those rich people do. I would think that they couldn’t have that much leisure time reading books but at the same time reading will help improve yourself. So its more about learning than leisure! Great list MSM!
Kris recently posted…Expense Chronicles – January 2018 Prius Checkup, New Tires and Fitbits
Thanks for sharing Kris!!! I too was shocked at how much time rich people take to read. I definitely need to a take a cue 🙂
Great list!
#2 is something I’ve been trying to do more of lately.
Buying (and reading) books is one of the highest ROI investments you could actually make. I actually went back and looked at the books I read for the past two years.
One book I bought for $9.99 and I’ve made over a 100x return by applying the advice!
That’s awesome to hear that you’ve received such an awesome return on investment. I wish I had more of those ROIs 🙂
All great principles. Smart to take a look at people who have already accomplished what you are trying to accomplish. Very relevant quotes as well. Clearly it is working for them. If they have already figured it out, might as well try to duplicate and learn from those lessons. Thanks for sharing!
I’m right there with you. I try to emulate those that are more successful than me 🙂
Love the list and have been meaning to read Shoe Dog for a while now. Thanks for the reminder, my friend.
Shoe dog is incredible. You will absolutely love it 🙂
That last one is key. Be creative, resourceful, and persistent. Find ways to get things done!
I definitely agree with you. If you are resourceful and persistent you will find a way to reach your goals in life 🙂
I love these rules! I try to follow them as often as possible. Unfortunately the shoddy quality leads to additional homework and I was never the best student haha.
Hahahah…I was never did enjoy homework either 🙂
Haha Daewoos. I had a Daewoo computer monitor (I’m pretty sure it was the same company) and totaled my second car by rear-ending a brown Daewoo. I don’t think they even make Daewoos anymore, do they?
Making your money work for you can be tricky. Of course, the hard part is getting that money in the first place. The key here, of course, is to spend less than you make.
JoeHx recently posted…February 2018 Blog Statistics
Hahaha…I definitely don’t see Daewoos anymore. I’d be surprised if any of them are left on the road 🙂 You are absolutely right about money. It’s hard to put it together but once you get the ball rolling it picks up steam in a hurry 🙂
Great list!
Mawer Money recently posted…Five expert tips to make money-talk in your relationship more romantic
Thanks Mawer!!!