Budgeting comes second – and other habits of the rich
Everyone’s path to wealth is a little bit different. Usain Bolt can sprint his way to fame and fortune, but J.K. Rowling can’t. Then again, Ms. Rowling can make millions off a novel, whereas Richard Branson can’t. But Mr. Branson can make millions in business, which…you get the idea. The “secret sauce” is a little different for everybody. But the good news is, there are some general lessons you can take away:
1. Budgeting comes second
We’ve all been told that budgeting is important, and that’s true. Spend within your means, and save 20 per cent of your monthly income. But what happens if something crops up and you need money?
Say, for example, you need an extra $1,400 by the end of next month because your laptop broke. How are you going to get the money (without using credit or eating into your savings)?
For many people, their first response is to budget. They make a list of costs they are going to cut – they pledge to spend $5 less on meals every day, skip going out on alternate weekends, sacrifice their gym membership, etc.
People who get rich, however, display a more proactive approach. When they are confronted with a need for money, they only budget as a last resort. Their first response is to find out who will pay them the money they need.
Not only does it help them stretch their income, it is also more practical. Think about it, which is more painful: Skipping one meal a day, walking in the rain to save on cab fares, not going out with friends every weekend, etc, for months to save $1,400… or just helping someone to tutor their kids, which costs an extra three or four hours a week?
Finding side-income does take time, but it is usually less of a sacrifice compared to the pain of prolonged budgeting. Now you know why rich people seem to find life so much more enjoyable.
2. They know their success depends on the number of awkward conversations they’re willing to have
The willingness to face difficult conversations brings not just financial success, but success in general. How many times have you wanted to ask someone out, but been unable to because it’s socially awkward? How many times have you been pressured by a sales pitch, because it would be awkward to tell the salesperson to just go away?
It’s amazing how much we deprive ourselves, just because we’re afraid of awkward conversations. This is doubly true for shy Singaporeans, who would rather drink the longkang water than ask their boss for a raise.
If you look at society’s success stories however, you’ll see the thing they all have in common is a form of social courage. You don’t make CEO by being quiet and nodding; you get there by also being the type of person who can also say “no” and stand your ground.
Almost invariably, successful people are willing to bring up difficult topics, and then take a stand on them. This will filter into many different facets, such as your willingness to negotiate a higher price for your services, and your ability to push through unpopular decisions.
3. They talk about ideas, not other people
Look through any number of conversations with Warren Buffet, Anthony Bolton, Steve Jobs, Bill Gates, or any other wealthy person. Notice what they have in common? Most of the time, they’re talking about ideas. They discuss concepts and possibilities. They’re virtually uninterested in talking about other people.
Now the next time you’re in your office, notice how C-suite executives or the rest of senior management talks. Even at lunch, they are more likely to discuss an idea than how colleague X has been fighting with her boyfriend.
This isn’t because they intend to be cold or impersonal. It’s because they’ve developed a habit of untangling themselves from too many social complications. They are free to explore deeper (read: often profitable) ideas because they’re not caught up in Facebook fights.
The best way to develop the same tendency is to hang around other “ideas people”. Find those who speak and think on the conceptual level.
4. They invest to get rich, not wait to get rich before investing
How do people get rich from nothing? They invest what little they have. It’s that simple. Over time, the power of compounding interest gets them to where they want to go.
People who stay poor tend to have the opposite mentality. They think investing takes a lot of money, so they’ll do it after they get rich. And of course, they never get there.
The key is to never think of investing as a chicken and egg situation. It’s not. Think of it as building a business: many of the most successful companies didn’t start with billions of dollars in capital. The billion-dollar courier giant United Parcel Service (UPS) started with two bicycles, a telephone, and a $100 loan.
So stop waiting to accumulate some spectacular sum before you start investing. If you don’t invest now, you won’t have that sum. We have a simple, reliable way to get you started; even if you don’t have buckets of money lying around.
5. They don’t have a narrow perspective
Most financially successful people are versatile. They have knowledge beyond their specific field. In order to be a good investor, for example, you’ll need at least a passably good understanding of all the companies you invest in – this may include everything from fisheries in Hawaii to global coal exporting services.
You can rely on charts and metrics to some extent, but this will never fully compensate for actual knowledge of the business. And, of course, spotting opportunities and threats is a lot easier if you’re well-read on current events.
(A good place to start is liking us on Facebook. We’ll update you on the latest interesting news).
In the years that we’ve met and spoken to financially successful people, we’ve never found one who (1) isn’t a voracious reader, and (2) is uninterested in new things. There is a skewed belief that rich people are always “wasting money” on novelties, like a trek through the Amazon – but it’s their love of novelty that often encourages them to explore new opportunities, and to pick up on trends before others
So don’t limit your perspective. Read often, and be as aware as possible of the world you’re in. When you have a bit of spare cash, do go on adventures and try new things. The more you experience, and the more people you meet, the wider your opportunities will become.