# Secrets of the "Rich"



## ENP (25 April 2011)

The rich have secrets. 

The rich do things differently. 

The rich are the smart money.

Are they really though? Or do they just have the discipline to regularly invest into sound investments? I don't know of any "secrets" that wealthy people have done differently, other than they just stuck at it and were persistent in what they did.


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## medicowallet (25 April 2011)

ENP said:


> The rich have secrets.
> 
> The rich do things differently.
> 
> ...




Some continuously improve their competitive edge (eg education, contacts)
Some work harder or smarter
Some can read the writing on the wall better and change before the herd

Most/Almost all have a driving force which they hold dear (eg kids, fear of failure etc)

IMO most rich people are there because they deserve to be (pity narrow minded governments and the general public don't recognise this and prefer penalise them as opposed to aspire to join them)


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## So_Cynical (25 April 2011)

ENP said:


> The rich have secrets.
> 
> The rich do things differently.
> 
> The rich are the smart money.




It they are young and rich they have rich parents.

The vast majority of older wealthy people i have met got rich by doing very little just simple conservative investing, mostly Capital city real estate buy and hold and just keep buying. 

No secrets, no difference, nothing smart about it....i ve only ever known 1 guy who got rich young by being smart and working hard putting in long hours...he got rich selling and installing mobile phones into cars back in the mid/late 80's and put the profits into real estate in Melbourne.


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## ParleVouFrancois (25 April 2011)

As someone who is both young and rich (for my age), I agree with Cyn, it'd be almost impossible for me to get into this position without the positive influence of parents. Mum got me into shares, and lent me money when I needed it, provided a good learning environment for school etc etc. 

Two points I want to make though, they both are from poor backgrounds, on my dad's side his parents are a nurse and baker, hardly upper class. On mum's side her dad was a nurse and her mother did odd jobs around the house (raising chickens etc), so what I'm saying is my parents both did the hard yards in saving more than they spend and working long hours for several years. Both of my parents were the first generation to obtain university level education and thus it is very possible to succeed even if in a bad household environment for money.

The second point relates to me, although my parents are "rich" (no mortgage on house etc but nothing crazy rich), it's no guarantee that I'm going to succeed financially but it is a very positive influence. Personally I think my large personal interest in shares contributes much more than parents, but having parents bankroll you early on does help.

Mum supplied me with some starting capital to the tune of $50,000 in a loan to get my share investments going. I think the main reason she lent me the money was because of Flinders Diamonds. When I was much younger, I noticed that they had minerals rights in the Pilbara next to Fortescue Metals, which was going bonkers. However Flinders Diamonds was obviously exploring for diamonds, not iron ore. The price at the time was 1 cent, and within a year they had reached 25 cents, mum put in $10,000 so before I was even legally an adult I made almost a quarter of a million for my mother. Pity that she didn't sell until the depths of the GFC (taxation issues mean that even if she sold at 25 cents she'd make only 100k or so) so she never got to obtain that quarter of a milly, and instead only got a triple or so of her money, but I think that event made her much more comfortable in lending me money later on in life. She has almost religious belief in my investment calls now LOL, it's rather worrying that she trusts me so much, I don't want to lose her money so I keep her in more conservative investments.

Then again I am a pretty strange kid in my personal time, preferring to research financial stuff instead of more conventional hobbies for kids my age (I used to play and still love soccer, and I read fiction when I want a change from serious business finance articles). Nothing beats a good forum chat, or a business article, or an economic article though, it's just the way my brain is wired.

One thing that can't be overstated however, is the influence of luck in life and finance. I have had unbelievable luck in my life and financially, so it's a set of factors (family/money etc) plus large amounts of luck, that tends to lead to rich people.

So all up, "secrets of the rich", all rich people that I know are either business owners/relatives of business owners who earn insane amounts of money, but if you're a joe average and want to become financially secure, the absolute first thing you have to do is take control of your finances. This means saving more than you spend, and once you've saved up money, managing that money to build up the pile bigger and bigger. Compounding really is the most powerful force in the universe.


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## ROE (25 April 2011)

ENP said:


> The rich have secrets.
> 
> The rich do things differently.
> 
> ...




There is  no secret, they are normal people eat the same stuff you eat and drive the same car you drive ..they are just discipline with money, spent less than they earn
and invest wisely ...

rich in material can easily be acquired with debt.
people living million dollar house may not be rich, they may be acting rich 

most people can be wealthy in one generation if they follow some simple money rules.

