19 October 2018

How the wealthy spend their money


To help you replicate the habits of the wealthy, here are seven ways the wealthy spend their money. 


Fix things before they break.


The wealthy tend to spend before something becomes a problem that needs urgent attention – as they know it’s much cheaper to prevent issues, than to fix issues. When cashflow is tighter, it’s commonplace to fix things in retrospect instead of getting ahead of things that could go wrong. For example, nobody enjoys taking their car into a mechanic (or paying the bill) – but doing this for regular servicing can mean the difference between a small maintenance fee and a surprise repair bill in the thousands.

Another purchasing difference is that the rich purchase goods outright. For example, this means no signing up to mobile phone plans where you pay off the phone as well as the texts/data/minutes over a 24-month period. This is because that locks up a set amount of cash for a long time – and can be an expensive contract to break. If you can afford it, you’re nearly always better-off paying a lump sum for the phone, and then just a pre-paid phone plan that you can tweak higher or lower as needed. The same goes for other consumer goods, such as TV’s and whiteware.



Wealthy people know that true wealth starts with their own health, as it doesn’t matter how wealthy you are if you’re too ill to make the most of it. This means that wealthy people aren’t afraid to pay for quality:


  • Healthcare including regular check-ups
  • Health insurance, and
  • Healthy foodstuffs


The value of short-term spending on health is to ensure you stay healthy over the the long-term.




The wealthy don’t save money, they invest it. This is for the simple reason that over the long run, bank returns have always been lower than investment returns. In fact, it’s often said that over the long run, keeping your hard-earned funds in savings or term deposits with the bank could be your worst enemy.


Buying time


Your time on earth is limited, and you can’t get back anything you waste – therefore spending a little extra cash to gain a few more precious minutes is one of the key things that the rich welcome spending on. Whether it’s grocery shopping online in 30 minutes instead of taking 90 minutes around the supermarket, or clothes shopping online versus strolling through the mall – a $10-$15 courier fee can buy a solid chunk of time. The wealthy then use that extra time as they see fit – which could be to work on their ventures, up-skill so they can earn more, spend time with their families, or take some time to themselves. Time is something you can’t get back and you can’t make yourself, which is why the wealthy see the value in spending to buy themselves time.

The grocery shop online may cost a little more money, but for those who have developed great earning power, they can earn far more than that in the same time.


 Professional assistance 


Wealthy people know the value of professional assistance. Not only will a professional be able to save them time, but wealthy people know that a well-selected professional will be able to do a far better job they can in their respective field. This could include a lawyer providing important estate planning advice, an accountant completing tax returns and advising on the best structures to hold assets, and of course a financial adviser assisting with investment selection and monitoring.


Avoid the lifestyle creep


Same house, same spouse, same car. This is often how the wealthy build their wealth – and keep it. For many people, it’s far too easy to increase their lifestyle as their income increases, but the problem this causes is that they never get ahead or improve their overall financial situation.

The wealthy have managed to avoid lifestyle creep and the “keeping up with the Joneses” mentality that’s prevalent throughout social media. Particularly when they’re in the wealth creation stage, those who end up wealthy don’t drive the newest cars, have the latest gadgets, or have the million-dollar mansion – they’re frugal – and it pays off in the long-run when they often end up with more wealth than they know what to do with. The wealthy don’t start to upgrade their lifestyles until they have reached their version of a very comfortable buffer. For some, this is a certain amount set aside, for others, it’s living in their current home debt-free or having regular passive income. Whatever the buffer, the longer you avoid lifestyle creep, the better off you’ll be.


To buy happiness


Believe it or not, spending on experiences and helping others (including by charitable donations) has been shown as a way to actually buy happiness. Once the wealthy have established a robust financial position for themselves, they usually know how to make the most of what they’ve built.


The bottom line


To recap, the ways that the wealthy spend their money are most often:

1. Fixing things before they break

2. Insurance

3. Investing

4. Buying time

5. Obtaining professional assistance

6. Avoid the lifestyle creep

7. To buy happiness


This article has been contributed by Joseph Darby, CEO and authorised financial adviser at Milestone Direct Ltd. This article first appeared on the Milestone Direct website. The views and opinion expressed in this article are those of Joseph Darby and not necessarily those of Milestone Direct Ltd. The views and opinions expressed in this article are intended to be of a general nature and do not constitute a personalised advice for an individual client. A disclosure statement relating to Joseph Darby is available, on request and free of charge.


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