By Casey Bond, GOBankingRates.com (TNS)
Ask most personal finance experts and they’ll tell you the secret to becoming rich is no secret at all: Work hard, live below your means, and save every dime. The nation’s wealthy, however, might disagree.
There’s no shame in a modest lifestyle — even Warren Buffett lives frugally. But if your goal is to get rich, it’s helpful to know these secrets the ultra-wealthy aren’t likely to share.
Salary Isn’t The Whole Story
Climbing the corporate ladder will only get you so far. At some point, you reach your earnings potential and plateau. The rich know that in order to grow wealth, it’s important to make your money work hard for you — not the other way around. In fact, Robert Kiyosaki, author of the personal finance book Rich Dad Poor Dad, built his entire money philosophy around this concept.
Generating income from passive, rather than active, income sources is the best way to do this. Investments that yield passive income include dividend-paying securities, rental properties, profits from a business you do not directly manage on a daily basis — even royalties on creative work or inventions.
Take Advantage Of Time, Not Timing
If the recent market activity proves anything, it’s that no one can predict what the market will do tomorrow. The wealthy know this and make no attempt to moonlight as day traders.
“Time is more important to investment success than timing,” explained Peter Lazaroff, a financial planner. “Most of the population believes that timing the market’s moves is the key to growing rich through the stock market. The wealthy, however, understand that time and compound returns are the most important factor in growing wealth.”
Though it might seem counterintuitive, getting rich requires investors to adopt an unsexy buy-and-hold strategy, ride out market fluctuations, and ignore speculation.
Put It In Writing
The difference between having an idea and putting it on paper is often what separates the uber-successful from average folks. And if you equate success with wealth, it might be time to start writing down your goals, both large and small, in order to become rich.
Thomas Corley, author of Rich Habits: The Daily Success Habits of Wealthy Individuals, noted that 67 percent of the wealthy people he surveyed wrote down their goals, while 81 percent kept a to-do list. If your goal is to become a multimillionaire, write it down along with an action plan for making it happen.
Understand Value Over Cost
According to Justin J. Kumar, a portfolio manager, “The wealthy person has three best friends: her attorney, her accountant, and her adviser. The wealthy tend to use the law and tax code to their advantage when figuring out how to maximize their wealth, especially over multiple generations, and they are not afraid to spend money up front for counsel to get these answers.”
Kumar explained it’s common for middle-income Americans to cut corners in order to save money, yet ultimately find the results lacking. “The wealthy look at value over cost, but they are still prudent in their decisions,” he said.
Image: Warren Buffett caricature, DonkeyHotey via Flickr