Seven secrets billionaires know about money

Not all of the super-rich own yachts and planes. Here are seven lessons from savvy tycoons...

There were 1,011 dollar billionaires in the world in February 2010, according to Forbes magazine’s yearly survey of the super-rich.

With a pound currently worth around $1.54, you would need nearly £650 million to make this list.

Where billionaires live

Forbes calculates that 56 countries have one or more billionaires in their populace. These ten countries have the most dollar billionaires  - note how far ahead the US is, compared to the rest:

The world’s richest

Forbes reckons that the UK’s 29 billionaires have collective wealth of $76.7 billion, or £50 billion. However, only one British resident (Lakshmi Mittal) makes this Forbes list of the world’s 15 richest individuals:

Not all billionaires are big spenders

Although Russian oligarchs and Middle Eastern sheikhs splash out on such luxuries as ocean-going yachts, private jets and Premiership football clubs, not all billionaires are such big spenders. Indeed, many self-made tycoons still practise the thrifty habits which helped them (and other shareholders in their companies) to become mega-wealthy.

Here are seven lessons which we can all learn from the world’s savviest entrepreneurs:

1.     You don’t need a mansion

Our national obsession with property means that most Brits dream of buying the swankiest house in town. Likewise, some billionaires buy homes around the world as often as we buy new shoes. However, you don’t need to buy a 66,000-square-foot mansion on Lake Washington, as Microsoft’s Bill Gates did.

Investment superstar Warren Buffet still lives in the five-bedroom house in Omaha, Nebraska that he bought for $31,500 in 1958 (although the ‘Oracle of Omaha’ has a $4 million holiday home in Laguna Beach, California). Similarly, Carlos Slim Helú, the world’s richest man, has lived in his current home for more than four decades.

And take a look at the Top 10 things that boost a property's value. It’s clearly not space that matters most to the  buyers!

2.     You don’t need to travel in style

Although lottery winners often rush off to buy one or more flash cars, many entrepreneurs and business moguls stick to low-cost travel. While Larry Ellison of Oracle is famed for his love of private planes and fast yachts (racing in the America’s Cup), other billionaires shun big boys’ toys.

For instance, Warren Buffett declines to buy posh motors; instead, he has drives an ordinary car for decades until it conks out. His explanation for avoiding extravagant purchases is, “Most toys are just a pain in the neck.” IKEA founder Ingvar Kamprad drives an ancient-but-reliable Volvo and flies economy class. As he says, “Ikea people do not drive flashy cars or stay at luxury hotels.”

If you see yourself more like James Bond than an ‘Ikea person’, then bear in mind that living the lifestyle of the rich and famous can be done on a budget. Read You too can live like James Bond to find out how!

3.     You don’t need a degree

This autumn has seen a record number of applicants to universities: over 673,000. Of these, as many as 150,000 students will not find a place on a suitable course in time for the new academic year.

The good news is that you don’t need further education to become loaded, as the billionaires’ list is littered with school-leavers and college dropouts. Among the dropout alumni are Bill Gates of Microsoft (ex-Harvard College), Steve Jobs of Apple (who dropped out after one term) and Facebook founder Mark Zuckerberg (another Harvard dropout).

In fact, according to Wikipedia, the average wealth of dropout billionaires ($9.4 billion) is nearly triple that of billionaires with PhDs ($3.2 billion). So, success doesn’t require a BA, BSc or PhD. Likewise, having a degree is no guarantee to wealth; far more important are drive, self-discipline and a passion for what you do.

If you do have a formal qualification, find out which are The best and worst-paying university degrees.

4.     You don’t need family money

Few of the 15 people in the above list rich inherited their wealth, with the notable exceptions of Christy Walton and Jim Walton, who inherited their fortunes on the death of Wal-Mart founder Sam Walton.

Although some of these billionaires came from well-to-do families, most built their vast fortunes on the back of their own hard work and abilities. So, while a helping hand from family may get you off to a good start, it takes sweat and tears to build an empire. Also, in Warren’s wise words: “A very rich person should leave his kids enough to do anything but not enough to do nothing.”

Of course, if you do want to leave your children something, you’ll need to know how to avoid paying inheritance tax.

5.     You don’t need ‘designer’ goods

Li Ka-shing, Hong Kong’s richest industrialist, is renowned for his no-frills lifestyle. Perhaps thanks to his humble beginning as a teacher’s son in China, Li Ka-shing wears plain black shoes and an inexpensive Seiko watch. Clearly, he can live without the Vacheron Costantin wristwatch and the Berluti shoes.

Ingvar Kamprad is another billionaire who cares little for designer labels. The IKEA founder doesn’t wear suits and explains his frugality thus: “People say I am cheap, and I don't mind if they do.”

Here at lovemoney.com, we recently conducted an experiment to see if we could copy a celebrity look using only clothes we found in a local charity shop. Find out what happened!

6.     You need a sense of perspective

Sometimes, vast wealth becomes a crushing burden. Famously, eccentric American billionaire Howard Hughes spent the last years of his life holed up a hotel room, terrified of human contact and germs.

However, many billionaires are remarkably well-adjusted and fully understand how fortunate they are. As Larry Ellison remarked, “I certainly never expected to become rich, certainly not this rich. I mean, rich does not even describe this. This is surreal.”

Warren Buffett acknowledges that he ‘won the lottery of life’ by being born in the US and gives this advice: “The trick in life is to do things that are fun all the time.” Also, one of America’s original tycoons, John D Rockefeller warns, “If your only goal is to become rich, you will never achieve it.”

So, in order to enjoy your wealth, you need to keep things in perspective and enjoy life. There is such a thing as caring too much about money, as you can see from these Seven seriously stingy money-saving tips.

7.     You need to be generous

In the words of Carlos Slim Helú, “I've always said that the better off you are, the more responsibility you have for helping others.”

Many billionaires and entrepreneurs have similar philanthropic views. As hedge-fund billionaire and international statesman George Soros says: “I'm not doing my philanthropic work, out of any kind of guilt, or any need to create good public relations. I'm doing it because I can afford to do it, and I believe in it.”

For example, Bill Gates and Warren Buffett have called on the world’s billionaires to donate trillions of dollars to charity after death. In response to this ‘Giving Pledge Campaign’, 40 US billionaires have promised to give $125 billion to charity. Find out how to maximise your own charitable donations.

It’s not about the cash

In summary, being a billionaire is much more than having dynastic wealth. Most moguls started chasing their dreams, not a fortune. Instead, they place much higher worth on their inner values, their everyday behaviour, their responsibilities, and their savvy spending.

In short, the mega-rich don’t rashly throw their money about, so you should do the same...

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