Do you remember being a kid and wondering how the people who lived in the rich neighborhoods ended up there? You know the ones . . . the families with huge houses, swimming pools, nice cars, the best clothes and pantries full of cool snacks.
The truth is that you can’t really measure wealth with those metrics, because they don’t actually show anyone’s bank account or net worth, but I think you understand the sentiment.
True wealth is typically defined by an individual or family’s net worth. Assets – liabilities = net worth
Anything between $1-$20 million is usually considered wealthy with $20 million+ being considered super-wealthy. How did they get that way? Did they get lucky, or did they make intentional decisions to get there?
It’s unlikely they ended up rich because of luck. What’s more likely is that they made very intentional decisions and had certain habits that allowed them to build impressive wealth.
So what are their secrets and is this kind of wealth possible for you to achieve too? I believe it is! So how do you get there?
These habits are the best place to start.
5 Habits of Everyday Families Who Are Wealthy
1. They spend less than they make and invest the difference
It’s simple. Spending exactly what you make or more than you make leads to being broke and even worse, in consumer debt. Consumer debt like cars, credit cards, and student loans do not help you build wealth. In fact, they do the opposite- stealing your future income away to interest payments!
Wealthy families spend less than they make from day one, even when they don’t make very much money. It’s easier to do this with a budget and a plan.
Wealthy families spend much less than they make, even when it’s a huge sacrifice. Some even spend just 40-60% of their income while they build up their wealth in the early stages.
After they spend less than they make, wealthy families take the difference between what they earned and what they spent and invest it. There are many successful ways to invest but some of the most common among the wealthy are real estate, index funds, stock market, bonds, business ventures, and so on.
New to investing? Take the How to Build Wealth by Investing in Index Funds Course- use code EASYBUDGET for 20% off !
Related reading: Do You Know These 23 Beginner Investing Terms?
2. They aren’t afraid to start or run their own business and take some risks
Wealthy individuals and families aren’t afraid to start a business and they aren’t afraid to take some financial risk. This is especially true of the super-wealthy and very young self-made wealthy people. They most likely earned their wealth through starting and/or running a business of their own.
There is just no match for entrepreneurship with it’s uncapped income potential.
Some people prefer to be an employee because you take on (perceived) less risk. You go to work, do your job, and get a regular paycheck every few weeks like clockwork. It’s safe, it works, and it’s in your comfort zone.
Now let me be clear. There is nothing wrong with being an employee and employees are invaluable to the economy, but your income is capped and your growth is pre-determined! This is not ideal for big time wealth building.
The best way to grow wealth is through having your own scalable business, investments, or side-hustles that have no cap on income potential. This may involve taking some risks, including investing back into your business, but with no risk there is no reward in the money world.
3. They are always looking for ways to increase their income and number of income streams
Cutting expenses is one way to spend less than you make so you’ll have money to invest and build wealth, but it’s no match for increasing your income dramatically. Wealthy people may cut expenses here and there, especially early on in their financial journey, but ultimately they look for ways to increase their income and number of income streams to build wealth more quickly and efficiently.
The average millionaire has 7 streams of income. E.g. A full-time job, a small business, 3 rental houses, an IRA with index funds and ETFs, and a 401k.
The problem with only having one stream of income, e.g. your full-time job, is that if something happens to it, you’re in trouble financially. Also, you have to work hard hours to earn that money and it’s not earning for you while you sleep. Trading time for money is good to make a paycheck, but it’s not great for building lasting wealth.
The ideal situation for building wealth is to build up multiple streams of income and grow each of them over time.
4. They have a growth mindset and think BIG
Don’t underestimate the power of this habit. Those with a growth mindset are constantly looking for ways to optimize and improve their lives and businesses, and they have no intention of staying stuck.
They also dream and think big.
Think about it: if you only dream of having a $250,000 house, a modest retirement, and a $90,000 income, that’s what you’re going to get. You’re not going to accidentally create a super successful business or get rich without being super intentional about it. If you never think of it, it will never happen. So think big.
Wealthy people plan to get wealthy and they do what it takes to get there. This includes constantly improving and optimizing and dreaming really big with goals and aspirations!
Whatever your goals are now, 10x them and get to work!
5. They are financially literate
Financial literacy is essential to becoming wealthy. You won’t get rich if you have a basic, poor, or limited understanding of how finances work. You need to understand how personal finances, credit scores, investments, entrepreneurship, tax optimization, real estate investing, retirement planning, and general money work so you can make the best decisions that lead to wealth.
One of the biggest mistakes you can make when it comes to becoming wealthy is thinking you know it all and remaining ignorant on an important financial subject such as investing, tax optimization, or retirement planning. Don’t make that mistake. You don’t have to know it all today but start collecting as much information as you can and implementing it as soon as possible if you want to see results.
Here are some of my favorite resources for increasing financial literacy:
- How to Build Wealth by Investing in Index Funds Course (Use code EASYBUDGET for 20% off)
- Rich Dad, Poor Dad by Robert Kiyosaki (wealth mindset)
- ChooseFI Podcast (all things wealth building, start with episodes 100, 38, and 21)
- Bigger Pockets Podcast (real estate investing)
- Millionaire’s Unveiled Podcast (millionaire habits and portfolios)
- Follow me @easy_budget on Instagram (daily personal finance and budgeting tips)
I hope this article has given you some ideas of ways you can improve your financial habits and build more wealth for your family. Implement these habits now and enjoy more wealth in your future.
You might even become the rich family that has people wondering how on earth you got where you are!