Helping people on their wealth-building journey is what we do every single day. Today we are going to cover 5 observations about individuals who take building wealth seriously. For those of you reading this who might be on your own personal wealth-building journey, we encourage you to take note!
- Wealthy People Learn How to be Self-Disciplined with Their Money
The first is more of a character trait but it can be developed. People who are wealthy are typically self-disciplined in their finances.
What is self-discipline?
One way of thinking about it is sacrificing something now, so your future self will benefit. A good picture of self-discipline is someone who gets up early to go to the gym on a regular basis. They are sacrificing their present time, energy, and sleep in exchange for future health, wellness, and physical fitness.
Self-discipline is about seeing the end goal, the transformation you can make to become the best version of yourself, and knowing that the only real way to get there is to remove the things (or people) in your life that will prevent you from getting there.
As it relates to building wealth, developing healthy spending habits, saying no to purchases that don’t align with your financial goals, and making smart investment decisions are all part of the discipline we are talking about.
Self-discipline is inspired by the end goal. So that brings us to the next point.
- They Are Intentional
Goal planning takes a bit of intentionality. You aren’t going to set goals for yourself unless you carve out time and space to sit down, perhaps with a significant other, and talk about the things that are most important to you. Goals are birthed out of your established values, so perhaps the discussion starts there. What do you value most? Is it spending time with those you love? Is it a hobby? Travel? List out 5-10 of the things you absolutely love spending your time doing. From there, you can establish some goals to usher in more of those things in your life.
Let’s say you love boating and fishing. That’s something you value. Now you can establish a goal that says: "When I retire, I want a cabin on a lake with a dock where I can park my boat and take it out fishing every morning." That’s an example of how a goal can come from first knowing what you value, and putting a tangible goal on paper that you can work toward. Saying no to temporary pleasures now, such as the home renovation or the new sports car might be a lot easier if you know that waiting for you on the other end of that sacrifice is a cabin with a boat on the lake.
Wealth-building isn’t about simply having money, it is about what the money frees you up to be able to do with your life. That’s a good segue into our next point, wealthy individuals are often very hard workers.
- Wealthy People Work Hard
Sure, wealth can be inherited, some are born into more privileged situations or may have more opportunities. However, studies show that generally wealthy people do in fact work longer hours. One study shows that 44% of the wealthy worked 11 hours more each week than those not as well-off financially. 86% of affluent individuals who had full-time jobs worked 50 hours or more each week, whereas 57% of non-affluent individuals who had full-time jobs worked less than 50 hours each week, and 88% of the wealthy took fewer sick days than anyone else.
This would suggest that, if you put in the work, you have a higher likelihood to rise to the top financially.
That said, wealth is not simply built from putting in the work, it is also finding a way to let your money work for you.
- They Find Ways to Make Their Money Work for Them
We are talking about putting your money in investments that will create passive income opportunities or grow in accounts that require little to no effort on your part. The saying “it takes money to make money” has some truth to it. The fact is, putting $1 million in a mutual fund that generates an 8% return in a year means you made $80,000 by simply investing it and letting the market (and fund manager) take care of the rest. If you have $1,000 to invest in that same mutual fund, that 8% return provides you with $80 at the end of the year.
Indeed, the more cash you have, the greater the opportunities to compound your wealth. The key is to actually find ways to let your money work for you rather than tucking it under a mattress, and that leads us to our final point: Wealthy people aren’t afraid to take risks.
- They Aren’t Afraid to Take Risks
Those who build wealth over the course of their life likely have a track record of taking calculated risks.
Life is full of risks and that is certainly the case when it comes to investing. Investing in the stock market means you are taking on risks of companies going under, external factors like economic risks, the ups and downs from the market, recessions, fraud, etc. If you invest in real estate, maybe your tenant doesn’t pay rent, a major appliance needs replaced, or the housing market crashes.
What many people don’t realize is that even keeping your money in a savings account, CD, or tucked under a mattress comes with risk. Purchasing power is reduced annually with inflation, and that’s out of our control. So if you tuck your cash under a mattress, the risk you have is losing a significant amount of purchasing power over the years.
Wealthy people recognize life is full of risks, and rather than running away from it, they calculate their risks by weighing the potential risk to the potential reward and pursuing opportunities with high probable payoffs. And they identify people in their life who can help with this, covering their vulnerable spots and protecting themselves from taking unnecessary risks.
Of course, the downside to taking risks is that sometimes it means your risk won’t pay off. You must learn the art of viewing your risk that didn’t pan out as part of the process. Sometimes an expensive lesson is learned, or sometimes bad luck plays a part. However, the ones who are building wealth are the ones not on the sideline but on the playing field. The ones building wealth are not afraid of the potential risks, because the reward is in sight.