7 Life Changing Lessons You Can Learn from the Wealthy
Vol 13 | Issue 23
The rich are just like us – except when it comes to their money. That is where the two paths diverge, leading to two completely different realities.
But the great thing about life is that you can always observe what the ones who have ‘made it’ do, and try to emulate it. And so, let us have a look at 7 life changing lessons that you can learn from the wealthy ones.
1. Passive income is better than active income
Most taxation systems in the world are built on taxing passive income at highly discounted rates. For example, incomes from receiving dividend, appreciation of your capital assets, etc. are taxed at less than half the tax that you pay on the humble salary.
|The rich of the world have their fingers in multiple jars at once, says the author (Photos for representational purpose only)
The wealthy of the world have surprisingly low salaries – because they derive their income from more tax-efficient sources. Though it may not be possible for everyone, try to move away from active sources to passive ones, by investing in long term income generating assets.
2. Diversify your income
The rich of the world have their fingers in multiple jars at once. Of course, this ability also comes from the privilege of having ample capital and time.
But as far as you can, try to diversify your income streams, even if it is just investing in a rental property or mutual funds. Depending on a single employer is a recipe for disaster when you can be thrown out with nothing but a farewell speech.
3. Evaluate your Opportunities
The wealthy have too many opportunities – and they say no to a lot of them. That is because they know that while an opportunity could generate a lot of money for them in the future, it will require time and money right now, which could be better utilized elsewhere for a higher return.
When you evaluate opportunities, do take into account whether you could be doing something potentially better instead, a knack that we often do not develop, scared that once we reject an opportunity, no new ones will come knocking at our door.
|We find joy in negotiating down the prices of daily essentials – the rich don’t bother about that
4. Delegate your work
How many of us spend time during the day doing things that could’ve been done by someone else? All of us. That is because we value our money more than our time. If I have to pay someone to do something for me, I would rather do it myself.
The wealthy know that money can be earned as long as you have time. If you can afford to do so, delegating the administrative tasks in your life, for example, household chores, paying bills, doing your taxes, etc. can free up essential bandwidth for you, and the time saved can be used to earn more, making it a net positive.
5. Focus on the big wins
We find joy in negotiating down the prices of daily essentials – the rich don’t bother about that. Not just because they can afford not to, but because they value their time more than what they could possibly save from the groceries.
Instead, they focus on the bigger wins, the ones that would truly impact their lives.
|Most of the wealthy do not bother about the geographical location of their income. They will go where the money is
While we can’t think of negotiating down the price of a private jet like the wealthy, we can implement this in our own way. For example, you could use your limited time in researching on and negotiating a pay raise, switching your job to a better-paying one, or structuring your assets to be more tax-efficient.
All of these will give you a much higher ROI than looking for the best deal on potatoes.
6. Take location advantage
Most of the wealthy do not bother about the geographical location of their income. They will go where the money is. Given the fact that most of our work can now be done from the remotest island on planet earth, and the speed at which we can travel if required, this should become the default setting for all of us too.
If you can earn more by being employed in one location, and simultaneously spend less by being a resident in another, you would be using location advantage, just like the wealthy have always done.
7. Pay for financial advice
The rich pay for the best advice out there, especially when it comes to their finances. That’s because they know that the benefit they derive will be multifold compared to the price they pay.
|While being uber-wealthy is a combination of many factors, we can at least try to implement the right lessons in our own lives
When we attempt to research everything on our own, manage our own assets, and file our taxes, to save money that would have gone to an accountant or advisor, we do ourselves and our money a disservice. The best financial advice is to pay for good financial advice.
While being uber-wealthy is a combination of many factors (usually family and privilege), we can at least try to implement the right lessons in our own lives. Maybe we won’t get to the 1%, but even if we can improve our own situation by that much, it is a win.
Priyanka Mashelkar is Dy. Commissioner of Income Tax and Author, 15 Sure-shot ways to Hit the Jackpot