5 Lessons I’ve Learned Living Among Wealthy People
Living next to wealthy individuals can be an eye-opener about your own financial situation. Here are 5 valuable lessons that helped me build a six-figure investment portfolio in four years. You can achieve this even faster.
Although I’ve managed to move into a prestigious neighborhood in Munich, Germany, I wouldn’t consider myself truly wealthy. Sure, I’ve paid off my relatively modest student debt (especially when compared to the average American student debt), save over 60% of my salary without sacrificing my decent lifestyle, and invested wisely in profitable assets. However, when I compare myself to some of the people I’ve met over the past year, I realize I have a long way to go to reach their level of financial success.
Some might argue that I’m experiencing a confirmation bias, but I genuinely feel wealthier after learning the lessons I’m about to share. My aim is not only to offer you insights gleaned from the truly wealthy people from Munich but also to inspire others to share their own story.
Before we dive in, I feel it’s important to clarify what I mean by “being wealthy” in this context. I’ll focus solely on the financial aspect of wealth. While I acknowledge that a comprehensive understanding of wealth includes factors like family, friends, spirituality, and environment, this article will zero in on the financial side to keep things straightforward.
So, let’s get started. Here are the 5 lessons I’ve learned living among wealthy people.
Lesson 1 — You Want to Become Wealthy, Not Rich
Many people describe a “rich” individual as someone with a high income who spends lavishly on expensive items without much thought for the financial future. This kind of lifestyle can lead to significant debt, even if the person continues to earn a high income.
In contrast, a “wealthy” person doesn’t necessarily have to earn an exorbitant salary. The key is to be heavily invested in assets that accumulate value over time. Assets are investments that can generate a positive return, as opposed to liabilities, which continue to cost you money while you haven’t paid it off.
The goal is to accumulate more assets than liabilities. Doing so will help you build wealth over the long term. Conversely, having more liabilities than assets will lead to financial ruin, regardless of your income level.
So, aim to acquire assets that will generate a cash inflow, either directly into your pocket or your bank account. For example, investments like ETFs, stocks, bonds, or real estate are assets. Buying a luxury car just to show off is a liability. However, if that car is used in a profitable business, it could potentially be turned into an asset.
Assets can generate income through dividends, interest payments, or capital appreciation. While returns are not guaranteed, taking calculated risks is essential for earning a premium on your investements. To mitigate risk, it’s crucial to diversify your asset portfolio. Putting all your money into a single asset exposes you to the high risk of losing everything, whereas diversification can offer a more secure path to long-term financial growth.
In the end, rich people may come and go, often squandering their money on expensive and sometimes unnecessary items, thereby losing the long-term financial game. Wealthy individuals, on the other hand, are in it for the long haul. They let their money work for them and can generate a substantial income from their assets.
Lesson 2 — Wealth Enables True Freedom
If you dilligently apply the principles from Lesson 1, you’ll eventually accumulate enough assets to finance your desired lifestyle. This financial independence grants you a unique form of freedom, especially in capitalist-oriented societies where money often dictates one’s level of autonomy.
As your assets generate positive cash flow even when you’re asleep, you’re not solely dependent on a regular salary. This gives you an edge even over individuals in high-paying professions like banking, law, medicine, or information technologies. Even if these professionals were to work around the clock without breaks for sleep, food, or drink, they couldn’t out-earn a wealthy individual whose assets are constantly working for them. This advantages frees you from trading time for money, allowing you to live life on your own terms.
Imagine being able to take extended breaks from work without worrying about bills. Your assets become your diligent employees, ensuring you can enjoy life without financial stress. A toxic work environment or difficult colleagues become easier to leave when you’re not scrambling to find another job just to pay the bills.
Wealthy individuals leverage these financial advantages to enhance their quality of life. They often own multiple residences, giving them the freedom to choose where they spend their weekends — be it a mountain retreat, a beach house, or some other sanctuary. Their passive income streams enable them to maintain these multiple homes without the need for overtime work. They’ve mastered the art of making their money work for them, rather than the other way around.
Even if you weren’t born into wealth, the strategy of letting your money work for you is universally applicable. You may not have a head start, but the race toward financial freedom is open to everyone.
Lesson 3 — Your Network Defines Your Net Worth
While money is undeniably important, even the wealthiest individuals agree that it shouldn’t be the sole focus of one’s life. In fact, your network of contacts can be an even more valuable asset than your financial holdings. A diverse and robust network across various professions can offer you unique opportunities and experiences that money alone can’t buy.
Imagine being friends with someone who sells luxury watches. Your relationship could give you exclusive access to special releases, putting you ahead of others who simply have the money but not the connection. In such scenarios, money becomes secondary; you can’t buy early access or insider information.
This principle extends beyond material goods to experiences like sold-out concerts or exclusive events. If you’ve ever scrambled to find tickets to a popular event, you’ll appreciate the value of knowing someone in event management or a related field. Such connections can offer shortcuts to what you desire, bypassing the limitations that even a hefty bank account can’t overcome.
People often place a higher value on relationships that offer mutual benefits, making it crucial to invest in your network. Unlike financial assets, good relationships can’t be bought; they require an investment of time and effective people-management skills. Cultivating a strong network can provide you with a level of wealth that transcends monetary value, enriching your life in ways that money alone cannot.
Lesson 4 — The Perils of Keeping Up with the Joneses
Even if you’re among the wealthiest individuals in your country, living in a community of similarly affluent people can make you feel less fortunate. There will always be someone with a more luxurious car or a bigger home, leading you to feel inferior by comparison. This urge to keep up with an even wealthier set of Joneses can ultimately make you miserable.
Despite being financially well-off, you may find yourself feeling inadequate. In such a mindset, it’s easy to lose sight of your own considerable wealth and forget that you’re far better off than the majority of people in your country or even worldwide. Climbing the social and financial ladder to live among the affluent doesn’t automatically confer happiness, especially if you’re constantly comparing yourself to neighbors who appear to be doing better.
The most effective way to sidestep this psychological trap is to measure your success against your own past performance, rather than against others. Use other people’s achievements as inspiration to set higher goals for yourself, rather than as a yardstick for your own worth. If they can achieve great things, chances are you can too. But it’s crucial to remember that your journey is your own, and it’s the only one that should matter when assessing your success.
Lesson 5 — Health and Time: Your Most Precious Assets
Walking my dog regularly through various neighborhoods has given me a unique vantage point. My dog’s curiosity prompts me to explore new routes, allowing us to discover corners and areas I would have otherwise missed. During these walks, I often encounter elderly individuals taking their daily strolls, enjoying the quite streets while the younger generation is at work. Sometime, however, these seniors are no longer able to walk on their own and require wheelchairs pushed by caregivers.
Observing this has deepened my understanding that regardless of one’s financial standing, age will eventually take its toll on everyone’s health. While this may not be a groundbreaking revelation, it serves as a poignant reminder, especially for those of us engrossed in the daily grind. We often forget to consider the bigger picture and the long-term implications of our choices. Or how valuable our younger and healthier years are.
Although financial wealth and a robust healthcare network can delay many health-related challenges — thanks to better access to medical specialists — age-related health issues are inevitable for everyone, regardless of financial status.
In the end, we all exit this world as we entered it: without a bank account. While accumulating financial wealth is a worthy goal, it should not overshadow the importance of maintaining our health and valuing our time. These are, without a doubt, our most precious assets — one’s that money can’t buy.
