One of the mantras personal finance and development gurus tend to often use is that in order to be rich, you need to act rich.
Now, that doesn’t mean that you need to spend like you’re rich without regard to the future. A truly rich person isn’t just about a high salary.
If you want to be rich, manage your money like a truly rich person.
Here are three ways the rich manage their money better than you.
They Focus on Net Worth, Not Salary
Your salary is only as good as your ability to continue to work. As we’ve seen with athletes with million-dollar-a-year salaries, you can’t count on money to always be pouring in.
The real rich focus on growing their net worth. From the book:
Your net worth is:
- the difference between your assets and debts
- a full picture of where you stand financially
- the best barometer to measure your financial success
Too often, our society places value in people with high incomes and just as high expenses. Celebrities and athletes may pull in multi-millionaire dollar salaries, but if they’re spending all of it, their net worth isn’t increasing.
Your net worth is dependent on how much you save and invest ? not on how much you spend.
Buying a BMW isn’t going to make you rich. Owning a million dollar home isn’t going to make you rich. Not spending all of your income each month will make you rich.
By keeping more of the money you make, the longer you’ll have it to keep you rich.
They Know Where Their Money is Going
The rich treat their spending like a business: they know exactly where their money is going.
Every expense has a category, and every category gets scrutinized. Corporate tax software is used if necessary, rather than a less robust solution.
Are you dining out too much? Cut back this month. Cable bill too high? Get a discount today.
Start tracking your expenses today and get a grip on where your money is going.
They Treat Money as a Tool, Not the Goal
For every Scrooge McDuck, famous for diving into his pile of money, there are tons of rich people who realize money is only a tool for achieving your dreams.
Why do you think the covers of most personal finance books show people on the beach?
Having money is great, but it’s what you do with it that matters. And each person’s goals are different, be they traveling the world, sending your kids to college or buying a beachfront house.
Money is only as useful as what you do with it.
About the author: Jason is the author of Automatic Finances: 17 Days to Your Financial Freedom, a guide to automated money management. He started investing thanks to a free lunch, and after finding out how he was getting the short end of the stick, he sought out how to do it right. More »