When the topic of financial behaviours and attitudes arises, it is believed that people will end up being the product of information that has been obtained – along with the successive decisions that end up being made with all of this information.
Decisions a person makes can be influenced by many different aspects including anything experienced in the past and ingrained principles regarding financial matters. One type of information that is collected either consciously or subconsciously is the financial behaviour of the people that surround ourselves with most often. In many cases, we tend to compare their financial situation to ours.
This type of comparison may not always be a bad thing. After all, perspective is indeed a valuable tool if correctly used. For instance, dwelling on comparisons with other people could result in us addressing and rectifying bad financial habits like determining the true difference between wants and needs, or it can unfortunately cause us to try and do as they do such as buying everything that everyone else has when you can’t afford to do so.
This content explores the financial behaviours and attitudes of ultra-high net worth individuals (UHNWI) and information has been obtained from data in a recently released Wealth Report. UNHWI individuals are those who have a net worth of more than AUD$39.67m – over and above their primary property.
It was also surprising to note that the Wealth Report stated that a few members of the UHNWI population aren’t immune to financial insecurity. Many of their major concerns stem from a potential decline in asset values, political instability, interest rate amendments and increasing taxes.
When taking your finances into consideration, do any of these issues make you feel insecure about your existing wealth? For instance:
- Would you still be able to meet your financial obligations and maintain your current standard of living if taxes and/or interest rates increase?
- What effects will the recent legislative changes to pension and superannuation frameworks have on your financial goals for retirement?
- How will your capacity to build wealth or fund your retirement be affected if there was to be a short-term decline in the value of your investment capital?
All of these are serious concerns that must be addressed and managed correctly. With assistance from a professional financial advisor, you will be able to obtain clarity regarding your financial objectives and goals, while also addressing any financial insecurity you may have.
In some cases, luxury products form part of the asset list of wealthy people. The Wealth Report noted that top luxury items owned by UHNWIs include private planes, yachts, sports teams and race horses.
Information in the Wealth Report noted that there are seven aspects that influence a UNHWI to buy various luxury assets:
- They will potentially increase in value over time
- Personal enjoyment
- It enables them to diversify their portfolios
- They become part of a community of like-minded owners or collectors
- Intellectual curiosity
- It provides them with a safe haven for some of their capital
Although this will most likely be different to your own spending patterns, you may find an underlying similarity – namely that these are all luxury items. Discretionary purchases form part of most people’s spending habits. For example, you may enjoy eating in restaurants, buying designer clothing or new vehicles.
It’s crucial to take into consideration which passion drivers are influencing you when making discretionary purchases and whether or not there is a practical balance between your wants and genuine needs.
While forming your path to true financial freedom, it can be advantageous to gain true perspective along the way. If used appropriately, perspective will be a valuable tool in that it can help you make positive changes by introducing new processes like obtaining professional advice with regards to managing your personal finances, eliminating debt and accumulating a substantial amount of wealth.