We mostly tend to have certain stereotypical images of those who are wealthy. We visualise individuals who have the best of everything life has to offer. But the kind of lives such people lead are actually quite different. Their personality traits are also in stark contrast to what we perceive them to be. So today I'm going to delve into the attributes that go into making one wealthy. I will throw light on how those who are genuinely wealthy lead their daily lives. I will then show what we can learn from them. This would allow me to bust myths around our perception of being wealthy.
The first and foremost quality that makes one wealthy is that of frugality. They understand that frugality is the foundation on which lasting wealth is built. Most wealthy people have parents who are frugal, are frugal themselves and have spouses who are more frugal than they are. They also live run of the mill lives and follow low consumption lifestyles. This is why we find it so hard to identify them. The way they live just doesn't fit in with our perceptions of how wealthy people live their lives. They pass on the fundamental principles that helped them create their wealth to their children.
This gives both generations a much better shot at achieving financial independence. So the first quality we should imbibe to become wealthy is to follow a frugal, low consumption lifestyle. This does not imply leading a bare bones lifestyle. It just means that we need to have a disciplined regimen with regard to saving, investing and consumption. This would be the major driving force that helps us achieve financial independence. I have spoken about the concept of frugality in detail in an earlier piece, Frugality Decoded.
Those who are truly wealthy understand that financial independence is more important than displays of social status. They understand that the pride of owning luxury items is not worth the bill they come with. They realise that such items add little or no value to their lives. Their pursuit of wealth is always driven by the right reasons. The ideal motivation for wealth financial independence should always be the desire for financial security. Once financial security is secured, everything else would follow automatically.
The next attribute that is common among genuinely wealthy folk is their use of time and effort. They focus on creating conditions and taking actions that are conducive to building wealth. They understand that one of the best ways to build wealth is to aggressively defend the income they earn. They combine moderate incomes with a high savings rate and disciplined investment behaviour. This makes them less likely to be affected by uncontrollables such as financial emergencies and inflation.
Accumulators of wealth also hold the right kind of assets in their portfolios. They do not spend on depreciating assets such as vehicles or electronic gadgets. Their asset mix is likely to have a significant proportion of assets that grow in value over time. These could take the form of stocks, bonds, businesses they own and sometimes real estate. They do this because they understand the importance of maintaining and increasing the purchasing power of their money. And owning assets that appreciate over time is one of the most effective means to do this.
By now I hope it is clear that material possessions alone do not symbolise wealth. True wealth comes mostly from that which cannot be seen. Income is what we earn. Wealth is what we accumulate. And accumulating anything requires a lot of time, discipline and effort. So whenever we marvel at the kind of luxury wealthy people live in, we must realise two things. Firstly, that they must have lived a lot more austere lives to be able to enjoy what they are today. And more importantly, that if they can get wealthy following such lifestyles and principles, then we can do it too.