You might ask yourself, “How can I invest like rich people?” I know that I get asked this all the time.
Yesterday I went to a party and my friend’s son Jim asked me this very thing. I was inspired by the young man because he just graduated college and was working very hard to build a future for himself. While it’s hard to find fault with a young Jedi like that, I was worried. He was completely focused on making a killing by investing “like the rich people.” In fact, he continued living at home after graduating from school just so he could save, invest and become rich.
Here’s what I told him:
Rather than investing and saving money for retirement, Jim needed to make sure he had enough savings to tide him over in case of emergency. In Jim’s case, he didn’t really need much because he was living at home, but he did need to get into the habit of always keeping an adequate emergency reserve. I suggested that he keep $5,000 in his emergency savings account.
In Jim’s case, it was time to leave the nest. He needed to move out. While he is a very nice young man and his parents are crazy about him, it would be better for Jim if he forgot about savings and starting thinking about living.
3. Periodic Pops
Once Jim has his emergency funds set aside and enough income to provide for living on his own, he could start creating wealth by setting aside $100, $200 or whatever each month – depending on what he can afford. I suggested that he put that money in a diversified fund and stop worrying about finding the perfect investment right now. If Jim stumbles into a windfall, its’ a different situation. But for ongoing investments, an automatic investment plan is just great.
4. No Quick Fixes
I work with lots of rich people – none of them made their money overnight. They worked hard, didn’t do anything dumb and (most important) didn’t ever take undue risk. That means they didn’t waste time looking to make a killing.
5. Focus Shift
This is going to sound really weird, but believe it or not, the best way to invest like rich people is to stop focusing on being rich. When you focus just on being rich, your greed blinds you. Nobody I know who is rich ever started out with that as their objective. They wanted to build financial security for themselves and their family. They wanted to do an excellent job. They focused on building wealth– not being wealthy.
When you focus on building, you think rationally. You consider, investigate and weigh carefully. When you focus on “being” rich, you look for the easy money and it almost never comes.
My experience tells me that people who want to be rich are the first ones who get taken advantage of in investment scams. And the same thing happens in debt relief scams. The thieves are just waiting with promises of fast results. Those promises are exactly what these folks want to hear, so they only too happily fork over their hard-earned cash. In most every case, these exchanges end up costing these people everything.
So my best advice to you if you’re interested in investing like rich people is to focus on building wealth and do it one day at a time.
How are you building your wealth? What mistakes have you made along the way?