Flower Mound Online News

So you want to be rich? Well then the first step is to ‘think’ like the rich.In a MSN Money article titled, “5 Lessons the Rich Can Teach You”, author and financial columnist Liz Pulliam Weston lists the surprising differences in the ways most of us think about money compared to the more affluent.

1. The rich give away more. On average, in 2004 the average household gave away just 2% of it’s income to charities. Households with $500,000 or more in investable assets gave away 6%, and households worth $5 million gave away 6.1%. Wow. I’m thinking major tax write offs here. How can one declare himself a charity again?

2. They are more likely to own their own business. On average, 12% of Americans own all or part of a privately held business. In the wealthiest 10% of households, 41% own their own business. So to be truly wealthy, own your own successful business.

3. They borrow strategically. The rich are less likely to have credit card debt then the rest of us. I knew there was a reason to cut up those credit cards! Only 22.4% of the rich are likely to have credit card debt compared to 44.4% of the rest of us. This is one of the best lessons we can pass on to our children preparing to start their lives. Be careful with credit cards, and pay them off monthly. Maxing out credit cards is a sad trend that appears to be getting worse.

The wealthy are also less likely to have any installment debt, such as car loans (25.6%), than the rest of us (45.2%). Maybe they understand the concept of interest just a bit better than we do.

What they do have is mortgage debt. 55.5% of the wealthy have a primary mortgage, compared to 44.6% of the rest of us. Another 15% of them carry additional real estate loans (2nd homes, investment properties, etc) compared to 4.7% of us.

4. They don’t blow a lot of money on cars. The median price for a wealthy person’s automobile collection is $25,400. They may buy nice cars, but their automobiles account for just 2.4% of their net worth, compared to 8.8% for the rest of us where our median price is $11,800. There’s something to be said for having one nice car that will get you from point A to B. I’ve seen some high value homes where their driveway looks like a parking lot from Sanford and Son (and old sitcom starring Redd Foxx as a junk dealer). Conversely, we’ve all seen lower value homes with expensive luxury cars in the driveway.

5. Almost all of them are homeowners. Among the top 10% of the wealthiest, 95.8% are homeowners, compared to 67.7% overall. And an additional 40% own a rental property or 2nd home compared to 11% overall. But even their real estate doesn’t make up the majority of their net worth, only 10%, with second properties adding up to 7%. Most of the wealthy’s net worth comes from smart investments. 46% of their net worth comes from stocks and bonds, IRAs, mutual funds, managed accounts, and alternative investments.

So you want to be rich? Save your money, and invest it wisely. Stay away from high interest credit card debt and auto loans. Buy a second vacation home or rental property. Buy your cars smartly, and give to charities.