There are things that the rich people know that average people don’t. This is why they are wealthy in the first place. They learn these along the way while building their wealth. They apply what other rich people did on their own lives. Do you think that average people should do the same?
1. Rich people know how to outpace inflation. Can you imagine the cost of 1 kilo of rice 10 years ago as compared today? Do you notice the rising tuition fee every year? This happens because of inflation. Rich people understand that the cost of commodities and services are rising every year. Because of this, they make sure that their money is growing more than the current inflation rate. They look for facilities that can help them fight the losing value of the money overtime.
2. Rich people know how to plan their estate. One of the important financial aspects that is overlooked by average people is the dreaded estate tax. Some don’t even know that this tax exists. Rich people know that they need to plan ahead of time for their estate. It may take up to 20% of their assets in the future if something happen to them. They protect themselves through life insurance so that this will handle the costs. Also, some put up their own corporation so that they can take advantage of the probate fees.
3. Rich people know the discipline of saving and investing. Rich people have the habit of consistently saving and investing for the future. Most of the time, becoming rich will take overtime and not overnight. They know that discipline is the key in growing their money. They realize that earning money is difficult but saving and growing money is even harder because discipline and time are needed.
4. Rich people know how to protect their responsibilities while building wealth. One should take care of their responsibilities while building wealth. These responsibilities include basic needs and the family’s future needs. Rich people make sure that their growing money is protected by getting themselves life insurance and healthcare insurance. Life insurance can help for the financial adjustments of the family if they die sooner. Healthcare insurance can ease up expenses on medicines and hospital bills for medical needs and if they live longer.
5. Rich people know that setting up an emergency fund is essential. Emergency can happen anytime and anywhere. It is very important to set up an emergency fund for the uncertainties. Rich people know that these can happen and funds is needed. The money is ideally to be set aside in the banks and some should be cash on hand for daily expenses.
6. Rich people know how to avoid unnecessary debts. Consumer debts eat up the potential of the money to grow faster. Instead of allocating money on investment, the money is wasted for the interest incurred in debts. Rich people know that still cash is king. If they can pay it in cash they will do it. They also have the knowledge of taking advantage of using the credit card wisely.
7. Rich people know what is the difference between needs and wants. Needs are the things that are necessarily to be bought or else you will die. Wants are the things that can wait and be planned ahead of time before actually getting them. Rich people know that needs should be prioritized and not the wants. They put value more on the money for its potential to grow rather than spending them in things that depreciate overtime.
The average people should not take this for granted. If the rich people managed to become wealthy, there is no reason why the average people can’t.
Are there other things rich people know? Please share them and meet us in the comments.
PS. We conduct Free Financial Check Up if you want to know the secrets of the wealthy and grow your money wisely. Check out our financial coaches here.
Photo credit: Murad Hassan