When you think about Rich, what comes to mind?
Men in suits, cruises and yachts, high end luxury fashion brands, gourmet food, access to exclusive memberships. Maybe, access to a financial wealth manager.
However, in my last 10 years of being very close to very rich people, and actually through my life, having access to a lot of privileged people, I have found that these couldn't be farther from the truth.
Here are nine personal finance lessons that I have learned by being around wealthy people that changed my life.
1.True wealth is not flashy.
My grand uncle, used to be a millionaire, used to roam around streets with ragged clothes and tattered shoes. Now, obviously he was frugal to an extreme point, and by no means am I suggesting that you need to be like that. But what I'm suggesting is that by looking at him, no one could say that he was a millionaire.
He was known as an educator, a teacher, and as an extremely respected person amongst people, and that is because he had unlimited amounts of money for education, for helping people in need or spending it on family. So, he had his money dialed in. Rather than spending on flashy things to impress peers, he chose to spend his money on things that he cared about, and that is true wealth.
2. Keep your life simple and get the foundations right.
Before I go there, let me tell you a story. My dad spends an incredible amount of time shopping. However, he has only five sets of shirts and trousers, and this includes what he wears at home as in his pajamas, and it is so embarrassing sometimes to take him to a high end event because he simply doesn't have the clothes for that.
Again, I'm not suggesting that you be like my dad. Instead what my dad does is, he keeps his life simple and he gets the foundations right. When you get the foundations right, you don't have to spend an enormous amount of money, but also time and energy in upkeep, maintenance, and repair. The more you complicate your life, the more money, time and energy that you'll have to spend on it.
To be honest, if you don't get your foundations right, no amount of repairs and maintenance will get your foundations right.
3. Invest in yourself.
Frankly, I have not seen a single wealthy person who hasn't made it a priority to improve themselves in one way or another. They have invested in their education, their higher education. They have kept on continuously learning during the time they were employed.
What I really want to drive home is the fact that, salaries are correlated with your education. Whatsoever social media tries to tell you that actually structured education has no value in making you wealthy, data shows otherwise. You can believe social media or you can believe data. You be the judge.
4. Read at least one personal finance book.
A lot of people across the world are complaining that schools don't teach you personal finance. Governments don't teach you personal finance. But what would really help is you picking up a personal finance book, reading it cover to cover. Implementing what the book suggests.
Now, don't pick up a book by an author who doesn't have any expertise in the subject. Pick up an author who is an expert and whose financial philosophy you agree with.
Personally, I have found Ramit Sethi's 'I Will Teach You to be Rich' as one of my favorite books.
5. Set up a financial goal and do whatever you need to do legally to achieve it.
Your goal could be anything. It could be getting out of credit card debt. It could be saving your first thousand dollars. It could be actually saving up a deposit for your house or building generational wealth.
Take the first step. Figure out what the goal is and how you can get there.
For example, if you want to build generational wealth, maybe where you start is putting aside money for your children's education fund.
If you want to pay off your credit card debt, maybe start with automating your finances.
If your goal is to buy your first house, maybe start with building a deposit pot and if you are struggling to save up for a deposit while renting, consider moving in with friends or family to help you support build up that deposit.
6. Reward yourself
I'll be honest, I was really, really bad at rewarding myself. I used to set up goals. I used to achieve them. I'd never celebrated. I moved onto the next one. Now this causes problems.
The first one is burnout. When you are putting your body through stress, you are getting an adrenaline spike. Your adrenaline spike only resets when you have a dopamine and a serotonin hit, which is what you get when you celebrate. So celebrating and rewarding yourself actually helps you prevent burnout.
There's another problem that arises in absence of reward. You are really training your brain and your body to go through periods of stress so that there's a reward at the end of the day, if your body doesn't see it, the next time you are putting your body through that amount of stress, it'll only do half-hearted work, which means that you achieving your goals might not be as attainable as before.
This will keep happening till you actually start rewarding yourself and reinforce the process.
Rewarding yourself doesn't have to be an exotic trip or an extravagant event. It could very well be curling up with a book for an hour with some tea. Your reward has to be dialed in for you, not for someone else.
7. Cashflow is the king
Lot of people have heard about that Cash is King. I will take this one step further and say, not cash, but cash flow is king, equity is queen.
Let me explain. There are a lot of broke millionaires, which means that there are people who own a lot of real estate, but they don't have cash flow, so they can't pay their bills.
Now consider this person when they face, for example, a medical emergency, where will they get the cash flow from? You can't pay the hospital with equity or real estate. You need cash flow. Cash flow has to be the king. However, to build true wealth through the generations, you definitely need equity and you need to build your wealth and portfolio in a way that you address both cash flow and equity. But if your back was against the wall, I personally would choose cash flow over equity, at least to cover my emergency expenses.
8. Money buys freedom
A lot of us get confused about this term called freedom, and I can go on a completely different philosophical tangent about freedom. However, I think what most of us mean when we talk about freedom is time freedom. We want to do what we want to do, when we want to do it.
If that's the goal, money is one of the best tools out there to buy back time.
Imagine you can buy two hours of your day back by hiring a cleaner or a chef or a gardener. Money is an excellent tool to do all of that.
However, when people start pursuing financial freedom, they get really confused about the goal that they are trying to achieve and they end up pursuing financial freedom for all of the wrong reasons.
9. You need to be on the same page about your finances with your partner
It is absolutely critical to talk to your partner about money. I know a lot of couples out there, they do not ever talk about money. They put conversations regarding money under the carpet and then find themselves in an extremely precarious financial situation. This is something that, I don't think most of us think about.
In fact, talking about money early on in a relationship is often frowned upon. I find that really surprising because if building financial success is a part of your plan, you absolutely need to be having money conversations.
If financial success is one of your priorities, you need to act like it's your priority. The reason being, if one of you has a very different money philosophy to the other, you might find that you keep on earning, saving and investing while the other person keeps on putting debt on the credit card bill. So, no amount of you saving and investing will fill the hole, and this is like having a leaky bucket. You keep saving and investing, but if your partner keeps acquiring new credit card debt, you will never be able to see the financial success that you want to see. Obviously, every couple is not like that. There would be people who are aggressively saving and investing together, and sometimes they don't have their vision for their truly abundantly successful life.
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