Picture: ISTOCK
Picture: ISTOCK

Creating and sustaining wealth might seem like an impossible task, but it's not. If you're a dedicated and consistent investor, wealth will come. Holding onto it, however, requires a level of self-discipline and a long-term outlook. As a rule, successful people avoid these 10 common financial mistakes.

1. They don't spend more than they earn

The wealthy never spend more than they earn and they're not interested in keeping up with the Joneses. Warren Buffett eats lunch at McDonald's three times a week (maybe not the best advice from a health perspective), and Bill Gates wears a R150 watch. Mark Zuckerberg, with all his billions, drives a VW Golf.

2. They don't procrastinate

The wealthy don't leave things until the last minute. They start investing early in their careers because they understand the value of time in the market, the benefit of being invested during the best days of the market, and the magic of compound growth.

3. They don't live on credit

The wealthy don't use credit for depreciating assets (like cars), and risky investments and they don't go into overdraft when paying for holidays or household goods. However, they do use a credit card (paid up every month) for safety and convenience, and for benefits like loyalty points and free travel insurance. They also borrow funds, with calculated risk, for business ventures that will generate income and appreciate in value over time.

4. They don't put all their eggs in one basket

Wealthy people adhere to the age-old investment policy of diversification. They invest in different asset classes, industries, and in various geographic locations, to minimise risk. Wealthy entrepreneurs don't invest in their business/es alone; they also invest in unrelated or external investments, like a retirement fund, which will ensure that their business profits are locked in.

5. They don't try to "time" the market

The wealthy aren't speculators. They accept that it's becoming increasingly difficult for even financial analysts to forecast market trends since no two business cycles are the same and more people than ever before have access to investment knowledge.

6. They don't sell when the market dips

The wealthy know markets are cyclical. They don't sell when the bear growls, because they understand that any losses incurred during a dip are essentially "paper losses", and the bull will start to run again. They know you can't afford to be in cash during the best-performing days.

7. They don't make emotional decisions

Wealthy people are conscious of their particular emotional biases. They don't struggle with the so-called "familiarity bias" (only investing in assets you have experience with) and they're aware of "recency bias" (knowing that events from the past will recur). They don't follow the masses by placing excessive value on lifestyle assets like homes and holiday homes.

8. They don't avoid risk

Risk is inextricably linked to high returns in the long run. Wealthy people always have appropriate exposure to equity in their portfolios, to ensure that their investments grow well beyond inflation.

9. They don't undervalue themselves

Wealthy people don't doubt that they are their greatest asset. They invest in themselves by always learning more, staying healthy, and keeping abreast of technology. But the wealthy don't overvalue themselves either. They delegate tasks and responsibilities, and they consult various professionals in different disciplines. They almost always have a strong relationship with a trusted independent adviser.

10. They don't live with closed hands

The wealthy respect the concept of karma and they give back to the communities in which they live. In SA, this means employing more people. Even if you don't need to staff up, consider creating a role. If we all did this, we could make a real difference to our
economy and thereby grow our shared wealth.

• Swart is the Financial Planning Institute's Financial Planner of 2019 and a director of Autus Private Clients