We’re not wealthy but I’d say we’re getting more comfortable, financially. Comfortable is far from early retirement though, a goal we are striving for. I know a few folks who have achieved early retirement and financial freedom. I’ve noticed a few things over the years from these individuals when it comes to their financial habits. They certainly aren’t flashy with their money – at least those people I know. They have goals for sure. They are forward-thinking, about everything. Over the years I’ve watched, observed and learned from other people who are financially free. Here are some things they seem to do much better than me.
1. They manage debt effectively
Wealthy people either seem to leverage debt as a tool or simply avoid servicing debt altogether. By leveraging debt as a tool, they seem to fully understand their risks as they incur debt to build assets or generate cash flow from their investments. Real estate and secondary properties in particular come to mind. On the flipside many wealthy individuals I know got out of debt early and stayed out of debt. Their approach is to kill debt early and use income that would otherwise go towards servicing mortgage debt or consumer debt to buy assets for their investment portfolio instead. These are simple concepts to understand but rather difficult to execute upon over time.
2. They understand cash flow very well
The well-to-do individuals I know focus on cash flow, rather, they have a very good handle on it. They understand the income coming in and the expenses going out, almost to the dollar. They make good assumptions and they are realistic when it comes to their income expectations. They are able to forecast expenditures easily and with modest accuracy. Cash flow is top of mind for them.
3. They do their homework
The wealthy seem to do their due diligence, on everything. They can be meticulous. Sure, they might have experts and professionals they rely upon for some things but they also have a high-level of confidence in their ability to research, understand and make decisions about a host of issues or situations. They pay attention to details when many others disregard them or don’t see them.
4. They’re bullish and they continually improve
The wealthy seem to be optimistic about the future, they see challenges as opportunities and they do not dwell on the past or mistakes made. They are bullish about their chances and choices. They work hard and they have focus. They have goals, they know what they are striving for and they know what they want. The financially free and successful strive to understand financial matters so they can improve.
The wealthy people I’ve met certainly have a motivating mindset for me. I’ve worked on the items above in recent years and I think the progress is starting to show; changing the way I think, act and behave about money matters. I’m hopeful what I’ve learned from others can be tailored to help our financial plan and the good things that might come from it.
What traits do the wealthy have – what do they do better than you?