Friday, October 2, 2015

Habits of Wealthy People

Thanks to Jim Yih for the idea and some of the content

There is not get rich scheme that will work for all of us, to get to be wealthy as the top 1% we have to be earning $215,000 a year or have a net worth of 2.5 million. Many Canadians have this net worth because they own property that has accumulated in value over time, but they do not consider themselves rich. In order to accumulate wealth in Canada or any other country you have to have some good habits.

What are these 20% doing right to accumulate the majority of the wealth in Canada? Numerous books and studies have tried to answer this question so here are some habits of wealthy Canadians.

Save regularly.

80% of the wealthy are first generation and they built their wealth one step at a time. One of the key habits wealthy people possess is a systematic disciplined savings plan. The best way for anyone to develop this habit is to start an automatic monthly savings plan where money comes off your paycheck or out of your bank account before any other expenses or deductions. Studies suggest that wealthy Canadians save about 20% of their income.

Live below your means. (Spend less than you earn)

According to the book the Millionaire Next Door by Thomas Stanley and William Danko, you may be surprised at what a wealthy person looks like. According to their research, the typical wealthy person might not be the one that drives the nice new Mercedes, living in the biggest house, wearing the top designer clothes. Rather, the millionaire next door is the person living in the same bungalow they have lived in for the past 20 years, they may drive a nice car but it is an older well taken care of car with lower mileage.

Have a Budget to know where your money is being spent.

If you want to become wealthy, you should develop a habit of tracking where you are spending your money on a monthly basis. Budgeting can be a very intimidating word but the fact remains, it is an essential habit for wealth accumulation.

Go into debt only when necessary.

Wealthy Canadians make a very conscious effort to avoid, minimize and pay off debts. It is so easy in our society to access debt. One of the habits you’ll need to build wealth is to avoid spending money you don’t have.

They maximize income.

In a study by Statistics Canada, there is a correlation between wealth and income. The more money people make the more likely they are to build wealth faster. Take time to train your mind to think outside the box about ways you might be able to increase your earning power. This might mean getting more education or starting a business or getting a part time job, etc. No one said building wealth did not take some effort.

Go into debt to own your home, or other assets that increase in value over time

The majority of wealthy people own their own home. Most wealthy Canadians have equity in other appreciating assets like business, stocks and real estate. The next time you put your money into something, ask yourself if it is an appreciating asset or a depreciating asset.

Use a team of Professionals to help you acquire and keep your wealth.

Wealthy people typically have a team of professionals to help them accumulate, manage and protect their wealth. This might include accountants, lawyers and financial advisers. Studies suggest that although they use professional advisers, they ultimately make the final decisions themselves. If you want to become wealthy, you must seek help but ultimately you must retain control over key decisions which means getting educated about wealth accumulation.

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