What are the Top 5%
Doing Differently

Time to read: 5 min

Believe it or not, most wealthy people haven’t found themselves in the top 5% because they’ve made one brilliant investment or earn seven-figures a year. In fact, many have similar incomes to others who have accumulated much less money over time. So if income alone isn’t an indicator of wealth, what are the habits and mindsets of the top 5% that have led to their financial success? Just as importantly, what cues can you take from them to put yourself on the same trajectory?

Keep reading to learn more.

The Mindset and Habits of the Top 5%

The top 5% have gotten to where they are because of how they think about money and the seemingly minor day-to-day financial decisions they make. Here’s how the top 5% thinks and acts differently than their peers.

Cost vs. Worth

When most people are presented with an opportunity to buy something, their first question is, “what does it cost?” Meanwhile, the top 5% are more concerned with how much something is worth.

When these mindsets are translated into managing finances, it’s the difference between viewing any money that isn’t allocated to a savings account as “spending”, vs. the top 5%, who have reframed their thought process to say, “I’m not spending, I’m investing.” They understand the difference between unnecessary short-term expenses and taking advantage of opportunities to substantially grow their wealth in the long-term, even if they aren’t able to interact with their money and a day-to-day basis.

Future focused

The top 5% doesn’t have any more insight into what the future holds than anybody else, which is why they make financial decisions that will help them accumulate wealth and grant them financial freedom and flexibility in the future. They commit to making small financial decisions on a day-to-day basis so that they can plan for bigger things in the future.

They aren’t thinking about how they can spend or save every cent of their paycheck, or working towards purchasing one specific item. Instead, they’re thinking about how they can build and accumulate wealth over time.

Creating actionable goals

It’s much easier to commit to financial decisions when you know what you’re working towards. The top 5% determine what their long-term financial goals are, calculate a time-horizon for each of them, and identify the risk that they are willing to take. Once that is determined, they start to think about the most efficient way to achieve their goals and adjust their lifestyles accordingly.

Avoid lifestyle creep

It’s not uncommon to see families or individuals earning high six-figure salaries to still feel as though they are living paycheck to paycheck and are unable to invest in their futures or long-term goals.

The reason for this is obvious: one of the first things most people do when they get a raise is make a big purchase that accounts for most, if not all, of the additional money they’re earning. As their income rises, they adjust their lifestyle accordingly, and their expenses rise, too. While this may not put them at risk of going into debt, it makes it so that the increased income has no positive impact on their financial future, leaving them in the exact same position they were previously in.

The top 5%, however, does not use the additional income to increase their spending or change their lifestyles. Instead, they aim to keep their day-to-day expenses steady and view the added income as an opportunity to increase investments and passively grow their wealth faster.

Investing in themselves

Wealthy people don’t just think about what something is worth, but about what it is worth to them.

While they may avoid lifestyle creep, the top 5% isn’t opposed to spending money on services that will benefit them. They understand that time and energy are important resources, just as their money is, and make strategic decisions about when to hire somebody to complete a task, even if they could do it themselves.

The top 5% is certainly capable of doing their own taxes, but they may find that focusing on their careers, completing more billable hours, or honing an important skill is a better use of their time, and hire an accountant instead. Similarly, somebody in the top 5% may choose to hire a financial advisor, business attorney, or CPA because they trust that the expertise of their team and the time they save are well worth the upfront investment.

Adjusting your habits and mentality.

While knowing how the mindsets of the top 5% allow them to grow their wealth overtime, a complete overhaul of your financial strategies and lifestyle choices can be daunting, not to mention time consuming. If you’re looking to start transitioning your mindset and habits, there are a few immediate changes you can make to set you up for success.

Write it down

Just as many people trying to adopt a healthier lifestyle begin tracking calories or detail a workout plan, it is always helpful to put pen to paper.

Write down everything you spend your money on, from necessary bills to discretionary spending. Determine if there are any areas you may be overspending, and commit to cutting back on related expenses. Continue to track your money each month and hold yourself accountable for both the goals you’re setting and the financial decisions you’re making. Even these seemingly small day-to-day decisions can have a significant impact on your financial situation in the future.

Make future savings a line item

When most people get paid, they pay all of their bills and fund any discretionary spending first, and then allocate whatever is left over, if there is anything left over, for investments and savings.

Rather than viewing planning for the future as an endeavor that you can choose to opt out of on months where you’d rather spend the money elsewhere, treat it as a line item of your budget, giving it just as much priority as any other bill. Even small, regular deposits grow quickly and will make an incredible difference overtime.

Get help

Just as the top 5% isn’t afraid to invest in their futures, you shouldn’t be either. If you’re looking to approach your finances more strategically and build your wealth, consider contacting a financial advisor to see what their recommendations are to help you reach your ideal financial future.

Are you ready to shift your mindset and adopt habits that help you grow and accumulate wealth? Reach out to us at 847.680.9052 to schedule your consultation!

This blog is for informational purposes. Certain information contained herein (including any forward-looking statements and economic and market information) has been obtained from published sources and/or prepared by third parties and in certain cases has not been updated through the date hereof. While such sources are believed to be reliable, The Tranel Group does not assume any responsibility for the accuracy or completeness of such information. The Tranel Group does not undertake any obligation to update the information contained herein as of any future date.