Research has identified six characteristics or ‘wealth factors’ that millionaires have in common. The research was carried out by Sarah Stanley Fallaw and published in her book The Next Millionaire Next Door: Enduring Strategies for Building Wealth. It was found that these wealth factors correlated directly with net worth, however, net worth did not necessarily correlate with age or income. Therefore, it seems that anyone who demonstrates these six behaviours has the potential to become a millionaire!
Frugality
Income becomes irrelevant if a person is living beyond their means. Being frugal and spending below your means enables you to obtain a certain freedom. People who are capable of this are no longer a slave to the pay check and it is a key factor in achieving financial freedom. It is recommended that in order to build long term wealth, you only live off 80% of each paycheck and save the remaining 20%. This can be easier said than done, which brings us to the next wealth factor…
Confidence
Having confidence in your long-term financial goals will help you to be frugal and live within your means. It also takes confidence to invest and save successfully. A person who is able to resist the peer pressure to spend money in the short-term on lifestyle improvements with every income increase is generally the same person who has had saving and investment success in the past. They are able to focus on their end game and can confidently resist the pressure to “keep up with the Joneses”. When it comes to investments, confidence is crucial. Being confident enables you to remove the emotion from your investment decisions and stick to the plan.
Responsibility
Being accountable for your decisions, both good and bad, when it comes to financial matters, can make all the positive difference in managing your money successfully. It is not productive to rely on or blame other people for the outcomes of your investment choices or financial decisions. Taking on personal responsibility, by identifying the aspects of your wealth that you can control and living accordingly, will produce the desired results in your bank balance.
Planning
This wealth factor has been identified many times before as a deciding factor between success and failure, financially speaking. Ninety-two per cent of the millionaires surveyed by Fallaw had financial goals firmly set in place. Through following the other wealth factors, these goals were almost always achieved.
Focus
In order to achieve the goals so carefully planned for, the potential millionaire needs to have focus. This goal needs to be at the forefront of their minds in day to day life, to motivate and focus the individual to make the necessary short-term decisions and make the long term plan a reality.
Social Indifference
Being able to resist the new and shiny lifestyle factors in order to achieve genuine wealth in the future is often the highest hurdle on the road to financial freedom. However, living according to these six wealth factors becomes self-perpetuating and can lead to social indifference over time. As the benefits of resisting impulse spending become more and more apparent, your financial confidence grows. Your focus improves and goals become reality as plans come to fruition.
Rebecca is passionate about promoting the positive impact of quality financial advice on personal wellbeing. Read her full bio here.
