8 Myths About Rich People (or Getting Rich) That You Shouldn’t Believe
It’s easy to hold misconceptions about how people become wealthy when you’re looking in from the outside. Even if you run in some affluent circles yourself, you might still believe certain myths about the methods others have used to get to where they are today. After all, unless you’re actively discussing the topic of finances with them, chances are it’s left shrouded in mystery.
See: 6 Steps To Take To Become a Millionaire by 30
Learn: What To Do If You Owe Back Taxes to the IRS
Now is the time to clear up some myths about the methods rich people use to attain their wealth — along with some myths about wealthy people in general. Here are eight of the biggest.
They Always Know How To Time the Market
It’s no secret that rich people invest, but one common myth is that they have some secret ability to time the stock market exactly right. The truth is that trying to time the market is actually a mistake a lot of wealthy people make.
“Attempting to time the market is ‘fool’s gold,’ said Robert R. Johnson, PhD, CFA, CAIA, professor of finance at the Heider College of Business, Creighton University. “None other than Vanguard founder, Jack Bogle, is quoted as saying on market timing — ‘After nearly 50 years in this business, I do not know of anybody who has done it successfully and consistently. I don’t even know of anybody who knows anybody who has done it successfully and consistently.'”
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They’re Greedy
A popular misconception about the rich — and about money in general — is that it’s all about greed. But that couldn’t be further from the truth.
“One of the biggest things that people mistakenly believe about rich people [is] that they are extremely greedy,” said Sebastian Jania, the owner of Manitoba Property Buyers. “Rich people actually make the greatest financial contributions on the planet.”
Many rich people are philanthropists, making donations to causes they believe in and supporting poorly funded organizations. And while some of this can be beneficial in terms of tax deductions, greed has far less to do with making these contributions than people think.
They’re Big Spenders
When you see rich people in the media, you might think they’re all living like A-list celebrities with fancy cars, houses and the like. While this might be true for some, it’s certainly not the case for everyone.
“One myth is that rich people buy whatever they want,” said Scott Lieberman, founder of Touchdown Money. “Sure, their annual budget might have a few more zeros on the end of it, but they still need to watch what they spend. The lesson here is that you always need to be mindful of your limits, no matter what those limits are.”
James Allen, CPA, CFP, CFEI and founder of Billpin.com, added, “Many billionaires are more frugal than you might think. For instance, Warren Buffett, one of the world’s richest men, still lives in the same home he bought for $31,500 in 1958.”
They Like To Flaunt Their Wealth
If you’re basing your image of the wealthy off the people you see on TV, you might think that highly affluent people tend to show off a lot. After all, why wouldn’t they? In reality, many rich people live far less lavishly than what’s portrayed online.
“While there are rich people who do show off their possessions — typically people that are more ‘I type’ on the Disc profile — most rich people actually live fairly frugally as that is what got them to their status,” said Jania.
They’re Experts at Money Management
Contrary to popular belief, wealthy people don’t automatically know how to handle their wealth — at least not entirely. In many cases, these individuals have a team of financial experts who help them manage their money and make smart decisions with it.
“A prevalent myth is that all wealthy individuals are experts at money management,” said Allen. “While it’s true that many have made their fortunes through business acumen, it doesn’t necessarily mean they know how to manage their wealth. Even successful entrepreneurs like Mark Zuckerberg turn to financial advisors to manage their wealth.”
They’ve Never Had Debt or Money Troubles
As often comes with not always knowing how to handle money, many wealthy people have struggled financially at one time or another. It might not seem like it on the surface, but this is true for even some of the most affluent individuals in society.
“There’s a belief that wealthy people have never been bankrupt,” said Allen. “However, many successful individuals, like Henry Ford and Walt Disney, have faced bankruptcy before bouncing back to create brands we still see in our everyday lives.”
Similarly, a common myth is that rich people don’t have debt. After all, the term “high net worth” doesn’t typically equate to “debt.” But this isn’t always the case either.
“It’s a common belief that wealthy people are debt-free,” added Allen.” However, even those with large fortunes can have significant debts, as seen with professional boxer Mike Tyson who owed the Internal Revenue Service $18 million at one point.”
They Take Advantage of the Less Affluent
Another misconception that often accompanies the idea that rich people are greedy is that they’re also readily taking advantage of others. While this might be true for some, it’s not the majority.
“The reason why people believe this is because rich people make more money than those that are not rich and people sometimes believe they should be making just as much money as the rich people, but they haven’t really earned it,” said Jania. “Rich people typically have had to go through lots of obstacles to get to where they are at.”
Most of Them Have Inherited Their Wealth
“Another misconception is that all rich people come from money,” said Allen. “While some do inherit their wealth, many of the world’s most successful people started from humble beginnings. For instance, Starbucks CEO Howard Schultz was raised in a housing complex for the poor in Brooklyn.”
While passed down generational wealth and hefty trust funds might make some people wealthy, this isn’t always how it works. Without sufficient money management skills and a drive to excel, beneficiaries of wealth tend to lose it before they can truly make something of it.
“People also assume that rich people inherit their money, but that’s not usually the case,” added Lieberman. “A recent study from Bank of America found that only 28% of people with more than $3 million in assets inherited the bulk of their wealth. So, most rich people get there the old-fashioned way — by building a successful business.”
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This article originally appeared on GOBankingRates.com: 8 Myths About Rich People (or Getting Rich) That You Shouldn’t Believe
