Americans love tags to riches stories. With our Protestant work ethic and “pull yourself up by your bootstraps” mentality, the idea that with enough hard work that we can reach those heights to is inspiring.
But as great as inspiration is, the real appeal in those stories for many of us goes beyond that - we want to understand the mindset and habit changes that got those people where we want to be.
Warren Buffett would be the first to tell you that he didn’t get rich overnight, although he was the 3rd richest person in America when the 2017 Forbes 400 was published, right behind Bill Gates and Jeff Bezos. (Did you catch this photo of Jeff Bezos circulating on Twitter recently?)
Buffett has made a lot of conscious choices about his wealth, starting with his first stock purchase at age 11. Apparently, the man is so frugal that he still lives in the home he purchased back in 1958.
But getting rich isn’t just about being frugal or obscene corporate tax cuts (although I'm sure it doesn’t hurt). While luck is often a factor in these stories, there are fundamental habits and ideologies many of our wealthiest people operate by - and learning these principles is one way to begin building your own nest egg.
We’ve dug through the best advice from some of America’s wealthiest people, collecting these five financial habits of the wealthy that you can start applying to your life today. (Even if you’re not a trust fund baby, a developer, or a whale.)
1. Believe to achieve
You’ve likely heard the old adage – “Whether you think you can or think you can’t, you’re right,” but nowhere is this truer than in the story of Oprah Winfrey.
Another incredible story of coming from nothing to develop an empire, she’s one of the wealthiest people in America, having been on the Forbes 400 for multiple years.
In case you were living under a rock when she gave the Oscar speech heard round the world, she’s a big believer in mindset contributing to the progress we make.
Today, Oprah is third on the list of self-made women in America, and when asked about it, her advice is, “You become what you believe. You are where you are today in your life based on everything you have believed.”
Of course, merely believing in your success Law of Attraction style won’t bring in the nearly 3 billion Winfrey is reportedly worth. You must follow through with planning and strategy to bring your beliefs to life, which brings us to point number two.
2. Have a goal and plan for it
Want to buy a vacation home on the French Riviera? Retire early? Pay for your kids and your grandkids to go to college? Set up a charitable foundation? It’s going to take a plan to make it happen.
Consider your goal, and how much you need to save to achieve that goal. From there, you can come up with a realistic budget that includes savings and investments. You can absolutely create a plan on your own, but another habit (bonus!) of the wealthiest people is to hire a financial planner. In fact, 82% of millionaires utilize the services of at least one financial advisor.
3. Pay yourself first
To meet your biggest financial goals, you have to pay yourself first. The typical American receives a paycheck, pays taxes, pays bills, spends a little, and saves what’s left. This makes saving painful, and often, we don’t save nearly enough to meet our goals as a result.
David Bach, Author of “Start Late, Finish Rich,” and 8 other New York Times’ best-selling financial books, suggests having savings withdrawn automatically from your paycheck. This ensures the money is socked away before you even realize that you have it. The concept works because taking less steps makes saving easier.
4. Take calculated risks
Mark Zuckerberg is a well-known risk taker. Zuckerberg is often quoted repeating his favorite bit of advice from board member Peter Thiel: “In a world that's changing so quickly, the biggest risk you can take is not taking any risk."
However, he also cautions businesses not to take “big, crazy risks” often. Ramit Sethi of I Will Teach You To Be Rich recommends the Tripod of Stabilityto make sure you're secure enough to take the "managed risks" Zuckerberg recommends and grow as the business demands it over time.
The same logic can be used for investing and wealth management. Taking no risks is a strategy that’s sure to fail, but being shrewd about the risks that you do take is crucial.
5. Train your brain
Wealthy people tend to spend differently and save more. Like Buffet’s frugal behavior, many wealthy people live well below their means. Dr. Thomas J. Stanley, co-author of “The Millionaire Next Door: The Surprising Secrets of America’s Wealthy,” spent years tracking the behavior of some of America’s wealthiest individuals. His research reveals that much of the major wealth in this country is thanks to hard work, saving more, and spending less.
So how do we spend less? There’s science behind “tricking” your brain – creating rules for your spending that help simplify decision making – can keep more of your hard-earned money in the bank. Known as heuristics, these rules to live by can be simple.
Whether you’re 25 or 55, you can make an impact on your financial future by saving and investing whatever you can afford to now. Obviously, in terms of collecting interest, the sooner you start the better, but don’t let that keep you from making smart financial moves today.