Rather than living pay day to pay day, what can you do to increase your wealth and improve your lifestyle?
Stressing about money, how you are going to afford everything you have to pay for, unexpected expenses and not having enough time or energy make life difficult.
We wrote about 4 families in the top 1% wealth bracket in Australia and how they manage their money previously.
Before reading, keep in mind, some of this might sound impossible and some might sound like there’s no fun in life.
It depends on your goals for wealth and life. If you want more wealth, sacrifices generally need to be made and we are not talking about “skipping your daily coffee”.
The habits here are based on those who built their wealth and are above average. Not the obscenely uber wealthy or famous.
Here is a breakdown of common habits the wealthy use to grow their wealth.
1. They Pay Themselves First: Start with $1 or 1%!
Treat your savings the same as any other bill that has to be paid but pay it first.
Doing this builds your savings, it can be automated to make it easier and as you adjust, you can increase the amount you pay yourself.
How To Do It
Start with $1 from each pay or 1% and as you adjust to living without that increase it to $2 or 2% and so on.
Choose the amount then set up an automatic transfer into a high interest savings account.
Do your research to find the right account for you and don’t withdraw because when you do, many drop the interest rate to a much lower one. Also, it defeats the purpose of paying yourself first.
Some people find it useful to have it with a completely separate bank too.
A few banks that might be useful and are fee-free include ING (who regularly offer a $100 sign-up bonus), UP (who are backed by Bendigo and offer an instant $15 bonus), and uBank (who also offer a bonus).
2. They Invest Consistently, Not Sporadically
Get professional advice or do your own research to determine how you want to invest then stick to it and be consistent.
How you invest will vary depending on your risk profile, what you are interested in and what your goals are.
Investing consistently will help grow your wealth and is a long term strategy, not a get rich quick scheme.
Compound interest and growth works best with time, whether it is your superannuation fund, investing in EFTs, business or anything else.
Know what you are investing, be patient and consistent.
How To Do It
There are micro-investing platforms that allow you to round up or invest small amounts but they do have high fees.
Another option is to set a target and invest when you reach it as per The $1,000 Project by Canna Campbell.
She found ways to make and save money then as she reached $1,000, she would invest.
Quit Like A Millionaire and The Simple Path To Wealth are two books that can help you learn about investing.
Check out these ways to make money on the side and these ways to easily save money.
3. They Track Their Net Worth, Not Their Income
Wealth is about what you own, not what you earn.
Doing what you can to increase your net worth through investing, improving your home to increase the value and decreasing your debt all helps with your net worth.
Read more about your net worth and how to increase it here.
How To Do It
Start with a simple spreadsheet listing assets vs liabilities and update it at least monthly.
Your assets are things you own such as your house, investments, superannuation, business, real estate etc.
Liabilities are your debts.
The wealthy do tend to have debt but those debts are for things that increase in value or generate income, not things that decrease in value.
Be strategic about how you use your money and avoid consumer debt.
4. They Avoid High-Interest Debt
Interest erodes wealth faster than you can build it but it can be hard to get a good deal if you have bad credit.
Unfortunately, debt might be essential at times and if you don’t have a good credit score or credit history, you won’t have many options.
Not only that but the options you will have are the highest interest rate ones.
Do what you can to avoid high interest debt but if you absolutely must do it (e.g. to fix your car so you can get to work) then aim to pay it off as soon as possible.
How To Do It
Check your credit score and credit history to ensure it is accurate and you know what you are dealing with.
Work on improving your score by paying bills on time, living in the same location for a long period of time etc.
The get started on eliminating your debt or the high interest ones at least.
As you pay this down and improve your score, look at switching to low or no interest rate options if they are available to you.
Use these tips to clear debt and deal with debt collectors if you have to.
5. They Think in Terms of ROI (Return on Investment)
Wealthy people see money as a tool, not an end. Your time and energy matter as much as money, if not more.
Anything you do needs to be assessed in terms of the return on your investment.
