Ever wondered why rich people are cheap? Well, it turns out there might actually be evidence to prove why - enjoy! Add me on Instagram: GPStephan
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To understand this, we have to dig deeper into the psychology of becoming wealthy, and get to the source of where it all begins. One of the more pertinent revelations was that 86% of Millionaires were self made. And even more remarkable was that 78% of them started out as middle class or poor.
From that, we can dispel the notion that rich people mostly come from wealthy families and inherit their money. In fact, the vast majority of them built up their wealth the old fashioned way: through hard work, diligent saving, and long term investing.
Business Insider found that it took the average self-made millionaire 32 years to reach a one million dollar net worth. Even more astonishing, fewer than 1% of millionaires were able to do that before the age of 40.
The first, logical conclusion from this research is that: rich people didn’t get rich by wasting money.
What many people fail to realize is that the personality trait of someone who diligently saves and invests their money to one day become a millionaire, doesn’t magically change the day they become wealthy.
Secondly, speaking of keeping their money…to most millionaires, every little bit counts.
This becomes very evident when you start breaking down the statistics. A survey conducted by Millionaire Corner found that 1 out of 3 people with a net worth above $5 million dollars…shop at, you wanna take a guess? The answer is: Walmart. That’s right. 1 /3 people worth over $5 million shop at Walmart. And we can go even further. 50% of those high net worth individuals shop at Costco, and 25% of them shop at Target.
Third, studies have shown that a person’s spending habits are largely dependent on how quickly and easily they make their money.
And, no surprise…the faster you make money, the quicker you tend to spend it. The National Endowment for Financial Education found that up to 70% of people who receive a large amount of money upfront, blow it within a few years.
Psychologically, earning a LOT of money, very suddenly, has a large impact on how much that person is likely to spend, and when a person’s wealth isn’t derived from their own financial habits and discipline over long periods of time, they’re less likely to keep it. People who receive large windfalls also have a harder time conceptualizing just how much they really have or how long it will actually last them, because they’ve had no prior experience dealing with wealth.
Now fourth, when it comes to that, the majority of millionaires understand that their wealth isn’t permanent, so they’re more likely to save.
According to the 2015 Survey of Affluence and Wealth, which analyzes data from the top 10% of earners worldwide, found that 81% of respondents were concerned about unquantified risk. This led to an over-abundance of savings, knowing that wealth can very easily be short lived. The reality is that wealth can be very much fleeting, and most self-made millionaires recognize this - and plan for a time when they WON’T be making the money they are right now.
And the fifth thing to remember, is the millionaires often recognize the long term value of money.
Saving $20 per week on groceries by going to Walmart might not seem like a lot of money when someone’s worth $5 million dollars. However, what many people fail to realize is just how much $20 per week adds up when saved and invested.
And sixth, saving money becomes a habit that’s hard to break.
Like the studies discussed earlier, the majority of rich people became rich through decades of living frugally and investing. Longtime habits like this are not easily broken, especially when they’ve become engrained time and time again for, on average, the 32 years it takes for someone to become a millionaire.
So, given all of this information, it’s easy to see how the idea developed over time that “rich people are cheap.”
And as of now, there’s been enough research and data to suggest that, overall - this is relatively true, that rich people DO INDEED place a higher emphasis on saving money. It’s because of that they’re often rich to begin with.
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness @gmail.com