Wealth isn’t just a wad of bills or a collection of random assets that came to the right people at the right time: It’s a state of mind that takes hard work to attain.
The stuff of legend isn’t make out of luck, so when legends speak, prospective legends should listen because what they have to say might surprise you.
It’s not just about which stocks to buy or whether to hide your money away in gold. It’s much more than just “diversify”, “do your homework”, “takes money to make money”.
Here are four tips from five billionaires covering everything from owning your own home to hanging out with the right people, in the right way:
#1 Stay Close to Home
We don’t mean geographically, and neither does Warren Buffett, investor extraordinaire and founder of Berkshire Hathaway who is now worth over $80 billion.
Keep it simple and stick with investments that you understand, and things that are familiar to you, says Buffett. If you have no idea how mortgage-backed securities work, then don’t pursue them. If all you know about hedge funds is that they sound aggressively greedy, then steer clear.
Buffett advises everyone to invest in companies and industries they know and “never invest in a business you cannot understand”. Related: Is There Upside Potential For Gold Juniors?
It’s what Buffett calls the “circle of competence”, and once you step outside that circle it’s nothing but speculation. Speculation is risk, and while risk can bring reward, when speculation is the sole aspect, you’re bound to lose.
#2 Naked Without Real Estate
Self-made millionaire and personal finance expert David Bach, author of The Automatic Millionaire, says buying a home is an escalator to wealth, and he’s worried about the Millennial generation. If they don’t buy their own home, he says, this generation’s chances of any real wealth will be close to zero. “The average homeowner to this day is 38 times wealthier than a renter," according to Bach.
For years, buying a home was a measure of financial success—until the bubble burst on the housing crisis and younger generations decided that owning real estate might not be that smart.
The housing market crash left deep scars on Millennials and new research shows that average member of this generation will spend over $200,000 on rent before buying a house. But even more frightening is the fact that its successor, Generation Z, will spend even more on wasted rent.
#3 Debt First, Investments Later
Main advice from several self-made millionaires is that the best investment anyone can make is paying off your credit cards and debt in general.
The money saved on interest by not having debt is better than any return one could get on an investment—at least in the short-medium term.
A general rule of thumb for anyone considered wise with their wealth (or their prospective wealth) is that spending, responsibilities and debt only increase as one gets older (student loan-mortgage-children student loan). So waiting until later to pay off debt just doesn’t work. It’s simply compounds and eats away at your wealth prospects.
According to the Kevin O'Leary, an investor on ABC's Shark Tank and personal finance author, you should aim to have all debt paid off by the age of 45.
Still, not all debt is equal. A mortgage, can be leveraged into an appreciating asset, like a house, though paying it off early still has benefits.
#4 Wealth By Association
Richard Branson, founder of Virgin Group claims that the key to success in business is relationship-building, and few would dare to argue with him.
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"It should go without saying, if you look after your people, your customers and bottom line will be rewarded too."
Branson has said that the people skills were the most important skills he had to learn in order to become successful.
Wealth is primarily a game of emotional intelligence, after all.
As for how to develop solid interpersonal skills, paying attention and being a great listener are key. Branson is also often seen cruising in the offices, interacting with workers and even pulling various pranks with or on them.
By David Craggen for Safehaven.com
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