Ever notice that rich people don't smoke. I'm not talking about some Hollywood star or starlet who receives millions from each picture - many of them are smoking cigarettes and a lot worse things. I'm also not talking about some futures trader who makes a million dollar bonus each year, or some partner in a law firm who makes millions each year from the firm. While some of these people may be rich as well, they may only be high earners, going through money as fast as they get it. Perhaps they may even have high credit card balances because they are going through more money than they are making. Remember Michael Jackson who was going bankrupt before his untimely death despite making hundreds of millions from albums in the 1980's and continuing to receive royalties from not only his works but for the rights that he purchased from other artists.
I'm talking about people who are truly wealthy. Those who could quit working or sell their business and have enough money to live comfortably upon for the rest of their lives. These are not the kind of people one would find shopping on Rodeo Drive or in the boutiques of New York City. The certainly could afford to do so, but they would rather save their money for more important things than clothes and gadgets. They would also know that they could get the same stuff for far less in locations without all of the flash and high rents of these upscale shopping districts. The fact is, they know the high mark-ups of retail and would prefer not to pay them.
Sure, some of these people may enjoy a cigar once in a while. Perhaps a special blend that they get through one of their connections. They would not be down at the convenience store buying a pack of cigarettes with their morning coffee, however. They would look at the high cost, both the price of the cigarettes with all of the taxes, and the increase in their life and health insurance costs. More importantly, the high cost in the form of the effects on their health would be of concern.
You see, these people have learned to control their impulses and bring discipline to their lives. They evaluate every situation with logic more than emotions. They are wealthy not because they make a large income from their career (although many of them do) but because they are disciplined in the way that they handle money. In many cases that large income they have is due to sacrifice and patience in investing or building a business. They realize that if they delay a large purchase until they can pay cash, they will save thousands of dollars in interest. They know that in purchasing a house with a 30-year loan one will pay more than the value of the home in interest over the life of the loan. If one chooses to save up a large down payment and buy a home with a 15-year loan, or save up and buy a home for cash, thousands in interest can be saved. That savings of interest could be invested, which would increase their income further. They will have the home and the money too, instead of just having the home.
That same discipline in handling money translates over into other areas of their lives. They realize that eating too much will make them gain weight, so they use discipline in what and how much they eat and make sure they get enough exercise. They know that by being physically fit and at a good weight they will suffer fewer health problems and live a healthier, happier life.
Most of all, they know that the person they stare at each morning in the mirror has the biggest effect on the state of their lives. If they squander their incomes it is not the fault of MasterCard and Sax Fifth Avenue. If they ruin their health with smoking it is not the fault of Phillip Morris or Benson & Hedges. If they gain too much weight through over eating and not exercising it isn't the fault of McDonald's or the TV networks. It all is has to do with the choices that they make. If they wish to be wealthy, or be healthy, they make the necessary choices to do so. The plan on what they want to do and make the necessary decisions to get there. This is why the rich do not smoke.
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Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.