If you have been living with a scarcity/frugal/savings mindset for a long time, it can be an adjustment to value your time and energy when assessing what you are doing.
Members of our team and their kids get asked how they afford what they do such as travel.
It was because we invested in business and real estate, didn’t upgrade our cars with new loans every few years, did not eat takeaway food all the time etc.
We assessed what mattered to us, how we wanted to spend our money, time and energy then lived accordingly.
How To Do It
Ask yourself: “What’s the return?” before spending—time, energy, or money.
Some frugal habits save money but take a lot of time and energy.
Other habits might cost more but you save time and energy that you can invest in other ways.
Read about opportunity cost to learn more about how to do this.
6. They Buy Assets, Not Liabilities
Assets grow, they increase your wealth and opportunities. Liabilities cost money and decrease your lifestyle.
It can be tricky to get to this point if you had to pay for your education, have debts, needed a car, had medical issues etc.
But if you can clear those and focus on obtaining assets instead, you can improve your wealth.
As listed in tip 2, you can start small such as micro-investing, $1000 parcels or if you have a specific interest, you might be able to turn that into an asset.
For example, a parent of our team loves model cars and has collected them over the years.
He’s also bought bundles sometimes and sold off what he doesn’t use for a profit.
This enabled him to buy what he wanted, increase the value of his collections as they were complete and make a profit selling off what he didn’t want.
All of this was a fun hobby for him and is an example of a different type of asset building but you need to know it’s true value and the market for this to be effective.
How To Do It
Prioritize investments, skills, or businesses over luxury items.
It can be tempting to upgrade the car when you get a pay rise or to borrow the maximum you can to get things you want but that won’t help grow your wealth.
By driving older Toyotas, we had money to invest in education and business which increased our income and gave us more freedom.
Had we bought more expensive cars or upgraded when we wanted to, we would have missed income earning opportunities.
7. They Live Below Their Means (Even When Income Rises)
Lifestyle inflation kills wealth yet it is so easy to fall into that trap.
Thinking of the things you will buy when you get a pay rise, upgrading the house or car, a holiday etc.
Learning to live below your means and continue to do so as your income increases will enable you to build wealth faster.
We are aware that for some, they do not yet earn enough to live or pay for the basics and might never earn enough. Try to do what you can, though.
How To Do It
Get yourself to that point through promotions, educating yourself to get a better job, change companies for higher pay etc. There are tips for doubling your income here.
When your income increases, upgrade 10% and invest 90% instead of spending it all.
By allowing yourself a small increase, you won’t feel deprived, you get to do a bit while still investing and improving your finances.
8. They Learn About Money—Continually
Learn as much as you can and keep learning.
Many money rules from previous generations apply today but there are also various tools to make wealth management easier and different ways to invest that did not exist before.
Continuing to learn can also help keep you motivated with your financial goals.
How To Do It
Head to your local library and start reading the top financial books. I have a list of the financial books that helped me (it’s on my other site).
Listen to finance podcasts such as She’s On The Money to learn and be inspired.
Watch YouTube videos but make sure they are relevant to your country because some financial tips especially around tax and superannuation are country specific.
Do what you can to educate yourself and apply what you learn.
Note: It can be beneficial to meet with financial professionals to learn more and create a solid financial plan for you. Also, an accountant or tax professional can help you know more about your tax situation.
9. They Diversify Their Income Streams
If your only income is your wage, what happens if you get sick or injured and can’t work?
A single income leaves you vulnerable, whereas multiple income streams create stability and enable you to grow your wealth faster.
If you can live off your main income and invest the rest of the income streams, you can grow your wealth in ways you might not have thought possible.
How To Do It
First, assess how much time and energy you have to put towards a second income.
Next, consider your skills and interests, how might they be turned into a side hustle or passive income?
Research to see what the value of that idea is, if it is worth your time and energy or if you are better off doing something else.
Then get started on whatever it is you decide to go ahead with.