I know about 10 or more of these people


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## Tyler Durden (26 April 2011)

ROE said:


> There is  no secret, they are normal people eat the same stuff you eat and drive the same car you drive ..




I drive a Mercedes SLK??


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## Bill M (26 April 2011)

ENP said:


> The rich have secrets.
> 
> The rich do things differently.
> 
> ...




I think the rich just do things differently. Going against the herd, being patient and knowing good investments. Lets look at CBA for example, at around October 2007 it was about $62. People were queuing up to buy more at that price 2 years later it hit $24 and no one but the smart investors were buying. Buying that stock at that time would have given you double dividends and double growth by now. Same goes for many stocks, buy them cheap and collect the dividends and maybe later sell them at much higher prices. The rich are patient, they don't follow the herd and they don't subscribe to the end of the world theories, life always goes on.


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## medicowallet (26 April 2011)

Bill M said:


> I think the rich just do things differently. Going against the herd, being patient and knowing good investments. Lets look at CBA for example, at around October 2007 it was about $62. People were queuing up to buy more at that price 2 years later it hit $24 and no one but the smart investors were buying. Buying that stock at that time would have given you double dividends and double growth by now. Same goes for many stocks, buy them cheap and collect the dividends and maybe later sell them at much higher prices. The rich are patient, they don't follow the herd and they don't subscribe to the end of the world theories, life always goes on.




The rich ran with the herd in 2007.

The successful ones read the writing on the wall and sold out either just before the plummett, or early during the plummett.

The against the herd theory is flawed.

You run with the herd, and then turn just before the lemmings fall off the cliff.

Housing is a great example. When the smart money exits, then it is probably a sign of something to come.


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## So_Cynical (26 April 2011)

Bill M said:


> I think the rich just do things differently. Going against the herd, being patient and knowing good investments. Lets look at CBA for example, at around October 2007 it was about $62. People were queuing up to buy more at that price 2 years later it hit $24 and no one but the smart investors were buying.




Bill i think that's more a niche of rich/successful people...lots of rich older people have nothing in the stock market, its all in real estate, the stock market for them is simply to risky etc...they could care less about CBA at 24 bucks.

I was buying at the bottom and im not rich...ive done ok and am a hell of alot wealthier than i was in Feb/March 2009 (4x ) but far from rich.


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## Bill M (26 April 2011)

medicowallet said:


> The against the herd theory is flawed.
> 
> You run with the herd, and then turn just before the lemmings fall off the cliff.
> 
> Housing is a great example. When the smart money exits, then it is probably a sign of something to come.



I know a few rich people and the last thing they will ever sell is property. They just hold on and rent them out and if property does fall then they will buy more. I have heard plenty of commentary on this big housing bust that is supposedly coming and so have they, none of them are selling.



So_Cynical said:


> Bill i think that's more a niche of rich/successful people...lots of rich older people have nothing in the stock market, its all in real estate, the stock market for them is simply to risky etc...they could care less about CBA at 24 bucks..



That's true too. Back in 08 and 09 I was looking for property on the Northern Beaches, most of the buyers at that time I was competing with were the over 60's group, unassuming normal quiet people. As you say *usually* older Aussies in general do prefer property.



> I was buying at the bottom and I'm not rich...ive done ok and am a hell of alot wealthier than i was in Feb/March 2009 (4x ) but far from rich.



Me too, I can never get my head around people who buy stocks at top dollar but then won't buy the same stock for half the price and nothings changed? Unbelievable.


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## tech/a (26 April 2011)

*In Simplistic terms*

Dont be limited by a wage.
Seek to employ people.

"_Who is smart he with a degree or he who hires those with degrees_?"

If an employee costs you $30/ hr and can return $100/hr add more employees.
If a machine costs you $2000/mth and returns you $10,000/mth add more machines.
If an item costs $3 and you can sell it for $30 then sell more items.

Minimize and seek to eliminate risk.
There are times to--"bet the house"
There are times to---watch.

Seek passive income.
Understand "Money does make Money"

Place yourself in front of opportunity and wait for it to hit you---you'll likely be known as "Lucky"---but we know differently.

*****If you cant control it* then---DONT DO IT!****--no matter how no risk it looks.
Never look back with regret look forward with optimism.


Be decisive.
The worst decision you'll make is NO decision.
*Understand* the power of leverage and compounding.
Use and take advantage of it every opportunity you get.
Dare to be different.

Make *equity* WORK HARD!

Enjoy life--we do this ONCE!


