The Top 5 Financial Mistakes Wealthy People Never Make
While almost everyone dreams of being wealthy, few make it happen. In most cases, the reason is not because they don’t have the money, but rather how they manage their money and their decisions. Despite working hard, prosperity never seems to come their way. However, such is not the case for those who are wealthy. While some people believe wealthy people have a magic formula for getting rich, the fact is they simply choose not to make many of the common mistakes made by others. If you’re interested in keeping more of your money in your pocket, try not to make these five financial mistakes that wealthy people know to avoid.
Buying on Credit
Above all else, wealthy people rarely if ever buy items on credit. In order to become rich, credit cards should only be used to help grow a business, not buy big-ticket items aimed at simply impressing others.
While everyone wants to have their own home someday, wealthy people realize that home mortgages result in having them pay at least twice as much as they would if paying with cash. To save money, it’s recommended that renting a place and saving up money over a few years will work best in the long run.
Many people make the mistake of thinking that Social Security, 401(k) plans, and other retirement planning strategies will result in riches later on in life. However, wealthy people realize that building a fortune along the way results far more often in wealth being obtained, so concentrate on using your money wisely in your younger years.
Failing to Save Money
While rich people save on average 10 percent of what they earn and rarely take out loans for anything, others not as prosperous are that way due to spending impulsively and being unwilling to save for a rainy day. Rich people realize impulse buying is the quickest way to financial hardship, so they avoid it at all costs.
Buying Cheap Goods
Most people think if they spend only $10 for a shirt, they’re getting a great deal. However, if the shirt is of poor quality and requires replacing quickly, it’s a poor choice. Instead, rich people know it’s better to spend $40 for a shirt that will last for several years. Wealthy people always buy the best products available, knowing they will save money in the years to follow.
David Milberg is an investment banker from NYC.