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Research says this is how to be rich in the UK (2020)

8/23/2020

 
Why do the rich pay less for housing month on month? How do they make their money grow? How many of them can survive one month without a pay-check? I read the 2020 report from Resolution Foundation on wealth in the UK to see what research says about how to be rich in the UK. Keep reading to see the surprising answers.

First, a quick recap: What is Wealth?
Wealth is your assets (An asset: is a thing of value that grows e.g. savings, pension, real estate, art, gold etc.) minus your debt. We also call this your net-worth. In this study, 4 types of wealth were measured:
  1. Property: residential and non-residential property and land
  2. Financial: includes ISAs, bonds, stocks and shares.
  3. Physical: such as consumer durables like cars or appliance
  4. Private Pension: money in your pension pot

So, how do the rich manage their money?

The top 10% have about 50% of UK's wealth

The average net worth of the 10% is £800,000. But, where do they grow their money? Keep reading to find out.

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Do it like the Rich:
Track your net worth. Click here to get started.

When it comes to financial assets, the Rich hold less cash and more of their money in growth assets like savings bonds, ISAs, and Stocks and Shares. 

Poor households hold most of their money in cash or current accounts where there is very little growth.

When the rich hold money in savings bonds, ISAs, and Stocks and Shares, they benefit from:
  • Compounding and High Interest rates
  • Stock prices going up: the value of cash doesn't go up. Inflation does and so you'll need more money to get the same amount of the things you buy
  • Reinvested Dividends from holding stocks or funds
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  • Risky Assets: stocks and shares of companies
  • Safe Assets: ISAs and Savings bond
  • Savings Assets: non ISA Savings accounts
  • Zero- return Assets: money held in cash. under your pillow, in the piggy bank on the shelf or current accounts 
Do it like the Rich:
Hold most of your money in places where it grows. Choose ISAs, High interest savings accounts and the stock market over cash. Hold cash for a specific purpose  e.g. to build your Emergency fund or for a  home deposit.
The Rich have about 45% of their money in pension pots, 35% in property and 20% in financial assets (savings bonds, ISAs, and Stocks and Shares)

Financial wealth (in high growth assets) increased substantially in the last 10 years and this contributed significantly (80%)  to the overall wealth of the rich.

As mentioned above, the financial assets of the rich are held in growing assets like bonds and the stock market. The Stock Market grew substantially in the past 10 years and it made the rich richer.

​The poor held most of their money in zero growth assets e.g. cash or current accounts and even when they added more money in these places, it grew at a much lower rate.
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Do it like the rich:
Write the numbers down, how much of your money is held in: 
Cash
Current accounts
Savings bonds
ISAs
Stocks and Shares
Richer families tend to be homeowners 

Their housing costs are around 5% of their income if they own their home outright or 11% of their income if they have a mortgage

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Do it like the Rich:
Reduce your housing cost. Limit it to a maximum of 33% of your income so you can find money to save and invest
The Rich have emergency funds 

7% of the rich would have a hard time if their main source of income is impacted as opposed to 44% of the poor.

An emergency fund allows the rich to stay afloat if a shock like a pandemic or job loss takes place. Young females who are not degree educated were the most at risk if their income ran out.
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Do it like the Rich:
Build an Emergency Fund of at least 3 months.
There you have it. Some insights into the habits of the rich. Of course there are other ways to get rich, such as owning a successful business, investing in start ups, inheriting money or owning art for example. The options above are the accessible ways to start to build wealth which is also the reality for many people. See this infographic on how to spend £2000 which highlights the step by step guide to implementing the lessons above.
​
Which Rich habit will you start to use?
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Doing this has made me exceed a money goal by 4000%

8/23/2020

 
What do you want to be when you grow up? What is your 5 year plan? What are your career goals? What are your relationship goals? We've all heard this at one point in time and I wonder, why do we not also ask: WHAT ARE YOUR MONEY GOALS?

if you are the kind of person that writes your life goals, does it include money goals? Research has shown that writing your goals down can make you reach them faster. Keep reading to find out how you can incorporate this money habit for success.

What you need to know
  • See the money goals 5 readers want to achieve
  • Writing money goals make you save and invest faster
  • You can choose a amount or a lifestyle
  • 4 ways to make it stick

I asked 5 readers to share their money goals:

I asked 2 questions:
​1. What makes you want to save and invest 
2. What DOES NOT make you want to save and invest

Click on the images below to see their responses.
The research and experience of writing money goals

Every year, I write my money goals down. So far, I have found that I met them before or after the deadline I had initially set. I believe that there is some magic to writing things down. Once you write it down, it is autosaved in your brain and then somehow, you start to focus consciously or unconsciously to  make it happen.

My experience aside, research has shown that setting goals makes you more confident, motivate and in control - no wonder employers use performance reviews to set and monitor targets- they know that if done well, it motivates employees and can also help their business grow. If you want to actually make it happen, start by writing them down. 'A study by Gail Mathews, found that you are 33% more likely to meet your goals if you write them down, share it with a friend and review it frequently'.
Want to meet a money goal? write it down.
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How to Write a Goal that you stick to (4 ways)

1. Choose an exciting goal
According to Business Insider, 'Instead of being afraid of your finances, focus on the goals that excite you'. Why? when you choose an exciting goal, you stay motivated to make it happen. Here are the types of goals you can write down:
Types of Goals
  1. Travel
  2. Comfortable living
  3. Comfortable retirement
  4. Homeowner
  5. Retire comfortably
  6. Create an education fund
  7. Wedding
  8. Financial Independence
  9. Increase savings  by 1%
  10. Reduce debt by 50 a month
  11. Save 500 this year
  12. Save 3 months in your emergency fund
  13. Increase my net worth by 200
  14. and more...​
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2. Break it down into small bits
Big goals can feel overwhelming and when it comes to money goals it is important to break it down. A Harvard study explains, 'When we’re judging the difficulty of a goal, the first thing our brains see is the size of the gap that separates the goal from the baseline. The bigger the gap, the more difficult the goal'

For example, if you are planning that trip to tour the East Africa and it would cost 2000. Saving 2000 might today can feel challenging. To make progress, you can break it down to save 100 a month and add more in months where you can. After 5 months, you'll have 500 saved and have covered 25% of the cost. With an exciting goal ahead of of you, you can celebrate the small progressive wins and that is key,
3. Make it Challenging
If the goals is too simple, you won't be satisfied. Research has shown that you achieve 'greater satisfaction from achieving goals that help you improve as opposed to maintaining the status quo'. So, If you  are dedicated to clearing your  3 credit card debts of 2000, 1000 and 300, you'll likely be more satisfied clearing the 300 than paying off the minimum for each month which would make you feel like you are not improving.

Going back to the readers response on 
 What DOES NOT make you want to save and invest? I noticed most of the response was about making sacrifices today so they can enjoy tomorrow. I think this is another crucial element of satisfaction, delaying gratification, allows the reward at the end to be more enjoyable.
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4. Track It
Truth session.  Years ago I began tracking one specific money goal. Since then, that number has increased by a whopping 4024% to be exact. How come? What you cannot track, you cannot measure. Remember the research I mentioned earlier, it said, if you share your goal with a friend on a monthly basis, to keep you accountable, it happens. My friends are my spreadsheet, MUTAZ, and you readers of this post. I review my spreadsheet monthly to check how I am doing. Tracking helps me to stay focused and also allows me to think of new ways to reach my goals faster. Grab a copy of the WealthSquats smart budgeter to write and track yours.
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Need help on where how to start tracking? Use Financial Success Map to make a plan.

In Summary

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