The wealthy possess characteristics and traits which are usually out of the norm from most people. Is this such a surprise? After all, they have to be doing something different if they are millionaires in the first place.
Here are five of the characteristics millionaires possess.
They Don’t have a Budget
At first pass, this may sound counter-intuitive. Upon closer inspection, though, it makes sense. The wealthy have developed the discipline to save, invest, and be smart with their money. Why then would they need a budget?
When I first learned got into the world of finances, I started by taking a class offered by my employer. The class was on retirement planning and retirement. The instructors pushed for a budgetary system of cash in envelopes.
The way this system works is simple. Each month, you’re to take out paper money and stick them in envelopes. Each envelope is for a different part of your budget, like food and entertainment. When you run out of actual paper money, you’re to restrict yourself to a ramen diet until the next time the budget rolls over again. This is your “punishment” for failing to follow your budget.
While it sounds good, I must confess I never did this myself. In fact, I don’t even have a budget. Over the years, I just developed the discipline to be smart with my money.
The wealthy know roughly what their income and expenditures are every month. They know because most of them check their portfolios on a daily basis (more on this later). Another reason they check almost every day is so they can keep an eye out for suspicious activities, like unauthorized transactions.
They Check Their Investment Portfolios Everyday
But Rarely Make Changes
Another of the characteristics of the wealthy is that they check their investment portfolios on a daily basis. They are also keeping an eye on their overall net worth. While this may seem vain or obsessively controlling of money, checking daily does have its perks. For one, you’re reminded of the progress you’re making.
You’re also developing the discipline (there’s that word again) to resist making changes out of emotions. The wealthy know the gains are in playing the long game. This is the reason they don’t have a budget. When you watch your money every day and develop the discipline, a budget becomes unnecessary.
For a more esoteric reason, when you constantly think about money, you attract more money into your life. Earl Nightingale said that “man becomes what he thinks.”
The wealthy know the gains in the stock market are in keeping money there for the long-term and riding out the bad days. In fact, JP Morgan Asset Management’s 2019 Retirement Guide shows the effect on a portfolio of pulling out of the market.
In a 20-year time period (Jan 1 1999 to Dec 31, 2018), missing out on the best ten days of performance in the stock market meant your overall return was cut in half!
The study also showed that many of the best days came within two weeks of the worst days. The lesson here is simple: Avoid the temptation to time the market and just ride out the bear market. It’s called a bear market for a reason: You just have to bear it. The good news is bear markets on average last only about 14 months.
Most Millionaires Have High Incomes
It’s no secret that generally the more money you have, the easier it is to make money. This advice only goes so far. You still have to be wise: Save and invest.
The median household income for millionaires with high incomes is $250,000. Fortunately, this higher household income comes later in life. This means you don’t have to make $250,000 now, early in your career, or even all by yourself. If your spouse makes $125,000 and you make $125,000, then this counts, too.
Even if you’re not making anywhere close to $125,000 this doesn’t mean you should just give up. In fact, most of these $250,000-earners started off with very low income early in their lives.
It’s Also True They Work Harder
While it may sound glorious to have a job which pays over 6-figures, this also means these individuals work harder and longer hours. Their jobs don’t stop simply because they’ve gone home for the day. They could be on call 24 hours a day, 7 days a week.
This brings up an interesting question: Do you want to be this person? There’s a price to pay for everything. When you say “yes” to something, you are saying “no” to something else.
Characteristics of the Wealthy: Get Educated in a High-Paying Field
Of course, to actually be in a position where you’ll one day enjoy a high pay means you’ll have to get educated in a field that pays well. Careers in tech, finances, and legal tend to pay well.
Then you’ll have to spend time building up your career. Remember that the high-income earners didn’t start out that way early in their careers. They gradually worked towards a higher income. They climbed the ladder, making a little bit more money each year, along with increasing their responsibilities.
This is another way of “paying yourself first”: By investing in yourself through continuing education to build up skillsets, you can provide more value to other people. This in turn comes back as greater monetary returns. Then there’s the intangibles of success, such as the warm, gooey feeling of knowing you helped someone and made a difference in their lives. While it may seem that wealth equates to money, remember that money is just energy. It is a reflection of your value system and what you believe in your heart.
The greatest return is that of knowing the mark and difference you made. This is another of the many characteristics of the wealthy.
Characteristics of the Wealthy: They Have a Better Work-Life Balance
Going back to the high, six-figure earners, you can imagine the company doesn’t expect that person to only work 40 hours a week. Many work 50- or even 60-hour weeks. This can be a challenge to work-life balance.
At the same time, there’s really no magical balance point. It’s more of a balancing act. Work-life balance is but an illusion, meaning it’s up to you to get to work discovering the balancing point as life changes.
Some people have difficulty saying “no” and seem to work all the time, while being the most unproductive people I know. Others are good at saying “no” but producing oodles more quality work. They prioritize, get things done with laser focus, and avoid perfectionism. As the old saying goes, if you want something done give it to someone who’s busy.
The millionaires first started out with significant work commitments. Over time, they learned how to say “no” and balance their work lives with their personal lives.
They also built passive income over time. This can be in the form of stocks, real estate, or even businesses. The point here is simple: In order to work less hours, you’ll have to somehow find a way to replace those hours through another revenue stream. Note how 401(k) or retirement funds do not count because you cannot access this money for a very long time, basically until you retire at age 59 1/2 depending on the type of funds you have.
Characteristics of the Wealthy: They Pay Themselves First
At the crux of all this, another of the many characteristics of the wealthy is that they pay themselves first. They do this before they pay their debts, bills, and other people. The general rule of thumb most financial advisers give is you should be saving at least 20% of your income.
In essence, the wealthy are super-savers, some saving up to 64% of their income. Take this percentage at face value, though, for it’s unclear if this is a pre- or post-tax dollar value. Of course, if it’s pre-tax, then the amount saved will be higher than a post-tax amount. Instead, understand that the more you’re able to save and invest, the better shape you’ll be in the future.
How do they pay themselves? By putting that money into investments of course! This includes a laundry list of things like…
- Certificate of Deposits or money market accounts
- High-yield savings accounts
- 401(k)
- Real estate crowd-sourcing
- Owning own real estate
- Stocks and bonds
- Loaning out their money (in essence, acting as a bank)
- Selling a product or service (e.g., a business)
In other words, the wealthy are always looking for ways to leverage their money, putting it to work making more money. They may be happy with where they are in life but at the same time they are dissatisfied. This dissatisfaction is the fuel for continued growth, for at any given moment you are either expanding or contracting.
When you continually challenge yourself through looking at new (to you anyways) ways of making more money, you are expanding. On the flip side of the same coin, when you choose to do nothing, paralyzed from over-analysis, you are contracting.
Conclusion
These are just five of the many traits and characteristics the wealthy possess. To summarize:
- The wealthy do not have a budget
- The wealthy check their investment portfolios and overall net worth every day
- The wealthy are high-income earners
- The wealthy have better work-life balance
- The wealthy pay themselves first.
These are the fundamentals to building wealthy, both monetary and spiritual. Mindset shifts are important. If you have some or all of these characteristics, then you’re on your way to becoming wealthy. If you don’t, then here’s your chance to improve.