Occasionally, people luck into riches. Lottery winners, flash-in-the-pan celebrities, subprime mortgage bankers circa 2005. And of course bratty heirs and heiresses, born to their riches.
Most of those people don’t stay rich.
Everyone remembers MC Hammer famously being foreclosed on a few short years after topping Billboard charts in the early ‘90s. He’s not the exception, he’s the rule. Consider that 70% of big lottery winners declare bankruptcy within a few years of winning.
“But,” you say, “what about those elitist families, hoarding money and sending their children to the best schools?” Dynasties are a myth; most wealthy families end up broke too. A shocking 70% of wealthy families lose their wealth within one generation. After two generations? Over 90% are no longer wealthy. U.S. Trust’s chief fiduciary executive Chris Heilmann notes “It takes the average recipient of an inheritance 19 days until they buy a new car.”
(As an aside, this is the basis for the argument that we don’t need an estate tax to redistribute money from the wealthy – heirs almost always squander the money themselves, and redistribute it themselves without any government spending necessary.)
So why is it that people who don’t earn their riches go broke?
Because they don’t have the skills and habits to maintain – and create new – wealth. This includes the children of the wealthy; parents just don’t talk to their children enough about money and financial habits.
Here are four habits of the truly successful, based on interviews with self-made multimillionaires, about the habits that helped them create and sustain their wealth for the long term.
1. They Invest in Themselves
This includes education, but it doesn’t end there. Formal education is a great start, from a college diploma to a graduate degree. But education needs to be constant, ongoing dedication to learning new skills, honing old skills, staying ahead of constant shifting technology and trends.
The rich listen to audiobooks while in the car or on the metro. They read the news over their breakfast, or listen to it while they brush their teeth. They attend conferences, seminars, webinars. They are evolving, every minute of every day. To stay static is to become obsolete.
Nor does investing in yourself just mean education. It also means physical fitness, healthy eating, moderation in vices. No one is saying you can’t enjoy a bottle of wine, but when a vice becomes a habit, it becomes a problem. Likewise with that sloppy meat-lovers pizza, or that “Made Under Cuban Supervision” cigar.
In the early 20th century, gout was considered “the rich man’s disease” because it is exacerbated by lack of physical exertion. Nowadays how many overweight, gouty rich people do you see? None. They’re all out busy exercising, working, attending seminars and spending active time with their families.
2. They Constantly Review – and Revise – Their Goals
Success doesn’t just happen. People create success based on goal-driven actions and behavior. Whatever success you’re looking for, from financial to romantic to fitness to good parenting, if you want to actually achieve something you need to define it. I wanted to get married, but I’d exhausted all my friends’ single friends, and I was sick of meeting women at bars. So I went on Match.com, sifted through hundreds of profiles, exchanged a bunch of “winks” and emails, and went on dates with 20-30 women that year before eventually meeting my future wife.
If the above sounds exhausting, well… at times it was. But goals take work!
It’s the same for anything you want to achieve. Before you can create a plan to succeed at something, you first need to define it. Then you can build and define your plan. And work hard. And refine. And then work even harder.
And then one day you reach your goal, and it’s time for a new goal.
One last tip: build goal review into your morning ritual. Spend five minutes each morning reviewing your long-term goals. Then think about what actions you can take that day that will move you closer to those long-term goals. Keep in mind that short-term demands often feel urgent, but they usually aren’t very central to the broader goals that will actually improve your life.
3. They Take Responsibility for Everything
If you’re like most people, you rant and rage when something bad happens, and blame everything but yourself. Your computer crashes? You curse it out (extra points for colorful and creative curses though). Your car breaks down? Your power goes out? Your flight is delayed or cancelled? Curse curse curse.
The most effective people spend a moment getting their frustration out of their system, then they take responsibility for the problem. If their computer crashes, they access their cloud backup. Or they accept responsibility that they failed to keep a cloud backup. Either way, they internalize that they are responsible for the outcome, not their cranky computer.
Now think about the least effective person you know. They would whine and moan that their stupid computer crashed, and it’s not their fault, and how are they ever supposed to get anything done with a computer that crashes on them?
They always have bad luck. Nothing’s ever their fault. They’re a victim.
Victims are slaves to circumstance. Good things happen, bad things happen, their lives are ruled by external forces. Effective people are never victims. They are always responsible for their successes and failures, because they’re responsible for everything that happens in their lives, regardless of the circumstance.
4. They Associate with Other Effective People
Want to take on the habits and mindsets of successful people? Spend time with successful people.
Effective, successful people think differently. They talk differently. When working towards their long-term goals and an obstacle pops up, they start from the assumption that there is a way through. You can model their thought processes, by changing your mindset from “Can I make this work?” to “What are five ways I could make this work?”
They don’t lean on words like “impossible” or “can’t,” but rather look at problems in terms of what options are cost effective, what is likely to yield a return. Anything can be done, it’s merely a matter of whether it makes sense to do. Whether the juice is worth the squeeze.
Effective people talk about ideas, world events, new technologies, new developments. Being around them will stimulate your mind, encourage you to adopt effective mindsets and habits.
After all, wealthy people have a lot more than four habits that make them effective, so grow by spending time with the kind of people you want to be more like.♦
What ways of thinking have you found more productive than the average bear? Tips for financial enlightenment?