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5 Money Mistakes That Wealthy People Don’t Make

Ever wondered how the uber-rich — the Warren Buffets and Mark Cubans of the world — live day-to-day? Sure, they may have some extravagant habits, but it’s highly likely they also follow the same key money rules that help them increase and protect their wealth. Even if you haven’t yet amassed a fortune of your own, you can benefit from doing the same. Here are five:

1. They don’t spend everything they earn.

“Most people make a living, spend what they feel they need to enjoy their lives, and then dutifully save what is left. Unfortunately, that’s often little or nothing,” says Steve Martin, a Certified Financial Planner and senior managing director at BKD Wealth Advisors in Chicago. “Successful people, on the other hand, make a living and then first set aside the amount needed to reach their goals.”

By choosing to pay themselves first — which you can do, too, by diverting a portion of your paycheck into a savings account or scheduling auto-transfers from checking to savings — wealthy people reliably hit their targets, while also learning to delay gratification and avoiding wealth busters like credit card debt.

2. They don’t miss opportunities to grow their wealth.

Sustainably wealthy people don’t stop after securing a well-paying job; they’re constantly looking for ways to improve themselves and their financial pictures — whether it’s by working toward raises and promotions, finding passive income sources, or starting a business. And as they increase their income, they make sure not to increase their lifestyle expenses at the same rate.

The same types of people who push for more than the status quo are also more likely to be invested in the financial markets. “They understand the chance for loss, but by investing regularly, over time, they recognize the opportunity for long-term growth,” Martin says.

3. They don’t make emotional financial decisions.

Rather than buying or selling investments based on gut feelings and emotions, financially successful people make deliberate decisions with their long-term goals and strategies in mind.

“They believe in creating a comprehensive plan—and following that plan,” says Anne-Marie Laboe, executive vice president at Bernard R. Wolfe & Associates, Inc., a financial planning firm in Chevy Chase, Md. “They don’t invest in the latest fad or ‘hot tip.’”

Understandably, it’s not always easy to put your emotions aside when it comes to money, which is why it’s important to create systems that prevent irrational decisions — adhering to a 24-hour cooling-off period before making any big money move, say. Or establish a set of rules for when it’s safe to purchase a new investment, such as a particular stock price-to-earnings threshold.

4. They don’t put all their eggs in one basket.

“High-net-worth clients understand the need for diversification and how [diverse income sources] work together,” Laboe says.

That means that rather than, say, hinging their retirement security on the success of their employer’s own stock, or spending all their savings on real estate projects, successful people aim for several different sources of wealth — then look at them holistically as part of one, big portfolio.

“If designed appropriately, there will always be pieces performing better than others at various times,” Laboe says, which minimizes your exposure to risk. “Be realistic in overall returns, knowing that you are looking at the long term.”

5. They don’t go it alone.

Financially successful people don’t gamble with their livelihood on the line. In other words, if they’re not sure how to approach a big money decision, they get help. In some cases, Laboe says, that assistance should come from a trusted advisor, whose job it is to create financial plans that address complicated issues like taxes, estate planning and income distributions during retirement.

But getting help doesn’t always mean paying for financial advice. If you find yourself in uncharted financial territory, you can consult friends who’ve faced a similar situation with success, research expert analysis online, or leverage technology.

From apps like Acorns and other robo-advisors that help you start investing, to platforms like Mint and You Need a Budget, there are plenty of tools out there to help you make great financial choices and set you on the path to long-term financial success.

Read the original article on Grow. Copyright 2016. Follow Grow on Twitter.

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  • Eloise

    Articles of this nature–and there are way too many of them–make my soul hurt. Do you know what other smart financial decisions rich people make? They buy their cars instead of leasing them! They buy property instead of renting! They hire the finest accountants to minimize their tax bills! They buy in bulk to keep unit costs low! They keep liquid cash reserves available at all times for emergencies!

    Why can’t we peasants just take a lesson from the rich???

    • Mj D’Arco

      I actually enjoy articles like this. Thinking like the wealthy and learning to manage money like them is a good habit to pick up even if you can’t afford it. Knowing to diversify your risk, saving before spending don’t need to be only for the uber rich…

      • Judith

        I agree with your point, though I’d point out that it’s not like people who aren’t rich don’t know *how* to do a better job, they just might not have the money or resources to spare. Sure, some probably have no idea how to handle money and they’re leaking it everywhere but some might not be able to afford doing such things as “buying a car instead of leasing it”.

    • Anon

      It’s mostly the vagueness that bothers me. This is boilerplate advice with Warren Buffet’s name tacked on.

      • Eloise

        I agree. What frustrates me most is that it’s implied that these tips represent a way to become wealthy (otherwise, why say these are “mistakes that wealthy people don’t make” and not mistakes that *financially competent* people don’t make?), but you’re right: the advice is too vague to really be striking or helpful.

        I think MJ’s point below is valid. It just really rubs me the wrong way that this article (and many others like it) conflate being wealthy with being smart/savvy/clever. At least in the USA, that is just so, so far from the reality and it’s a dangerous message to propagate.

    • Duncan’s Dividends

      I actually don’t mind too many articles of this nature, repetition makes people remember things and the more times people see them the more likely it is to start sticking. Keep in mind that those of us reading these are likely to already understand and embrace many of the thoughts involved, but many people don’t hang out on finance websites and may be seeing it for the first time.

  • T

    So in essence, takes money to make money

  • Clytamnestra Dunge

    in itself this is pretty sensible advise (save as much as you can, diversify your interests), but please please please drop the ‘this will make you as rich as warren buffet’ attitude.

    i assume the writer of this is no multimillionaire, so by their own implied rationale they must be doing something terribly wrong.