There are side hustle ideas here or check out the 5 easiest side hustles I’ve ever done, or how I made over $30,000 on the side one year.
If your income streams include shares or property, try to keep reinvesting the profits of those.
For example, when you purchase shares/EFTs etc you can opt to have the dividends reinvested.
This way you are creating another income stream while investing it automatically to grow both your net worth and the cash flow from that income if you decide to use it instead of investing it later.
10. They Associate with Other Successful People
We used to hate hearing this because we felt everyone was equal, we should not judge etc.
It’s not about judgment though; it’s about the fact that who and what you are surrounded by influences your habits.
One team member has a great example with different places they lived, and how they felt there, how their health was impacted and their finances.
They have lived in wealthy areas as well as lower socioeconomic areas.
The difference between them is extreme when it comes to conversation topics, encouragement, collaboration, etc.
In wealthier areas, they had more of a community, collaboration, networking, success, achievement, all of that was natural and it was easier to succeed.
Lower socio-economic areas had pockets or groups of amazing people who were encouraging but overall, the herd mentality was one of lack and tall poppy syndrome.
They achieved incredible things no matter where they lived but mentally, emotionally and physically, it was easier when surrounded by people encouraging them.
Note: We are not saying wealthy is better. It’s the mindset and shared knowledge, networks, opportunities etc that came in those areas that was such as stark difference. Those areas also had little cliques, especially a beachside area they lived in for a while.
Do what you can to surround yourself with people who have a growth mindset and who are encouraging, supportive and collaborative.
How To Do It
Join groups, online communities, masterminds, or courses in the areas of interest to you.
Be mindful of the general vibe in those groups and search for ones that will lift you up not tear you down.
Sports are an easy way to meet others and create a community for yourself with an immediate combined interest.
Look for networking events relevant to your business and lifestyle goals.
Online communities, masterminds and courses usually have private groups with like-minded people.
It might take you a little while to find the right ones but when you do, it’s life-changing.
11. They Set Long-Term Financial Goals
When you are clear on what you want and your goals are specific, you can measure your progress and make adjustments as needed.
Short-term goals should be the stepping stones to your long-term vision.
Keeping those goals in mind helps with decision-making and your habits as you’ll be less tempted to waste time or money because you know what you want to achieve.
How To Do It
Set 1-year, 5-year, and 10-year financial targets with the steps from your 1 and 5 year ultimately working towards achieving your 10 year financial goals.
Here are some articles I have written about my goals:
How to set and achieve goals
How to achieve BIG financial goals
WeMoney: An app to help you track your finances
12 Habits for a healthier, wealthier life with more free time
Once you’ve done that, I want you to look at the 12 Week Year and see how you can condense those goals and achieve them faster.
12. They Delay Gratification
Impulse control can wreak havoc on your finances.
Learning to delay gratification, focus on your long-term goals rather than spending on impulse will help you increase your wealth.
We know that it is an issue for many, which is outside their control e.g. ADHD. To manage that, learn what triggers you and make some changes.
For example, we realised meeting friends at a cafe or the shops would always result in me spending more or browsing and wanting more.
So we switched to going for a walk on the beach or around a sports track or similar instead.
It was better for our health and our wallets.
Read how to reduce temptation and these 10 tips to stop spending from an ex-shopaholic.
How To Do It
We use a 30 day delayed gratification list. Anything we want to buy on impulse has to go on the list.
In 30 days if we still want it, we can incorporate it into my budget but we are only allowed to get it once we get the money for it.
Putting it on the list or adding to cart and closing the shop helps us.
Others use a 72-hour rule where anything that wasn’t essential or planned cannot be purchased that day. You have to wait 72 hours.
This can be extremely difficult if you have impulse control issues. Some will rationalise it with “it’s only on sale today!” or “I will need it later so may as well buy it now” and so on.
It doesn’t matter what the discount is, if you did not need the item you did not save anything. You spent money.
If an item was reduced from $200 to $50, you didn’t save $150, you spent $50.
This is one of those things that gets easier the more you do it.
