MONEY COMMENT
Join The Millionaires' Club

By Cliff D'Arcy
August 26, 2004

The UK is home to around 425,000 millionaires, according to research from the Centre for Economics and Business Research (CEBR). This is almost double the 230,000 millionaires identified by the Inland Revenue in 2001. This increase in wealth is partly due to rocketing house prices, which have risen by almost two-thirds over the last three years.

The CEBR claims that there are around 175,000 households in London worth £1m+, which means that around one in eighteen of the capital's 3.1m households (almost 6%) has net wealth of at least a million pounds. Net household wealth includes property, savings, investments and other assets, less mortgages and other debts.

Here's where the UK's remaining 250,000 millionaires live:

(Mathematically minded Fools will note that the grand total comes to 430,000, which I attribute to rounding error.)

So, Harry Enfield's 'I could not help but notice that we are considerably richer than yow' character is far more likely to have a London accent than a Brummie twang!

Anyway, here are five highly effective financial habits that many rich people adopt:

1. Learn to budget

If you can't budget effectively, you endanger your financial security by spending more than you earn. However high your income is, you should learn to budget.

2. Never pay full price

I'm always amused when stores scramble over each other to offer discounts to National Lottery winners. Why shouldn't they haggle like the rest of us? Many wealthy people hang on to their loot by always getting more bang for their buck, which involves negotiating lower prices on everything they buy. They understand the buying power of their wealth and the value of their custom. Learn more in Never Pay The Price You See.

3. Borrow sensibly

One of the best ways to come unstuck is to borrow more than you can afford to repay. Many businesses that collapsed during the last recession also took their owners' homes with them, thanks to secured business loans. If you're going to borrow money against your home, make certain that you can meet the repayments throughout the lean years.

What's more, when self-made millionaires are forced to borrow money, they shop around very shrewdly indeed. If you need a mortgage, personal loan, credit card or bank account, don't just stroll into your local branch and sign on the dotted line. Do your homework first, because it will save you a king's ransom in the long run!

4. Save and invest wisely

People who become wealthy and want to stay that way learn that having all your eggs in one basket is dangerous. Hence, most diversify (spread around) their wealth – in property, cash, shares and so on. What's more, they aim to increase their wealth every year by sweating their assets – squeezing more income and growth out of them. Given the power of compound interest and plenty of patience, even people on a modest income can become much richer.

5. Protect your assets

Many self-made millionaires didn't achieve success first time, but learned from their mistakes and worked hard until they got it right. There are lots of pitfalls on the road to wealth: unpaid bills, unemployment, sickness, accidents, fires, even death. For example, my mother's employer was forced to close his premises for over a year after someone wrecked his building in a car accident. If it hadn't been for business interruption insurance, a successful business that began in 1980 would have gone under.

So, if you – and your earning power – are your biggest asset, make sure you take steps to insure your life, health, home and treasured possessions.

See you in the Millionaires' Bar someday!

More: For savings and investments, visit our ISA centre | Three Roads To Riches | Money Quiz: Will You Be Rich?