As a child, I remember reading about the wealthiest people in the country and wondering, how did they get there? Was it intelligence, hard work, or just plain luck? Now fast forward to my adult life with 10+ years of experience as a financial advisor, and I have seen how many people have built their empires and have accumulated wealth. Some inherit large sums of money, but many earn and save it. Here are five things successful people do to build wealth:
- Successful people save systematically – Many people save out of each paycheck for their 401k, and maybe some to savings, but some people take it a step further. They take substantial amounts of their income and have it automatically deducted from their bank accounts each month and put directly into investments for additional goals. With good planning, the result can be what they need for their desired lifestyle, and any additional dollars are getting compounded growth over time.
- Successful people get professional help – While you might be capable of doing your taxes on your own, doing a living trust online, or picking your investments, successful people realize they don’t have time to be an expert in all of these areas. Instead, they surround themselves with skilled professionals they can trust to take care of these things for them. Even the best athletes have coaches; so do the best business people and entrepreneurs. You can’t be an expert in every field, so focus on the ones you’re good at and leave the rest to the other experts.
- Successful people follow a budget – This used to involve keeping detailed spreadsheets of your income and expenses, but now it is easier than ever. There are online budgeting tools such as Mint.com that will automatically track your spending and alert you when you are close to reaching your set spending limits in certain areas. Once you have a handle on where your money is going, it is easier to identify areas that can be optimized and places where you can direct more to saving for your goals.
- Successful people live within their means – I have noticed that those people who are able to build wealth tend to live within their means. When they get a raise, they add it to their savings and do not increase their spending. Think of Warren Buffet, who is one of the most recognizable people who has built a fortune from nothing. Even though he is one of the richest men alive, he still lives in the same home he bought in 1958 for $31,500. And he drives a Lincoln Towncar, no Bugatti’s for Warren. This mindset has helped him build his empire.
- Successful people stay invested – Markets are volatile and staying invested when they go down can be scary. History shows that time in the market could lead to higher returns, not timing the market. So think about this fact when you are scared of a market downturn and want to get off the rollercoaster ride of investing when emotions are high. Missing just a few of the best days of the market can greatly reduce your long-term returns. Therefore, successful people tend to stay invested because they take the emotion out of investing and turn to history as their guide.
Sure, not all successful people do all of these things, but they could be great tools for reliably building wealth. This requires a long-term mindset when a lot of people want instant gratification. I challenge you to take a real look at your behavior to see if it is in line with these five ideas. Seemingly insurmountable tasks could be accomplished one step at a time and each one of these steps can put you on a track to greater financial success.