When it comes to financial attitudes and behaviours, we are often the product of the information we collect and the subsequent decisions we make with this information.
Our decisions can be influenced by numerous factors, such as past experiences and our inherent values on financial matters.
One piece of information that we may collect, whether consciously or unconsciously, is the financial attitudes and behaviours of others around us.
Often we compare their similarities and differences to our financial situation.
This comparison is not always a bad thing, as perspective can be a valuable tool if used appropriately. For example, reflecting on comparisons with others may lead us to either correcting bad financial habits (such as balancing need versus want purchases) or perpetuating their cycle (such as trying to keep up with the Joneses).
In this article, we explore the financial attitudes and behaviours of ultra-high-net-worth individuals (UHNWI) drawing on data from the recently released Wealth Report*. A UHNWI is classified as someone with a net worth of over US$30m (AUD$39.67m), over and above their primary residence.
One of the interesting findings to come out of the Wealth Report was that some of the UHNWI population are not immune to financial insecurity. Several of the major concerns that underpin their financial insecurity are political uncertainty, potential fall in asset values, rising taxes and changes in interest rates.
When considering your personal finances, do any of these same concerns make you insecure about your wealth? For example:
- How do the recent legislative changes to superannuation and pension frameworks affect your financial goals and objectives for retirement?
- How would a short-term fall in your investment capital value affect your capacity to accumulate wealth or fund a retirement lifestyle?
- With a rise in taxes and/or interest rates, could you still meet your debt obligations and maintain your current lifestyle?
These are important concerns that need to be addressed and managed appropriately. With help from your professional advice team, you can gain clarity on your financial goals and objectives, and address any financial insecurities you may have. With this in place, you’ll be able to define a roadmap to help you get to where you want to be.
Objects of desire
It may come as no surprise to you that, in some instances, luxury items form part of the assets of wealthy individuals. According to the Wealth Report, the top luxury assets coveted by UHNWIs are yachts, private jets, racehorses and sports teams.
So what drives people to purchase these luxury assets? In terms of financial attitudes and behaviours, the Wealth Report highlighted that there are seven main passion drivers that influence a UHNWI’s purchase of luxury assets:
- 'Personal enjoyment
- Potential for an increase in capital values
- Becoming part of a community of like-minded collectors/owners
- Diversifying their investment portfolio
- Intellectual curiosity
- Safe haven for capital'
While this may be different to your spending habits, there may be an underlying similarity, namely, that these are all want purchases. Want purchases form a component of most people’s spending, for instance, you may buy a new car, concert tickets, a big screen TV, designer clothes or simply enjoy eating out.
Consider what passion drivers influence you to make a want purchase and whether there is a healthy balance between your needs and wants.
Whilst on your path to financial freedom, occasionally it can be helpful to gain perspective along the way, by considering and then reflecting on the financial attitudes and behaviours of others. Perspective can be a valuable tool. If used appropriately, you can bring about positive change by initiating processes, such as seeking professional advice to improve how you manage your personal finances, pay down debt, accumulate wealth and plan for the future.