It's startling how much in common ASX millionaires have when you dig into their finances, investing habits and outlooks in life. We'd all like to be a millionaire (as summed up in the title of that famous TV show).
But turning an abstract dream into reality is usually when things hit a wall for most Australians. So today, let's discuss three habits that millionaires almost always practise, but that still elude many of us. Hopefully, we can all learn something about how to build wealth.
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3 secrets to becoming — and staying — an ASX millionaire
Thinking long term
Many Australians live paycheque-to-paycheque, treating their fortnightly salary like an allowance that must be spent over two weeks. But millionaires never do that. Instead, they tend to think long-term, asking themselves how each dollar they can spare can help build wealth. Perhaps it's by saving up to start a business. Or else investing in ASX shares, property or other wealth-generating assets.
Millionaires always have a long-term plan and a vision of where they want to see themselves in five, ten or 20 years. And they use every dollar at their disposal to inch one step closer using the power of compound interest. It usually starts with spending less than they earn and reinvesting all earnings from their investments into more investments.
Millionaires diversify their wealth
Almost all millionaires have their wealth spread out over many different asset classes. Diversifying wealth in this way helps protect a millionaire from a downturn in one market, as well as ensuring that other risks can be mitigated as much as possible.
Millionaires tend to have plenty of cash invested in ASX shares, as well as international shares. That helps with currency and geographic risks. But they also tend to own prime real estate in one or more of Australia's capital cities (or perhaps even overseas). Some of our country's ultra-rich, including Gina Rinehart and Andrew Forrest, own vast swathes of agricultural land too.
But most millionaires don't stop there. It's likely you'll find assets like gold, cryptocurrencies, antiques and even fine art to the name of many rich Australians. Doing this helps millionaires both build and keep wealth over long periods of time.
Using the tax system to their advantage
Most Australians' experience with the tax system involves our annual trip to the ATO's website to collect a tax return.
But I can guarantee you that most millionaires have a far more thorough understanding of our tax system than the average Joe or Jane. There's a reason why discussions of trusts, franking credits or superannuation contribution limits – subjects of frequent discussion at millionaire's tables – can often go over the heads of many ordinary Australians.
The Australian system contains many… let's call them perks, that are vital to building wealth. Having at least a solid understanding of how these can work to one's financial advantage is a crucial step in building wealth.
