10 reasons wealthy people have all the money

There's a lot of things wealthy people can teach us about how they get rich and stay rich. Well, at least ten:

1. Don't spend your money before you've got it

You're looking forward to your next promotion, bonus or tax rebate and you book a holiday in anticipation. Then redundancy happens, bonus targets are missed, the tax rebate is a disappointing two pounds and 42p. What's more, you've had a costly emergency with your car in between. You've got trouble. Again.

Plan better and live within your means or you'll never be rich.

When you expect more money, don't think first how to spend it. Put immediate gratification aside and start saving money to build your wealth, or pay for more training to increase your income.

2. Start small

We have to start somewhere and that's with what we can afford now. Saving just £20pm will quickly be enough to cover small emergencies. As you can add more, it'll grow ever more substantial.

Starting small will give you the financial discipline you need to be rich and stay rich. This doesn't have to be saving. It could be with a cheap course to improve your job prospects, for example, with the idea of tackling a more expensive and impressive one when you can afford.

3. Don't believe what you're told

Whether you hear it from an advisor, read it on the Web or in the papers, or get it from a bank or other company, you must search for other opinions before you commit yourself to a big purchase or start making regular purchases. I have an inside track on companies and banks, and of course the media as I'm a journalist, and, I'm telling you, you can't trust anyone. By doing a little bit of research, you'll usually avoid relinquishing money on inappropriate or ineffective products.

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4. Defend yourself

When you make a purchase and it goes wrong, stick up for yourself. I always complain when I feel I've been wronged. Sometimes the company compensates me without a fuss and other times I have to fight for it, but I would be thousands of pounds poorer if I hadn't done so. Keep evidence of all communications and purchases, and politely complain. If that fails, look for an ombudsman, association or complaints body that can help you.

5. Control your impulses

We're prone to bursts of behaviour. This isn't good for anyone who enjoys shopping. You can be sensible with your money for four weeks only to blow it all and more in a storm of spontaneity, whilst dreaming up an original excuse each time.

Try buying nothing but essentials for six weeks. Write down what essentials are beforehand so you don't trick yourself. If you can't do it, you need to research creative ways to enforce discipline on yourself and build new habits. I'm certain readers can help you there if you use Q&A.

6. Understand your temperament

Investing is another area where you really need to understand yourself. If you can't limit checking your investments to once a week at most then you have the wrong temperament and are liable to sell when your investments and the market falls (i.e. when they're cheaper and better investments) and to buy when they've risen (when they've become more expensive and riskier). If you can't change, consider investing regularly in index trackers instead, where you won't be so tempted to keep checking prices, and can feel safe knowing you'll do better than probably 80% of other investors!

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7. Manage your time

There's absolutely no substitute for hard work, and no legitimate get-rich-quick scheme that'll save you from graft. That's the most important point in this whole article. Don't spend 15 hours a week attending to your investments if you're barely outperforming simple index trackers. Don't spend years building a corporate website if you can afford a professional to do it quickly.

Also, focus your time. I know someone who frequently comes up with brilliant ideas and then tries to do all of them at once, resulting in nothing being completed.

8. Time matters

When it comes to building wealth, time's crucial. Start saving and then investing early. Time will not only decrease your risks (as I wrote about here) but it's likely to vastly increase your wealth through compounding. Compounding is often called magic, but it isn't: it's real and for most of us it's essential if we want to be wealthy.

9. Buy your own home

There's been a backlash against buying, because more of us think we've gone property crazy. I'm sure some people have, which is why they've been buying when they can't afford to. However, if you can afford to (I mean, even if interest rates were to rise a lot), it just makes masses of financial sense. Indeed, it almost doesn't matter when you buy: over the long term, it'll almost certainly prove cheaper than if you'd stuck to renting, saving you many, many thousands of pounds over the rest of your life whilst increasing your wealth and financial security.

10. Only borrow to invest in yourself and property

The more we borrow and the more debt interest we pay, the less stuff we'll be able to buy in our lives. Hence, if you like buying stuff, it makes no sense whatsoever to borrow to do it. Get yourself some patience and save up instead.

Borrowing to invest in yourself and property, rather than to buy stuff, is different. Borrowing to buy a home makes sense, and extending your home will usually increase its worth beyond the debt and interest you've paid. Borrowing to buy a better car when that'll greatly improve your job prospects also makes sense, as does borrowing when it'll finance training or education to improve your earning potential. 

Compare mortgages, savings accounts and index tracker ISAs at lovemoney.com.