After reading many books, conducting interviews and doing research, we at The Money Vikings have noticed 3 consistent patterns of the rich. These are secrets that wealthy people have used to become and stay wealthy. We are not talking about the “illusion of wealth” that is all around us. People driving cars they don’t own, wearing clothes paid for with a high interest credit card or simply acting the way they think rich people act. Our society is filled with the illusion of wealth perpetuated by media stereotypes. As brilliantly laid out in the book “The Millionaire Next Door“, most wealthy Americans are not anything like what the media portrays as the stereotype of being rich. Most of them look quite humble from the outside. Most do not prefer caviar or luxury cars. Most did not actually inherit their wealth. Here are 3 things you can do to harness your own wealth.
ONE: Make your money work for you
Most people work for money, trading their time and skills for money. That is fine, but most of us will never make enough to truly become wealthy. Very few of us become high paid movie stars, athletes or wall street tycoons. Therefore, join the viking army and put your money to work for you. Let’s say the average American makes $60,000/year over 30 years. That person will make $1.8 million over their career. Much of that will be literally and figuratively eaten up surviving. Therefore, they must put as many of those dollars as they can to work for them into assets. Dividend stocks, low cost index funds, rental property, royalties from intellectual property, small business income or other forms of passive income. The great news is that in the modern world access to these vehicles are more available than ever.
TWO: Use time wisely
Time is important for a number of reasons. Your assets must have time to achieve the fruits of compound interest. Compound interest is basically when the interest you earn on your money is making more money and so on. Einstein called compound interest the 8th wonder of the World. Warren Buffet said, “those who understand it earn it, while those who do not pay it.” Check out a Khan Academy video on compound interest for an in depth explanation, https://www.khanacademy.org/economics-finance-domain/core-finance/interest-tutorial/compound-interest-tutorial/v/introduction-to-compound-interest. Or if you do not want to understand it, make some smart financial moves and simply earn it over your life. Time is also important to the wealthy because I think many of them use it wisely. To achieve wealth many wealthy probably do not waste a lot of time watching TV or doing mindless activities. They are probably constantly learning or taking care of themselves or their family or working. So in general, think of time as an investment too. This can also include an investment in spending quality time with people you love, learning new skills, etc. One more thing about time and that is timing. Warren Buffet said “try to be greedy when others are fearful and try to be fearful when others are greedy.” In other words, when everyone is running around investing in the big hot thing, be cautious at that time. But if something is a sound investment and prices have been beaten down by the market, scoop up as much as you can manage.
THREE: Use leverage wisely
What does this mean? It means that most of us will not be handed a million dollars and asked to go invest it. Therefore there are times when we may want to borrow money to invest in something that can make us more money. Classic examples are small businesses or real estate. In these cases we are leveraging the power of other people’s money to purchase an income producing asset. Most wealthy people seemed to have figured out ways to do this successfully.
We may not be the next Warren Buffet or other billionaire, but we can mimic some of their habits and create wealth in our own lives.