I’ve met thousands of families with a wide range of financial situations. Some are living check to check, others have some savings, and a select few are on their way to being the future rich. How do I know? I look for 3 characteristics:
- They Think Save First: The future rich question every expense. They get more satisfaction from saving than spending. They walk into a store with a budget, know the prices, and still only spend half of what they planned. They believe everything is overpriced, even when it’s on sale. Only late in their life do they take some liberties with spending and even those are feeble attempts to show they can ‘live.’ In reality, they would much rather save.
- They are Inept Investors: It sounds counter-intuitive, but it’s true. Most of the future rich I’ve met don’t know the first thing about investing. I recently sat with a young couple that had $100,000 cash savings and didn’t understand mutual funds. Immediately afterwards, I met with a young man who waxed poetic on his options trading strategy yet struggled to pay the light bill. Maybe people who can’t save overcompensate with random investment knowledge, while those with large savings simply focus on saving.
- They Feel Behind: I can generally assess a client’s financial situation in the first 2 minutes of the meeting. If they start by saying, “We know we could save more and have ideas of where we can cut costs,” they generally have a ton of cash. The future rich always feel poor. They worry they’re behind, and it’s the main reason they’re ahead.
I enjoy meeting and learning from the future rich. They follow simply philosophies that anyone can use and are on their way to having more money than they can spend.
What else? What other characteristics do you think define the future rich?