Rich Australians stay on top of the money tree with these ”secrets”

True financial wealth is measured in millions of dollars rather than thousands, and Australia’s mega-rich live by some simple rules that are vastly different than the rest of us.

Australians are often ranked among the world’s richest people, but just 1 per cent of households is worth more than $5 million, according to social research firm McCrindle.

Lottery winners have shown just how easily a fortune can be frittered away. So a big question for most people is how the rich bolster their wealth rather than blow it.

Financial adviser Dominic Aarsen, who manages the financial lives of ultra high-net-worth individuals with more than $200 million, said “what sets them apart from the everyday person is like the secret herbs and spices”.

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Firstly, they are happy to spend money to make money.

While fees were important, the net return on investments after fees counted more, Mr Aarsen said.

“Tycoons stay on top by happily parting with their money where they see value, and acknowledge that you pay for quality,” he said.

“This is something your average Joe is wired to think the complete opposite of.”

Rich Australians think differently than the rest of us, wealth advisers say.

Mr Aarsen said rich people knew where all their dollars were and paid attention to detail. A client worth more than $200 million had his team call one of the big four banks, because one of his $10-million term deposits was 0.1 per cent different.

Ultra-rich people also have the ability to step back and oversee proceedings. Despite handing control of their financial life management to an expert, the key difference was that they delegated instead of shirked responsibility, Mr Aarsen said.

Independent financial adviser Kyle Frost said one secret of responsible wealth management was to avoid showing off.

“From my experience, some of the truly wealthy people don’t act wealthy,” Mr Frost said. They maintain their wealth by avoiding living a wealthy life. Instead of consuming beyond their means, they avoid continually purchasing depreciating assets like expensive sports cars.

Mr Frost said true wealth was having investments that generated a passive income stream — an enduringly wealthy person’s takings were not limited by personal exertion.

“And by spending less than your passive income stream, the returns on your asset base compound to make you richer and generate more passive income. Rinse and repeat,” he said.

Certified financial planner Peter Horsfield said another way tycoons stayed flush was through avoiding divorce by taking care of their spouses.

Invest more time in your other half, he said. Shared experiences need not involve extra spending. Try jabbering “like two monkeys in a tree”, having a home-cooked meal or taking a romantic walk.

“Did you know that divorce is the fastest way to lose half or more of your wealth?” Mr Horsfield said.

HOW WEALTH IS SUSTAINED

• Splash on assets, not luxuries.

• Live like you’re poor. Chasing status is foolish.

• Avoid keeping up with the Joneses, Flanagans, Chans or Nguyens.

• Recycle your savings into investments.

Originally published as Rich Australians stay on top of the money tree with these ”secrets”