13. They Systemise Their Finances
Automation eliminates emotional decision-making which means you are less likely to impulse buy or waste money because it’s not available.
By creating systems and making it automatic on payday, you reduce the mental load and ensure everything gets paid as it should.
Review it regularly though to ensure you are not paying for things you no longer need or want.
Check subscriptions, insurance and all your bills at least annually but preferably more often.
Update any automations as your finances change.
How To Do It
Go through your finances and automate bills, savings, investments, and debt repayments.
Set up direct debits for the day you get paid and focus on your goals.
Read more about automating finances here.
14. They Look for Opportunities, Not Barriers
Mindset shapes action. Action shapes outcome.
Members of our team have faced homelessness, domestic violence, health issues, natural disasters and more.,
At times, the obstacles they faced felt insurmountable but they tried to look for opportunities instead of remaining focused on the difficulties.
When we focused on the difficulties, we couldn’t see ways to improve our situations.
Once we allowed ourselves to feel what we felt, process it and focus on what could happen, we automatically found opportunities.
It didn’t change everything immediately but it did improve otherwise impossible situations.
How To Do it
When faced with a setback, we ask ourselves 3 questions:
How can this become an opportunity?
How can I be grateful for it/what is there to be grateful for right now?
What are the lessons I can learn from this?
Learn more about how to apply those questions to your life here.
15. They Buy Quality, Not Quantity
We explained this in our article how buying luxury or paying more can be worth it.
Quality lasts longer and costs less over time. Buying the most expensive doesn’t guarantee quality either.
Do your research, buy the highest quality you can afford and save to ensure you can continue to replace items you need with the higher quality versions as they need replacing.
A great example of this is Terry Pratchett’s The Boots Theory:
“The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money.
Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles.
But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that’d still be keeping his feet dry in ten years’ time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.
This was the Captain Samuel Vimes ‘Boots’ theory of socioeconomic unfairness.”
How To Do It
Use cost-per-use thinking instead of upfront price when purchasing an item.
If a top costs $20 and you only wear it 5 times before it loses shape and you toss it, it is $4 per wear.
Vs a higher quality top costing $50 but you wear it 100 times then it is only $0.50 per wear.
It goes for anything, if a good quality fridge costs $1,500 but lasts 10 years vs a cheap fridge for $600 that lasts 2 years, then the more expensive upfront cost is worth it.
As you replace things, research the quality, longevity and overall value before making a decision on what to purchase then shop accordingly.
Note: If you are spending, make sure you use Shopback to get cash back. Look for upsized deals to save even more. This is one of the ways we save heaps on travel, appliances, beauty etc.
16. They Protect Their Money and Items
Get insurance for everything you need because one disaster can wipe out years of growth.
If you cannot afford to replace it, you need to insure it. This goes for your house, car, boat, conatents, everything.
Get legal advice for anything important too such as setting up your will, a family trust, business etc.
For example, if you decide to set up a home business, your insurance might not cover you anymore. There might be other legalities to consider too.
The wealthy know this and seek advice to protect themselves and their assets.
How To Do It
Get professional advice regarding your circumstances for which insurances you need such as health, home and contents, car, business, income protection and so on.
Have a professional sort your will and set up any trusts if needed.
17. They Understand Taxes and Use Them Strategically
Taxes are a major money drain if unmanaged.
Knowing how to reduce your tax can save you a small fortune which means you can build wealth faster.
It is not about avoiding tax or committing tax evasion. You are educating yourself anf using the resources to reduce how much tax you pay legally.
Professional advice is fantastic for this because each career and business has different things you can claim.
How To Do It
Learn deductions, offsets, and tax-efficient investment structures.
There are 2 great books for Australians if you don’t want to get professional advice:
101 Ways To Save Money On Your Tax Legally
Tax Secrets of The Rich
Both books are updated annually to ensure the most accurate advice.
18. They Outsource to Buy Back Time
We have a limited amount of time and energy. Time is a valuable asset and one you can get a little flexible with.
