If we asked 100 people on the street whether they would like to be millionaires, everyone would probably answer that question with yes. But if we go one step further and ask whether they would also be willing to follow certain rules, a lot of people would probably rather choose not to.
The reason is often our idea of how we want to live. And when we look at what the millionaires have in common, the rules seem to be very boring and also require discipline and perseverance.
Rich people often have the following characteristics.
1. No unnecessary expenses and relatively modest lifestyle
Many millionaires do not live in luxury, but in normal, inconspicuous conditions. It may be upbringing or just the mind telling them that big consumer spending wipes out capital and only makes them happy in the short term.
For example, many doctors are millionaires. But few would assume it based on their lifestyle. They work a lot and often into old age, although in most cases they probably wouldn’t have to.
In this way, they benefit from the effects of high income and relatively low expenditure, which enables them to save and invest large sums. The compound interest effect is therefore on your side. Most of the time they live in the same house all their lives and rarely buy a new car.
Financial freedom is often more important to millionaires than status symbols that destroy capital. Financial freedom increases personal happiness, while status symbols are usually only intended for the outside world.
2. Long-term mindset
Millionaires often think in long periods. This makes them deal with money differently. They understand that in the short term it makes no difference whether we smoke half a pack of cigarettes every day or not, but in the long term it does. Not just for health, but above all for your wallet.
Saving this expenditure alone can make the difference in the long term whether we will be wealthy or not. The reason for this lies in the compound interest effect if we invest the amount instead of consuming it.
3. High interest in learning
Many millionaires have an above-average level of interest in learning. They studied in 80% of the cases, but this is not a requirement. For example, Tesla’s (WKN: A1CX3T) Elon Musk read and read every book of his father (an engineer) as a child Berkshire Hathaways (WKN: A0YJQ2) Warren Buffett spends a lot of time reading books. The wealthy also spend more time planning their own finances.
Many millionaires are self-employed or have their own company. This allows them to deal with the area that interests them the most. As a result, they often work an above average number of hours a week, which can pay off in more success.
5. High savings and investment rates
Rich people save and invest more than average, regardless of what job they do or whether they have rich parents or not. Most wealthy people come from average backgrounds and invest about 20% of their income annually.
6. Long-term and defensive investments
Most millionaires do not constantly rearrange their plants, but buy them to stay in the long term. True to the saying: “Back and forth makes pockets empty.” They mostly act defensively and only invest in solid systems.
Of course there are millionaires who have a different lifestyle and therefore attract more attention, but they are the exception rather than the rule.
The post These 6 characteristics have many millionaires in common! appeared first on The Motley Fool Germany.
Christof Welzel does not own any of the shares mentioned. The Motley Fool owns and recommends shares of Berkshire Hathaway (B shares) and Tesla and recommends the following options: Short September 2020 $ 200 call on Berkshire Hathaway (B-Aktien), Short January 2021 $ 200 put on Berkshire Hathaway (B shares) and Long January 2021 call $ 200 Berkshire Hathaway (B-Aktien).
Motley Fool Deutschland 2020