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## sval62 (26 April 2011)

Aaahhhhhh
Such a fine post from my 2nd favourite Duck.
If only he was the Peking type.


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## skyQuake (26 April 2011)

tech/a said:


> *In Simplistic terms*
> 
> Dont be limited by a wage.
> Seek to employ people.
> ...




Agree with all that but most people wouldn't have the faintest clue where to start.


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## medicowallet (26 April 2011)

Bill M said:


> I know a few rich people and the last thing they will ever sell is property. They just hold on and rent them out and if property does fall then they will buy more. I have heard plenty of commentary on this big housing bust that is supposedly coming and so have they, none of them are selling.




And neither am I.

But if I was geared, I would not hesitate. 

What does it cost me if, eg $100000 worth of property drops 20% ?? $20k = 20% loss
If I only had 40k and 60k borrowed                                                     = 50% loss

See some rich people are geared into property to the max, and when the tide turns I will be buying their properties at rock bottom price.

Just like I did when the stock market tanked.

Just as I did when the property market tanked in the past, and just as my kids will do in the future after the coming crash (not making the assumption I will be alive in the property crash after the one coming lol)


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## tech/a (26 April 2011)

> See some rich people are geared into property to the max, and when the tide turns I will be buying their properties at rock bottom price.






> There are times to--"bet the house"
> There are times to---watch.




The rich know when those times are.
You wont become rich waiting for the rich to become poor.
They are way way ahead of you.


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## DB008 (26 April 2011)

medicowallet said:


> Housing is a great example. When the smart money exits, then it is probably a sign of something to come.




To an extent
They make mistakes too.

Luxury Australian homes draw Russians, Chinese 

...and then this...

Australia Luxury Home Prices Fall, Listings Increase as Rates Dent Demand

Flip a coin anyone???


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## Reasons (26 April 2011)

I think people give the majority of the rich far too much credit. They make mistakes like anyone else. However, one of their key tricks is to diversify and often still have their business(s) operational or receiving dividends. They build multiple income streams with their business, real property, fixed interest and equities and when they bugger up one of them they still have the others to fall back on to patch the wrong move. They do get good leads on assets occassionally at an earlier stage at times due to their networks. They tend to pay high attention to protecting their capital and to their annual return performance and continually learn.

Like everyone else, property has always worked for them over many years and are no different to anyone else in terms of believing in the historical nature of property prices into the future (albeit they could be wrong). As many of them own real commercial property that is often lightly geared at worst, they are probably in no significant cashflow danger if they have solid tenants and will fall back to other cashflow streams if necessary.


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## leonandnaye (27 April 2011)

Hi all,

My very first post and what a good subject, the secrets of the rich?

It depends on how you define rich? 
Are you rich if you compare yourself to Bill Gates?
Are you rich if you drive a SLK which the bank owns?
Are you rich if you earn a 6 figure salary but are working 80 hours a week?

Or are you rich if your passive income exceeds your expenses and you can wake up everyday and do whatever you like,( within reason) you have your health and a beautiful family, like me?

I think it is all about balance, having the time to enjoy your life and not comparing yourself to anyone else, because there will always be someone with more than you!

Leon
Passive income is the key!


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## adobee (28 April 2011)

need some definition of rich..  from what i see there are two type .. rich hard working and clever (those who run business & indusrty) and rich shonks (those who run property & investment trusts which fail but they still end up walking away with big $)..

Those i know who are rich, hard working & clever never sell property they continue to accumulate, and they say to me .. when I bought this in 1974 people said I paid $1000 to much.. it now generates $1m a year in rent.. or why would I sell it ? I would then just have to buy something else ? this has been my experience with the rich..


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## schnootle (28 April 2011)

It is always hard to determine how much of a persons success in anything is down to any "secret" or edge they may have or how much is just down to circumstances. You could have become very wealthy in recent years running your life by the "property in melbourne never goes down, it is a sure bet" mantra, and many have. Does that mean that is a secret or simply a wrong assumption that has been very profitable recently?.

I think sometimes we can read too much into anyones success or failure in anything, there is a good amount of "right place right time", "wrong place wrong time" in all our lives.

I think to get really rich you need a healthy dose of "right place right time", you need to ride a wave that by circumstances you are far better placed to ride. I think most stupidly rich people show this.

Although being rich like leon is within the grasp of most of us I think, its my goal.


