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Why the rich are rich?




You will need to do things differently – if you want a different result from your money!

Over the last couple of years I’ve looked at exactly what it is that makes the difference between
those that are incredibly wealthy and those just getting by, the J-A-M’s as Theresa May called them.

Whilst there are considerable differences in the overall wealth the are some fundamental differences between their approaches to money. I’ve been studying these for a number of years and the conclusions I’ve arrived at are interesting. There is no right or wrong answer in this short article but it does seem to concur with a lot of the research that’s already out ‘there’.

When talking to and commenting on those very wealthy people I’ve had contact with I have only included those that are self made, ignoring those lucky enough to have inherited wealth.

Mindset, money and the medium term future.

Two aspects of modern life will change a lot in the coming years, one is the death of the high street as we know it and the second part is technology. These changes will be profound, yet with some effort and a little knowledge it should be possible for everyone to have a share in the future, to have a seat at the big table, where the party’s at.

No matter how far back in time you want to look, you’ll note that the system of capitalism favours those with the available money and those that can move fast – in 2018 everything is moving faster, which is why there are so many millionaires and billionaires. I suspect that the pace of change will be even faster in the coming years.

The changes have always made the rich richer and the poor, poorer. The evidence for this is all round us and I don’t for one minute think it’s going to get better without a nudge. I do accept that there is enough money to go round, enough for everyone.

But I don’t believe that it should be taken from the rich and given to the poor – that does nothing for them long term, except make them dependent.

It’s all about the process.

Wealthy individuals broadly accept that becoming wealthy is a process that can be learned by anyone, whereas poor people make the assumption that the rich have a secret that no one else knows.

Understanding that a pound spent never comes back. Wealthy people spend their money more slowly than the poor, they don’t buy stuff unless it’s really needed and then they often look for value.

Either way they take a longer time to  buy. No money is ever spent on impulse and they always shop with a list and never ever buy things that aren’t already on their radar as something that’s needed.

Making your money work hard.

By understanding about money and how it really works it’s possible to make it deliver for you. Most of us that work for money (sell our valuable time) end up having to wait until we are half dead (retired) before we can slow down or start to enjoy our hard earned cash. Yet, there is a class of people (let’s call them the rich) that seem to enjoy their investments, or at least the returns on their investments well before being half dead.

They do this by investing on smarter basis than the poor, obviously. The rich, use models of ‘asset allocation’ or spreading their risk and invest for income not capital growth – they also take a lot less risk with their money.

The poorest amongst us tend to think that ‘they’ll be lucky’ so speculate more on lottery tickets and other forms of gambling. Whereas the wealthier tend to avoid this kind of investment as being far to risky.

No matter how much money you have/don’t have you should never take a risk with all of your money. That’s the  quickest way to the poorhouse.

Spending less than you earn – therefore making sure that you don’t need to borrow.

No matter how little you borrow – you are mortgaging your future income. Cash that you are trading your life for is being soaked up by a third party – the lender. If you are borrowing to purchase something that goes up in value – like a house or precious stones it makes sense to borrow.

However borrowing to fund day to day spending or to buy stuff is a guaranteed way to future unhappiness.

Having a focus on a money education will help

What you don’t know, you don’t know.

By design we are not able to manage money, it’s not something we are born with. You will need to get  educated about money if you are to make it work for you. Your parents probably don’t know how it works.

The better educated you are about money, the more you’ll understand it; the more you’ll make it work for you.

By following these basic steps it seems that whatever happens in the short to medium term your financial independence is  assured at some point in your lifetime. It really is.

Understand, that having a steady income from assets allows freedom from work. Even if it’s only a small amount.  You’ll get time freedom to use as you want, could go be used to deliver a better political system, to allow time to clean up the environment.

It’s obvious that the current system is not working, not delivering for all. And with the rich in charge of the systems – and they are in charge we will only get more of what got us here.

For more helpful insights in this area of your life, get in touch, the more you know
the more you’ll make.

Richard – Chief MoneyTrainer aka The Pitbull of Personal Finance.