In 5 years of studying rich people, I found self-made millionaires have 7 habits that help them build wealth
Mike Hewitt/Getty Images)
- Thomas C. Corley spent five years interviewing rich people.
- He found that there are two types of self-made millionaires: those who took a risk, and those who displayed good habits over time.
- Those who had good habits tended to do a lot of the same things that helped them build wealth.
In my five-year Rich Habits study, I found that self-made millionaires fall into two categories: Risk-Takers and Savers.
Self-made millionaire Risk Takers are individuals who take some risk in the pursuit of wealth. They are typically business owners, entrepreneurs, aggressive investors in stocks or real estate — or they create some product or service that is so unique they are able to demand a significant premium in return for it.
Self-made millionaire Risk Takers were among the wealthiest in my study, with an average net worth of $7.4 million. Being a Risk Taker is only for the bold and courageous. It’s the high-risk path to wealth accumulation. It requires courage, persistence, cunning and a hard core work ethic.
It's not for everyone.
Self-made millionaire Savers accumulate their wealth by living below their means, saving money, and then investing that money prudently. According to my Rich Habits research, this path to multi-millionaire status takes about 32 years. Savers typically are risk-averse, employed most of their lives, and have a low or moderate standard of living. Self-made millionaire Savers were among the least wealthy in my study, with an average net worth of $3.4 million.
But being a Saver is the risk-free way to building wealth. It’s the safe path to wealth accumulation. It requires discipline, diligence and adhering to a low to modest lifestyle.
In my study, I found that all Savers have a specific money mindset. Below are some of the top money strategies of self-made millionaire Savers:
1. They establish savings goals early in their lives
Ninety-four percent of the self-made millionaires who became rich by saving money saved 20% or more of their net pay or their net income. They did this early in their work lives, long before they accumulated their millions.
With your first paycheck, get into the habit of saving something — 10% or 5% or even just 1%. The point is to set some savings goal and stick with it. This creates the savings habit. The ultimate goal, if you want to become a self-made millionaire, is to save 20% or more or your net pay and prudently invest those savings. Through the power of compounding, your savings and investments will grow over time.
2. They are frugal
I’ve been studying the daily habits of the rich and poor since 2004. I’ve gathered an enormous amount of data on both groups.
Sixty-seven percent of the rich in my study said they were frugal. To them, frugal meant spending their money wisely. It meant buying quality items or services at bargain prices. Most of the wealthy in my study were raised by poor parents or middle-class parents who made a point of instilling in them good habits. Being frugal was one of those good habits they learned from their parents and that they took with them into their adult lives. Looking for value and quality makes you frugal.
Being frugal will not make you rich, but it does mean you will keep more of your money as your purchases are driven by quality and price.
3. They avoid lifestyle creep
'Lifestyle Creep' is increasing your standard of living in order to match your increased income.
It’s a common habit among many who suddenly find themselves making more money. The Rich Habit is to forgo the desire to spend your money today and, instead, sock it away into savings and investments that grow in value and provide financial resources that can be used in the future to maintain your standard of living.
Once you spend your money, it’s gone. When you hit a bump in the road, such as a job loss, you are then forced to sell your stuff. If the stuff you purchased depreciated in value, you get pennies on the dollar.
One of my older and wealthier friends explained to me his rule for financial success:
“Same house, same spouse, same car.”
There’s a lot of wisdom in these words. What they really mean is that no matter what good fortune visits you in life, do not change your standard of living. Don’t supersize your life by buying things you really do not need. Live a modest life and forge the Rich Habit of delayed gratification – putting off what you want today so that you can have something to fall back on in the future.
See the rest of the story at Business Insider
No comments: