The United States currently has the largest number of wealthy people, with more than 6.15 million people having more than $1 million according to Wikipedia. However, only 1% of the population generates more than $380,000 a year.
Winning the lottery, investing in financial pyramids, or other get rich quick schemes are far from being the common denominator among the wealthy. On the contrary, wealthy people have understood that money per se is not what makes them rich, but rather, their intelligence and wisdom.
The Magic Formula
Like our personal care, wealth generation has a lot to do with our attitude and discipline. It is of no use to us to know the whole theory on how to reduce weight without applying it. In the same vein, applying the basic principles of good money management is what has enabled the rich to achieve prosperity.
1. The rich buy assets and liabilities
Quite simply, an asset is a good that puts money in your pockets, while a liability is a good that takes money out of your pockets. For example, a house where you live is a liability, a house you buy to rent is an asset. We must focus on buying assets that generate cash flow, such as rental properties, a business, stocks, bonds or other types of financial assets, rather than goods that generate expenses.
2. The rich control their expenses
The simplicity and careful control of expenses is a fundamental characteristic of the rich. Unfortunately, it is mistakenly believed that the average millionaire looks like a rich uncle, with yachts, mansions, brand new cars and wearing the most expensive clothing and jewelry. Not true.
However, the average millionaire lives in a house in an average neighborhood, buys used cars, and buys clothes in chain stores, rather than adorning themselves in fancy clothes and expensive cars. The rich give a very high value to every dollar that goes into their coffers and do their best not to go out again.
3. Rich people give generously
Jewish people are the richest religious society in the world. Of the 400 richest in the United States, 25% are Jews, who have tithing as a basic principle in their law as Jews. For the great rich giving is never a consequence of receiving, rather, giving and receiving is a way of life.
In conclusion, although replicating these principles for your life does not guarantee that you will be a millionaire, having the proper mentality will position you for success in the long run.