When you think of “wealth,” you may not necessarily think of people who are good at money. Often, however, rich people do not spend their money on glamorous, flashy or impressive things – but only on things that they really need. With the rest of their money they can then increase their wealth.
They tend to be thrifty and often buy goods at discounts, says author Thomas J. Stanley, who interviewed millionaires for his book The Millionaire Next Door. And they tend to focus on long-term goals, according to The Boujie Budgeter’s money and budgeting expert Mykail James.
But there are four things for which people who are good with money are always willing to spend something.
1. Improvements to the apartment
Home is one of the greatest investments in life, and many people want their home or apartment to increase in value over time. But not everyone is an architect or a building contractor.
And while home improvement and DIY may be cheaper, renovations should of course be done professionally. Hence, people who are good with money prefer to pay the price necessary for quality work.
“There is this misconception that many people who are good with money are great DIYers. And that’s not always true, ”said James. Home improvement takes a lot of time, and many people who are good at money know that others can do renovations faster and better than they can.
So they hire someone to do the work for them. People who are good at dealing with money first think about the cost-benefit ratio and then happily spend their money on getting the job done right.
2. Used, inexpensive cars
In most cases, cars are not a good investment because they lose value quickly over time. As a result, people who are good at money “don’t like to spend a lot of money on asset depreciation,” says James.
These people do not enjoy expensive cars because they represent a lifestyle that they do not want to chase after. In “The Millionaire Next Door”, for example, Stanley interviewed a self-made multimillionaire whose friends had pooled money to buy him a Rolls-Royce as a gift.
The multimillionaire lived in a middle-class city in a modest house and had never owned an expensive car. He decided he couldn’t accept the gift. His reasoning? He wouldn’t be able to drive the car to the factory he worked at, his favorite restaurants, or the lake he went fishing on the weekend without feeling out of place, he told Stanley. For many people like this multimillionaire, a luxury car does not fit their lifestyle.
People who are good with money therefore prefer to buy used. Cars lose a lot of their value over time: a typical car around 20 percent of its value in the first year. “I’m not saying that rich people don’t buy new cars, but in most cases a person who is good with their money won’t buy a brand new car,” says James.
People who are good with money often enjoy buying a share or a mutual fund more than they do with a tangible asset.
Anyone who is good with money will always pay for “something that makes them more money,” says James. “That could be an investment in the stock market, for example. It could mean spending money on certain types of stocks if they want dividends to generate cash flow. “
Other investors might consider real estate. “They always think of something that will provide cash flow and contribute to passive income. That could also be buying investment property to rent, ”says James.
James says that people who are good at money see education as an investment, not an expense. “They are investing in education and thus in opportunities that will help them make more money,” he says.
Often times, this applies to both the wealth building people and their children. Stanley writes in The Millionaire Next Door that “Paying for an education is the equivalent of teaching your children how to fish.” According to Stanley’s research, most wealthy people agree that their education will benefit them, and many would like to pass this gift on to their children and grandchildren when they are able.
People who are good with money know that education brings income. And income can bring wealth – if it is used correctly.
This text has been translated from English. You can find the original here.