By learning to outsource, you save yourself time and energy.
Doing this when you are stretched thin already can be tricky.
Start small then outsource more as you are able to increase your wealth.
Read 18 time-saving tips for busy mums to get more ideas on insourcing and outsourcing.
How To Do It
Delegate low-value tasks (cleaning, admin, etc.) to focus on income-producing activities.
Start with something you hate doing or that takes a lot of time or energy.
A cleaner once a week or fortnight, someone to mow the lawn, a laundry service so you don’t have to wash, dry and fold the clothes are all common starting points.
Use the time you save to work on a side hustle or something that will generate more money than these tasks are costing you.
Then you can outsource the next thing to free up more time and energy.
19. They Create Money Systems for Their Kids
Generational wealth requires education. Learning as much as you can and passing that knowledge on.
This is also why the tip about who you surround yourself with matters. Those people are influencing your children too.
There are ways to set up their finances to increase their wealth so you both grow and they are not dependent on you or waiting for an inheritance.
How To Do It
Teach kids about saving, investing, and entrepreneurship early.
Get professional advice about how to set them up and teach them everything you can.
If you don’t know, learn or get help from someone who does.
Gift them knowledge by listening to podcasts and audiobooks in the car or having them on at home.
They might not realise it, but pieces from those shows will lock into their subconscious and their financial knowledge will grow without effort.
20. They Know the Difference Between “Looking Rich” and “Being Rich”
Flashy spending drains wealth quickly and isn’t always sign you are truly wealthy.
Be strategic with your spending, buy quality items and invest.
You can buy luxury items if you want but be smart about it. Buy it because you want it and can afford it, not because you want to impress someone.
How To Do It
Things that helped us stop longing for luxury goods to impress include:
- Had a style session done to learn what works best for us and dress accordingly. We got significantly more compliments, stood out in a crowd and landed more contracts for our businesses than when dressed in designer gear.
- Work on mindset and values. Knowing what we truly value, the lifestyle we wanted and having an open, growth mindset helped us achieve more than when we wanted to impress everyone or had a scarcity mindset.
- Grow confidence. We shared 20 tips to increase confidence here.
21. They Take Calculated Risks
Wealthy people became wealthy because they are willing to take smart risks.
If you are only comfortable putting your money into a savings account, you won’t be able to grow your wealth much.
Investing wisely through research and professional advice will help you grow your wealth.
What you invest in will depend on your goals, lifestyle and risk tolerance level.
Don’t go all out with gambling, high risk ventures or investing in things you know nothing about.
Be smart about it, invest consistently and be patient.
How To Do It
Start with small, low-stakes experiments such as increasing your skills to increase your income.
Micro-investing to see how you feel about shares, small investments like this can help you assess what would be worth investing in to you.
As you learn more about yourself and ways of investing, you can look to larger investments, or business ventures.
Resources Mentioned
Here are all the resources mentioned in the article to help you with your finances.
Books
The $1,000 Project
Quit Like A Millionaire
The Simple Path To Wealth
List of 10 finance books that increased my wealth
The 12 Week Year
101 Ways To Save Money On Your Tax Legally
Tax Secrets of The Rich
Apps/Other
ING bank with a $100 offer
Up Bank with a $15 offer
Ubank with a sign-up offer
Shopback
WeMoney: An app to help you track your finances
Articles
How the top 1% in Australia manage their money
24 ways to make over $25hr on the side
24 ways to easily save money
6 tips to easily reduce debt
Opportunity cost
How to double your income
5 of the easiest ways I’ve made money on the side
How I made over $30,000 on the side one year
How to set and achieve goals
How to achieve BIG financial goals
12 Habits for a healthier, wealthier life with more free time
How to reduce temptation
10 tips to reduce spending
How to get rich being lazy with money
3 questions to ask yourself to turn obstacles into opportunities
How buying luxury or paying more can be worth it
18 time saving tips for busy mums
20 tips to increase confidence
