7 Financial Facts Every Wealthy Person Knows
There are tons of financial facts out there, but 7 of them top the list when it comes to wealthy thinking. Self-made wealthy people have discipline with spending and saving. They have also learned how to make money work for them and not the other way around.
This article will cover the 7 financial facts every wealthy person knows with real-world examples of how to apply them. If you can take them into account today, you’ll be on your way to a more financially healthy tomorrow.
Financial Facts You Need To Know
1. You Need To Pay Yourself First
The majority of self-made wealthy people pay themselves before they pay their bills, and we aren’t talking about going shopping. Paying yourself first is putting money into your savings before you pay any other bill with your paycheck. You should be putting away a designated percentage or amount of your income to build up an essential emergency fund.
Many financial firms recommend saving enough money to cover at least three months’ worth of expenses in case you’re left without work. While it may sound intimidating, start with as much as you can every week and watch with pride as your savings slowly build up.
2. The Best Way To Make Money Is By Investing
Working more hours at a low-paying job may help boost your income, but it won’t give you nearly as much financial power as combining your work with investing. Once your emergency fund is up and running, take any extra income and put it into an investment vehicle of your choice.
Some reputable options are stocks that track the S&P 500 – the 500 largest companies in the U.S. You can also invest in bonds for lower risk or in self-managed robo-advisor accounts that do most of the legwork for you.
If you have $5,000 under your mattress, it will lose value over time. If that $5,000 is invested in the stock market instead – which has an average return of just over 10% annually – you could have $5,500 by the end of the year, over $6,000 the second, and so forth.
3. You’re Wealthy When You Live Off Passive Income
Passive income is money you make without working, such as dividends from stocks. True wealth is not defined as a number, but as making enough money passively to live off of without ever having to work again. Other forms of passive income include real estate income, advertising income if you post online content, and selling your own courses or books.
4. Financial Knowledge Is Power
Our school systems mean well, but they don’t prepare children in the realm of financial literacy and financial facts. This is why it is our individual responsibility to continuously grow and learn about the financial sector. Head to your library and pick up some of the highest-recommended financial books, listen to podcasts, watch YouTube videos, and connect with others who are in a better financial place than you are.
5. Paying For A New Car With A Loan Is Always A Poor Financial Decision
Out of our financial facts, this is the most practical and can be described through numbers. As of January 2023, the average monthly payment for a new car loan in the U.S. was $700 with an average loan length of about 6 years. Once you buy your new car and drive it off the lot, it will automatically lose up to 10% of its value by the time you get home. In the first year, it loses 20% of its value, plus an additional 15% each year after that.
To put it in perspective, if you purchase a $30,000 Chevy, it’ll only be worth half the price in three years. Instead, if you buy a used car for $15,0000 and put the remaining $15,000 into a standard investment, you’ll have your used car plus a $3,375-$5,000 gain through stock dividends and growth in the same amount of time.
6. Living Below Your Means Is Key To Financial Success
Wealthy people don’t make more money and blow it on vacations, clothes, and cars. They have learned to always live below their means, which includes being careful to not inflate their lifestyle with their paychecks. This may be one of the most important financial facts of all. As an example, Warren Buffet – perhaps the most famous businessman in American history and current billionaire – still lives in the same home he bought in 1958.
7. You Must Have A Plan For Dealing With Emergency Expenses
Wealthy people aren’t surprised or frightened when they get an emergency bill in the mail; after all, this is what their emergency fund is for.
If you haven’t established an emergency fund yet, you can still get started today. In the meantime, consider a title loan to pay off your urgent expense as you get your finances sorted. We here at Idaho Title Loans, Inc. can use your car title as collateral – meaning you keep your actual vehicle – on loans for up to $15,000.
Get Back On Track Financially Today
Self-made wealthy people are not special or lucky – they know the value of financial facts around saving, budgeting, investing, and learning. You too can take on these habits to spend wisely, save cautiously, invest excitedly, and face emergencies with confidence.
If you need help with the latter, Idaho Title Loans, Inc. is here to help with our title loans. The loan request process begins with our online inquiry form, there are only three requirements to qualify, and you could get your money as soon as today or tomorrow. Reach out to us to learn more and get back on the path to wealth as soon as possible.
Note: The content provided in this article is only for informational purposes, and you should contact your financial advisor about your specific financial situation.