How To Manage Your Money Like The Top 1%
In society there are many different types of people and different levels of wealth. When you talk about wealthy people, you could be looking at white collar workers, up to high net worth individuals and then up to the multi-billion dollar, ultra-rich 1%.
If you aspire to move up levels of wealth, each level requires a different version of yourself. In order to move upwards, you first need to start out with a solid platform.
Taking care of business
Starting off on an investment journey, it’s important to realise you need to treat everything like a business. All successful businesses have a good vision, a good structure, good budgeting and they know where they’re going to.
Many families don’t know what their situation is. The first thing to look at is what your money looks like. Do you have more money coming in than going out? Are you making the most of your cashflow, or spending it on useless things like loans, afterpay or credit cards?
Spread your risk
What does your cashflow look like? Do you have a defined cashflow stream? Do you have income from multiple different asset classes? If 2020 taught us anything, it’s that you can’t survive on just one income stream. A lot of people who were working for 10 years in a job, sacrificing hours a day on travelling to get there, then suddenly finding themselves without a job and in a financial crisis.
So how many revenue streams do you have? How secure are they? What can you do to bolster those streams? Do you have an emergency fund? Do you have savings? Do you know where that extra cashflow is going to come from if it’s needed?
Take a look at your expenses. What are the fixed costs you’re looking at to fund your day to day lifestyle? What can you change to improve that? What does your lifestyle look like? What do you want it to look like? What’s your break even? What’s your net worth position? Your capital position? Your asset under control position? How have you traded that out? Once you have an idea of that bigger picture you can look to make tweaks to enable you to achieve your goals sooner.
It’s important to look at your budgeting goals and keep yourself honest. Do you have a certain target for yourself, a KPI as if you were in a workplace? If you reach a certain amount of assets, will you reward yourself with a bonus? Maybe when you hit some goals you can buy a new car.
The difference is that a lot of people don’t do the work to get the reward. They simply go and get the car first, and get themselves in lots of debt and not think about the consequences of that. You need to look at how the actions that you’re taking fit into your overall plan and strategy.
Later will come sooner than you think
What is your retirement fund looking like? Do you have a super fund? Do you know what’s happening inside your super fund? Nine out of 10 people don’t know how much money they have in their super fund. Or they don’t know who their super is with. They could have a quarter of a million dollars in there but not be actively engaged with their money at all. You have to get with the program.
A ratio rule for income
Some people talk about the 50:30:20 rule. You spend the first 50% on investing in yourself, your assets, and your wellbeing and so on. You spend the second 30% on your basic needs, these being food, rent, and a roof over your head. The last 20% you spend on material things or hobbies that make you happy.
Moral of the story is
To live like those who are wealthier than you, It’s important to understand what your position looks like, what your clear defined goals are, where you are today and where you’re heading and what you need to do in order to be able to get there.