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1. Are you thrifty?
If the answer is yes, you are probably quite rich. And not just because you keep your purse shut tight.
According to Thomas J. Stanley – author of The Millionaire Next Door – most millionaires are not big spenders. Stanley conducted extensive surveys in the US to study the habits of the wealthy. He found that the most productive accumulators of wealth, people with a high net worth, spent below their means. Whereas the ‘wannabe’s’, people with high incomes but no substantial net worth, spent beyond their means.
So if your watch is a Timex not a Rolex, you usually spend less than £10 ($15) on wine, and drive a Nissan rather than a BMW you are living like the vast majority of millionaires in the US. If however, you have a thing for bling, fast cars and designer brands, you are trying to look rich but inadvertently preventing yourself from truly becoming wealthy.
2. Do you think rich?
Are you waiting to win the lottery or are you solving problems? Do you long for the past, or do you look forward to the future? Are you working to pay the bills or are you working because you love what you do?
How you answer these questions will determine your mentality. And according to Steve Siebold, author of How Rich People Think, mentality determines your wealth.
Siebold spent nearly three decades interviewing millionaires around the world to find out what separates them from everyone else. He says there are fundamental differences in the mentality of the middle class and the world class. Siebold claims that if you think like the wealthy you will become wealthy.
3. Are you financially free?
Can you pay a bill, buy yourself something nice, go out without having to check your bank balance first? If you can, you are financially free and therefore wealthy.
According to a recent UBS Investor Watch report “wealth equals no financial constraints on activities.” 50 per cent of investors they surveyed defined wealth as financial freedom. Whilst only 10 per cent defined it as never having to work again.
A similar result was found in an informal poll conducted by the US media outlet Marketplace.org. Marketplace ran a poll asking Californians to finish the sentence “You know you’re wealthy when…” The most popular responses centred around not worrying about money and being able to do what you wanted. A few people had a more spiritual take on wealth, saying if you were happy, loved, or healthy then you were wealthy.
4. What’s your wealth percentage?
Compare your wealth to the rest of the world for a definitive answer on how rich you are. By going to www.globalrichlist.com you can choose to compare your income or your wealth to the rest of humanity. And you will be surprised how rich you are. An annual net income of £12,000 puts you in the top six per cent of the richest people in the world. Whilst a £50,000 yearly income puts you in the top 0.12 per cent.
It is a different story if your comparison takes a more localised approach. The Guardian website has their own wealth comparison tool for the UK and the results are significantly different. A £12,000 salary, if you have no children and are single, means 34 per cent of the British population are wealthier than you. You are part of Ed Milliband’s ‘squeezed middle’. Drop that income down by £1,000 to £11,000 and you are on the edge of the poverty line.
5. Do you tell people you’re not wealthy?
If you do not consider yourself wealthy you may, in fact, be loaded.
According to Cracked’s Senior Editor David Wong, denial of wealth is a common utterance amongst the rich. Wong implores affluent Americans to stop claiming to be hard up. Saying if they do not they will seem like “an out-of-touch douchebag.”
Whilst Wong’s blog may seem like a diatribe against wealthy Americans, studies support his position.
The Federal Reserve states that Americans with a net worth of $1.4million are in the top five percentile. Yet the majority (72 per cent) of investors with assets worth $1-5million do not consider themselves wealthy, according to USB Investor Watch.
A 2009 UK study, conducted by the Joseph Rowntree Foundation, found that participants misrepresent their wealth. The conductors of the study were surprised to find the participants subjectively placed themselves in the ‘middle’ wealth category regardless of their actual socio-economic group. Meaning that participants who were in wealthier categories considered themselves lower on the socio-economic scale than they actually were.
So if you find yourself overestimating national salary averages, claiming not to be wealthy when the government say you are, or uttering phrases such as “Well it sounds like a lot but it isn’t really” then you are probably wealthy.