The Financial Fairy Tales Blog

If you were to base your opinion of wealthy people on what the mainstream media told you, you’d leave with the impression that they were all raised with a silver spoon in their mouths, they exploit other people, and they got massive injections of cash from their parents. But it turns out that only around 10 percent of the wealth that rich people have came from their families. The rest, (that is 90 percent of it), came from the own hard work and some pretty shrewd investment decisions.

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The mainstream media doesn’t want you to know this. Instead, they do their best to give you the idea that getting rich is something that only an elite few can achieve at the expense of everybody else, creating resentment and causing you to think that there’s nothing you can do to dramatically change your financial situation. Of course, none of this is true. Most of the people we’re going to discuss in this article got rich thanks to a good worth ethic, simple financial habits and persistence. In the end, it’s that that pays off.

Let’s take a look at how rich people think: perhaps we could learn something.

They’re Cheapskates

The rich understand that there are savings to be had at every turn. Hilary Swank, the award winning American actress, told talk show host Kelly Ripa that she still used coupons from the newspaper, even though she had made enough money to pay for groceries for the rest of her life. She said that she couldn’t resist grabbing coupons out of the newspaper. They are like “dollar bills staring you in the face.”

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It’s this desire to save all the time that characterizes the wealthy. They understand that the best way to build wealth is to hoard it, and then reinvest it at a high return. They realize that there are always savings to be had, whatever they are engaged in, and they’re willing to negotiate prices down all the time. It’s not just about how much you can earn for the rich, it’s also about how far that money can go.

They Go To The ATM Once Per Week

Alan Corey is the author of A Million Bucks by 30. He’s made a lot of money, but he doesn’t like to splash out, just for the sake of it. Instead, he plays a game with himself. He goes to the cash machine once per week, takes out the money he’s allowed to spend that week, and then goes through the rest of the week paying for everything with cash. Every week he lowers the amount that he takes out of his bank account by $20, just to find out how little he can spend.

Corey’s behavior goes against everything we think we know about the rich from watching TV. We see them in their million dollar cribs or on their luxury yachts, but this is mostly for show. The vast majority of very wealthy people live modest lives in modest homes, with modest cars.

The Rich Are Just Like You

Researchers at the University of Georgia Survey Research Institute wanted to find out whether the rich paid more for regular items, like haircuts. They found that millionaires pay the same as the rest of us, around $16 for a short back and sides, meaning that they don’t splash out just for the sake of it.

They Hate Waste

A lot of wealthy people run their own businesses. As a result, they hate waste that eats into their profits. It’s something that Pat Brennan, co-owner of a custom home building company in Pennsylvania knows a lot about. One day she was working with her granddaughter doing paperwork in the office. Some of the paperwork was held together by paperclips, and so Brennan told her granddaughter to remove the paper clips so that they could be used again. The granddaughter protested, saying that paper clips were cheap and so it didn’t matter. But Brennan hit back, informing her that even though they cost pennies, a penny could stretch a long way when you needed it to.

They Invest On Whims

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A partner at a Washington DC law firm recalls the time when he saw an opportunity for an investment. It was in the spring of 2012, and he was reading the Wall Street Journal. He saw that a company had just been acquired by another corporation, and realized that it would be good for that company’s business and profitability. That morning, he decided to buy $5,000 worth of shares so that he could cash in on the rising stock price as news of the company’s acquisition filtered through the rest of the market. Sure enough, the stock price began to rise, and by the end of the day, it was up by more than 50 percent. It was at that point that the partner decided to sell, netting himself nearly $2500 in a single day.

They Accept That Risk Is The Price Of Success

When AOL started to fail as a business back in the late 1990s because of its refusal to change with the times, it laid off more than 300 staff. One of those staff was Peter Shankman, and he was desperate for money. He took the $500 he had left and instead of wasting it on rent, he plowed it into a T-shirt business. The film Titanic had just been released, and so he printed out a bunch of T-shirts that read “It sank. Get over it.” Shankman knew that he had to sell the T-shirts otherwise he would be homeless. He quickly sold 500 shirts in six hours, making more than $5,000. But he didn’t stop there. Next, he contacted USA Today and told them about his story. They published the article in the paper, and he then went on to sell another 10,000 shirts, which provided the capital he needed to start his business. It just goes to show that getting a small amount of money from places like the Personal Money Store can help people make significant returns in the future.

They Are Careful About Giving To Friends And Family

Charity is something that is really hard to get right. Obviously, wealthy people want to support other people who are in financial need. But they understand that doing so can often create dependence: it’s a lot easier to rely on a millionaire for your income than it is to go to work every day.

Legg Mason, an asset manager, decided to do a survey of wealthy people to see what they thought about their friends and families paying their own way. They found that more than 72 percent of people with more than $250,000 in investable assets thought that their children should pay at least some of their college tuition. A third thought that prospective students should pay around half.