The rich really are different—but maybe not in the way that you think. While most people’s idea of a wealthy lifestyle involves flashy cars and designer clothes, that’s a reality TV fantasy. The truly wealthy tend to live much differently than Instagram influencers. Here’s what they do that sets them apart from the rest of us.
They Don’t Drive New Cars
New cars are a bad investment. The moment you drive a new car off the lot, its value drops by about ten percent. As Ramsey Solutions explains it, “So, with a $30,000 new vehicle, you’re basically throwing $3,000 out the car window as you drive the car home for the first time!”
No wealthy person would willingly take on an investment with a guaranteed 10% loss. After a year, a new car will depreciate another 10%, and after five years it will be worth around 40% of the original purchase price. Most rich people aren’t buying a new car every year. In fact, it’s much more common to see them driving older cars. They buy durable, reliable rides and keep them in tip-top condition so that they’ll last for a long time.
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They Don’t Let Their Money Be Idle
Wealthy people know that leaving too much money in a savings account is a bad idea. While you should always have access to enough cash to cover an emergency, keeping more than that in an ordinary checking or savings account is a lost opportunity. Rich people put their money to work by investing it.
The national average interest rate on a savings account is .06 percent. Compare that to the historical average return on mutual funds. The U.S. Securities and Exchange Commission states that the stock market sees a return of roughly 10% per year. Sure, there are some bumps in the road, but in general, you’d make a lot more money by investing in a mutual fund. If you do the math, a savings account with $10,000 in it would grow by just $6 in a calendar year.
They Don’t Buy What They Don’t Need
Many people who build wealth do so in part by being frugal. If you ever get a chance to peek inside the homes of the wealthy, you might be surprised to see that they’re not as fancy as you imagined. Last year, we got a glimpse of Princess Anne at home in her living room, and to be honest, it looked almost shabby. Rich people spend money on quality goods that will last a long time, viewing their purchases as investments.
Warren Buffett famously lives in the modest home that he bought for himself all the way back in 1958. The five bed/2.5 bath home is very nice, but it’s not a mansion. When you compare the purchase price of their homes to their net worth, rich people are spending less than the rest of us on housing.
Rich people also don’t dine out as often. In 2013, The Thin Green Line author Paul Sullivan and financial psychiatrist Brad Klontz collaborated on a survey of the ultra-wealthy. The results of the study revealed that rich people choose to spend their money differently from the rest of us.
“The two takeaways are that the main difference between the 1% and the average wealthy person — the 5%, the 10% — is that the 1% eats out 30% less, and they save 30% more of their income for retirement or whatever they may need,” Sullivan tells Business Insider.
They Don’t Pay Full Price
Here’s one way that the wealthy are like the rest of us: They shop at Target, Costco, and TJ Maxx. Rich people live within their means—often way, way below their means. They don’t max out their credit cards, and they don’t pay the retail price if there’s any possibility of getting a discount. Lady Gaga, Suze Orman, and Carmelo Anthony are among the rich and famous folks who have publicly come out as coupon lovers.
No matter how much money you have in the bank, why would you spend cash that isn’t absolutely necessary? Shopping sales in a strategic way, using coupons, and even thrifting are all sensible ways to get the things you need for less. If grocery store coupons are good enough for Lady Gaga, then surely they’re good enough for the rest of us.
They Don’t Pay Late Fees
Speaking of wasting money, let’s talk about late fees. Rich people never pay fees—and it’s not just because they have enough cash to avoid bouncing the mortgage check. They know where their money is and what it is doing at all times. They don’t get caught by surprise when a bill comes up because everything is carefully planned and tracked.
You can follow their example by writing down all of your recurring bills on a calendar, then sending yourself a reminder three days before the due date to make sure you don’t forget. Signing up for autopay can make the process easier—as long as you make sure there’s always enough money in the account to cover the bill. Paying a late fee and an overdraft fee is a double waste.
They Don’t Go It Alone
Wealthy people rely on a team to ensure that their finances continue to flourish. They have accountants and financial advisors who will help them navigate taxes and investments. Relying on professionals means that the wealthy don’t have to devote a lot of their time and energy to managing money. Unless investing is their passion, as with Warren Buffett, they have better things to do.
You don’t need to be fabulously wealthy to have a financial advisor or an account. As Lance Cothern explains for Money Under 30, “You don’t have to pay a financial advisor on a recurring basis. You can pay some advisors a flat fee or an hourly rate to develop a financial plan for you. Once you have the plan, you may be able to enact it on your own. You can then hire a financial advisor on an ongoing basis after you’ve started to grow your assets.”
They Don’t Let Other People Own Their Time
We’ve all heard the expression “time is money.” As business analyst Alex Cho explains it, once rich people start to accumulate wealth, money stops being a scarce resource. Time, however, remains as precious a commodity as ever. “What matters more to the wealthy person isn’t the dollar units they acquire, but the amount of time they must exchange for each unit of currency,” Cho says.
That’s a lesson that many of us never learn. Multiple studies have shown that people who value time over money are happier with their lives. Josh Hrala reported on such a study for Science Alert, explaining that “it doesn’t really matter which of the two a person has more of – instead, it’s all about a person’s mentality toward the two, with the person who values their time more than their money being more likely be happier despite the amount of green in their wallets.”
They Know Their Financial Priorities
It’s hard to see when you’re living paycheck to paycheck, but your financial priorities might be holding you back. Rich people have clear-cut financial priorities. They have a plan for how every dollar will be put to use, and they keep in mind their ultimate goals. Moving through life without understanding your financial priorities is a little like driving without a map. You’re going somewhere, but it might not be where you want to end up.
If you aren’t sure what your priorities are, it might help to chat with a financial advisor—or even a therapist.
They Don’t Let Failure Hold Them Back
The world’s wealthiest entrepreneurs all have something in common: They see failure as a challenge. If you get discouraged by failure, then you’re not learning the right lesson. You might need to regroup or come at the problem from a different angle. When you shrug your shoulders in defeat and walk away, you give up your opportunity to learn and grow.
As a young man, Warren Buffett began buying stock in Berkshire Hathaway, a textile conglomerate headquartered in Massachusetts, but not because he believed in the company’s bright future. He hoped to cash in on the stock fluctuations that happened every time the company closed a mill. Eventually, the company’s owner tried to buy out Buffet’s shares and regain that stake in the failing business. However, the owner lowballed with his final offer by a fraction of a cent per share—and Buffett was so mad that he bought out the company and fired the guy who had tried to short him.
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Buffett has since revealed that this was the biggest mistake of his career. He was in his early 30s and saddled with a series of textile mills that were teetering on the edge of collapse. Instead of letting his bad decision rule ruin everything, Buffett pivoted into insurance. The rest is history. Although he regrets his rash decision to buy out Berkshire Hathaway, he found a way to make the situation work for him.