Credit Suisse reported that the top 1 percent of the world’s richest people have more than half the world's total wealth. Rich people think and act differently from other people in general. They not only work hard to increase their wealth, but also smartly manage their money. There are several things we can learn from their principles and values.
1. Avoid bank loans and credit cards
Warren Buffett once said in 1991 at Notre Dame, “I’ve seen more people fail because of liquor and leverage — leverage being borrowed money. You really don’t need leverage in this world much. If you’re smart, you’re going to make a lot of money without borrowing.”
He further advised that if you are forced to borrow, do so wisely so that you can make the best decisions for your future. Good debt brings you to a better place in the long run, while bad debts do not have a positive impact on your life. Do your best to minimize good debt and stay as far away as possible from bad debt.
2. Use the "50-30-20 percent" strategy
Kyle Taylor, Founder and CEO of The Penny Hoarder, who was a bankrupt and later became a self-made millionaire in a matter of years, said there is one simple formula to achieving frugality.
This rule is called the 50/30/20 rule. Set aside 20% of your money for emergency fund or long-term savings. Spend 50% for your basic and daily needs and 30% for entertainment and fulfilling your other “wants”. With a defined breakdown of spending habits, it gives you the control to make wise financial decisions.
3. Be a smart buyer
"You will soon discover that the greatest ROI level you can get is to manage your own personal expenses," Mark Cuban wrote on his blog. He further advocated saving as much as one can, by giving examples such as choosing water over coffee and mac and cheese over McDonalds.
Cuban also suggested things like buying a two-year toothpaste at a 50 percent discount. He claims never to have bought coffee at $2.50, which costs only 20 cents to make. He makes his own coffee every morning, and spends the rest of that money to invest.
4. Not just rely on salary
Relying on salary alone does not make one become super rich. Billionaires like Warren Buffet, Carl Icahn and Donald Trump make their money work for them instead. This is done through investments such as stocks and others.
However investments are not without risks and so one needs to understand their risk appetite in order to know which investments are suitable for them. This includes passive long-term investments or short-term investments that offer investors greater liquidity. At Kapital Boost, our investments are short-term project based in nature, offering investors attractive returns of 14 – 24% per annum.
5. Find your Passion
Your bank account may be zero, but confidence does not cost anything. In the words of Oprah Winfrey, "You become what you believe." Believe in change for the betterment, and soon you will be on that path of change.
Discover your passion, whether it is sewing, saving animals or writing. Equip yourself with knowledge and start learning about your area of interests. The sooner you do it, the better.
6. “Money equals freedom”
Kevin O'Leary, a successful Canadian businessman and a prominent investor once said that money equals freedom. Money cannot buy freedom, but having enough money secures your basic needs, such as food and shelter. With enough money also you can get access to the best doctors and medical care, hire an assistant to do your mundane stuff or even plan a vacation during peak seasons. Having enough money gives you the freedom to choose what you want to do, and when you want to do it.
7. Never forget that money is not everything
Grant Sabatier who is dubbed the Millennial Millionaire, said that money is not everything and not worth sacrificing health, family, friends or new experiences for. While he believes that having money is freedom, it is also just a tool for creating experiences in life. Set your lifestyle in a way that would answer pertinent questions like what will you do with your money, how many hours a week do you want to work and how much do you want to travel.
At the end of the day, making more money becomes more beneficial if you have a plan on what to spend it on.
Notice how millionaires manage money differently from most people do. Start with a positive mindset and make small changes. You will be in their footsteps to building wealth.
Read also : 5 Books for Better Business Insights