Ever wondered how the wealthy manage their money and what they do differently from the average Australian? New research* from Colonial First State (CFS) has uncovered seven secret financial habits that will help you build wealth.
How do well off Australians create and maintain their wealth? From CFS’ research* over the past two years, there have been seven financial habits identified that set the well heeled apart from the crowd.
These habits are the financial equivalent of good dental hygiene. But while most kids are taught about oral health, many Australians are left in the dark when it comes to managing their money.
The value of the assets, investments and savings of the relatively wealthy averages around $3.746 million, the data shows – over five times as much as that of the average Australian, at $651,000.
Here’s what you can learn from them.
- Know the goal… and how to get there
Wealthy Australians are more likely to set clear financial goals including what they want to achieve and by when.
The research indicates 92% of affluent investors are more likely to have identified the age at which they want to retire, compared with 83% of the general population.
They’re also more likely to set lifestyle goals and review them to ensure they’re on track. For example, four in five specifically aim for a comfortable or even a luxurious retirement that enables them to travel and eat out – something less than one in two of us do on average.
This clarity and preparedness are important in helping them to maintain their standard of living without financial stress, allowing them to travel, enjoy leisure activities and look after themselves as well as their family.
In fact, four in five wealthy individuals say they feel prepared for retirement, compared with just two in five of the general population.
- Think long term
Planning for the long haul is another hallmark of the well to do. They are more likely to plan for the future, with 93% thinking long term compared with 87% of the average population.
This forward thinking approach helps them make informed decisions about their investments and retirement savings.
They’re also 50% more likely to seek help to identify different ways to invest their retirement savings than the general population.
- Have a thirst for knowledge
A desire to educate themselves about money is another defining habit of the well off. They’re almost twice as likely to rate themselves as having a very good or excellent level of financial literacy.
They’re also generally more interested in getting help to set financial goals, with 81% seeking help compared with 70% of the average population.
- Seek financial advice from professionals
Wealthy Australians are more likely to get help from a financial adviser and to talk to them regularly.
The research shows 45% of the well to do have an adviser – more than twice the proportion within the general population. Of those who have an adviser, 47% have spoken to their adviser in the past six months and 61% in the past year.
This regular communication helps them feel more prepared for retirement.
- Get involved with super
Affluent investors are actively involved with their super. They are much more likely to regularly monitor how their super performs, with 82% doing so compared with just 20% of the population at large.
They are also more likely to actively compare the performance of their super fund against competitors, with 49% doing so compared with 32% of the average population.
And they’re more likely to review how their super is invested to ensure it meets their needs. This active involvement ensures they can make adjustments as needed to help them stay on track to meet their financial goals.
- Know how assets are invested
Perhaps because of their financial knowledge, wealthy people have a more detailed understanding of how their wealth is invested, and the rate of return and risk profile of their chosen investment options.
While one in three Australians on average don’t know how their money is invested, that figure falls to 9% for these individuals.
- Invest outside super
Finally, affluent investors tend to have investments outside their super. They are much more likely to have a diverse portfolio, with 94% having other investments compared with 56% of the general population.
The most common investments they hold are shares, owned by 51%, and high interest savings accounts, held by 43%.
They are also more likely to have a range of different investment types, also including things like term deposits and even crypto currencies.
This diversification provides them with security and helps them spread their risk across different asset types.
These seven habits of the relatively wealthy are good lessons for any investor and worth considering if you’re looking to improve the value of your own investments and personal wealth.
For more information, book a time to chat, and we’ll discuss how you can create the habits you need to achieve your goals.
Source Colonial First State
