Finance Tips From the Wealthy

15 Aug, 2011Featured, Finance Tips

Most of us tend to think of the wealthy individual as someone who doesn’t have to worry about the small payments in life and can simply live large 24 hours a day. These are the people who would never dream of clipping out a coupon and who don’t even look at the electric bill each month because that’s chump change. Right? The truth is, I have worked with some families with high net worth and been around some personal acquaintances with millionaire status and some it takes some attention to detail to stay wealthy.

I have a friend, Sam, who for the 10 or so years that I’ve known him has been the guy with the large house and Mercedes that I just can’t quite afford. This is the only Sam I had ever known, until I got a glimpse of the man that had sacrificed the little things to make the big picture more promising. I normally only see him in a professional or social setting, not lounging in front of his flat screen at home so I was surprised to at the scenario I found one day when I came over to watch a football game. His socks had holes in the toes. I asked him about the situation and he responded, “They still work.” His wife was heading off to the store and asked if he wanted her to pick up any peaches since they were on sale that week. It had never occurred to me that even someone with wealth to spare would check for sales at the grocery and neglect to buy some new socks because the old ones did the trick.

When I asked Sam about this he explained his most powerful piece of financial advice to me: preservation. He had slowly and steadily accumulated his wealth by being fiscally responsible and knowing the turns of the investment market so now he aims to preserve that wealth while earning a substantial rate of return. He explained that he is at a mature stage in his life where he can afford the newest Mercedes but he didn’t care there by taking risks, he got there by preserving what he had built up.

After letting that settle in, I asked Sam if he had his funds mostly tied up in investments or if he had quite a bit of liquidity. Sure enough, he advised me to always have a healthy amount of cash on hand. Sam had encountered his fair share of emergency situations throughout his financial life but always managed to come out strong since he had some liquid assets to fall back on. I was very impressed to hear this realistic mentality coming from a millionaire and I have a new found respect for this upper class citizen with the humility to walk around in old socks.