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## 6figures (28 April 2011)

adobee said:


> need some definition of rich..  from what i see there are two type .. rich hard working and clever (those who run business & indusrty) and rich shonks (those who run property & investment trusts which fail but they still end up walking away with big $)..
> 
> Those i know who are rich, hard working & clever never sell property they continue to accumulate, and they say to me .. when I bought this in 1974 people said I paid $1000 to much.. it now generates $1m a year in rent.. or why would I sell it ? I would then just have to buy something else ? this has been my experience with the rich..





I think the term we are looking for is "wealthy" ... rich has too many definitions..

clasify wealthy? multi millions? billions?


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## skc (28 April 2011)

6figures said:


> I think the term we are looking for is "wealthy" ... rich has too many definitions..
> 
> clasify wealthy? multi millions? billions?




I would classify wealthy as net worth of $5m+ per household member / dependent.

$1-5m is probably upper middle class.

$0.5-$1m is middle class (many retirees sitting on their home have that).


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## xyzedarteerf (28 April 2011)

Bill M said:


> I think the rich just do things differently.The rich are patient, they don't follow the herd and they don't subscribe to the end of the world theories, life always goes on.




Now this you can bank your $$ on, but you have to ballance this with Risk as well .


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## Bill M (28 April 2011)

leonandnaye said:


> *Or are you rich if your passive income exceeds your expenses and you can wake up everyday and do whatever you like,( within reason) you have your health and a beautiful family, like me?*
> I think it is all about balance, having the time to enjoy your life and not comparing yourself to anyone else, because there will always be someone with more than you!
> 
> Leon
> *Passive income is the key*!




Hi leon, welcome to the forum. I'm with you mate, I feel rich with all of the above, cheers.


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## trainspotter (28 April 2011)

Never get so busy making a living that you forget to make a life is my motto.


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## Logique (28 April 2011)

I'd say the rich folks are the ones having home delivery of gold and silver bars atm. Of course as a gold and silver investor I am biased. AUD at 1.09 was it last?

Such a bother when Postie doesn't meet the expected timing of bars to the door. I'd be able to order some silver bars if Explod didn't have them all (only joking)


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## leonandnaye (28 April 2011)

Bill M said:


> Hi leon, welcome to the forum. I'm with you mate, I feel rich with all of the above, cheers.




Hi Bill,
Thanks for the welcome, I wish I had found the ASF sooner,

I think the words rich or wealthy are very subjective,

It was always my goal to be able to retire early, 

I started with nothing and through investment properties and shares I was able to retire at 35 because my passive income exceeds my expenses,

I am not earning a million a year, but I dont need to, to enjoy life,

I have no stress, no worries and enough money to go on a few family holidays each year as well as spend time following other passions and not working.

Kiyosake says you can measure how rich / wealthy someone is by the number of days they can live without them working or having to go into their business,
For me this is the rest of my life!!

Leon
Passive income is the key!


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## tech/a (29 April 2011)

> Kiyosake says you can measure how rich / wealthy someone is by the number of days they can live without them working or having to go into their business,
> For me this is the rest of my life!!




Subjective indeed.

Packer
Murdoch
Trump
Norman (Greg)

At the top level and many many like myself could think of nothing worse than to stop work all together.
Personally I can do all you can do when ever I want with passive income from a fair sized company as well.
I can also become involved in projects of interest which would not be available to me without the cash cow in the background.

So I'm happy to settle on subjective.


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## Sir Osisofliver (29 April 2011)

Some good responses in this thread.

The ATO defines highly wealthy as *"an Australian resident who, together with associates, effectively control $30 Million or more in net wealth."*

What do the rich do differently to most people?

I agree with most of what Tech said (I still think that you can work for someone else and still create passive income sources elsewhere) but I'd like to highlight that what I've found is that rich people know how to *manage risk* extremely well. Some of you have spoken about diversification, passive income streams etc. These are just ways of managing risk. As a generalisation most people don't understand risk, and so they think that risk is bad, they avoid any kind of risk because they cannot overcome the fear of loss.  Or they get burned because they didn't understand what they were doing and didn't manage their risks appropriately and then never want to do it again.

Rich people understand the risk involved in what they are doing and have strategies to minimise the risks involved.

Cheers

Sir O


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## jbocker (29 April 2011)

I am not telling ..its a secret!

well OK to be a little more accurate
I am not in a postion to tell.


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## kingcarmleo (6 May 2011)

ATO classifies 30m as rich? Jesus, I'd be happy with 1m. I think 5m in assets and 100k+ a year is a good estimate of "rich".


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