After compiling a list of the best podcasts about money according to Reddit, I’ve been sampling as many of the programs as possible. One of my favorites is The M.O.N.E.Y Show with Paula Pant and J. Money. The two hosts have a good rapport and their personalities mesh well: J$ tends to be more impulsive and emotional; Paula is the logical/analytical half of the duo.
I enjoyed their discussions about dollar-cost averaging (episode #15) and financial independence (episode #7). But my favorite installment is probably episode #8, in which J$ and Paula explain net worth by giving glimpses of their own financial lives. The similarities and differences are interesting and educational.
Not every episode of The M.O.N.E.Y. Show is a homerun, however. I wanted to like their interview with Tom Corley in episode #10, but I felt like the author never got to the point. I was hoping to hear more about his 2010 book, Rich Habits: The Daily Success Habits of Wealthy Individuals, which summarizes his research into the habits of the rich and poor. This episode offered only a small taste of the results.
Because I wanted to know more about Corley’s “rich habits”, I tracked down a piece he wrote for Success magazine that gives more insight into the results of his study. From there, I found similar lists by other authors — and unearthed one of my own.
Is it really possible to generalize about the differences in the way rich people and poor people behave? Let’s explore the “millionaire mindset” by examining habits that foster wealth and success.
First, let’s look at Corley’s findings. His approach is unique because he took time to interview both the rich and the poor. (Corley defines “rich” as those having an income over $160,000 per year and net liquid assets of more than $3.2 million. To him, poor means a gross income of $35,000 or less and no more than $50,000 in liquid assets.)
According to Corley’s article in Success:
- Rich people live within their means. “Wealthy people avoid overspending by paying their future selves first. They save 20 percent of their net income and live on the remaining 80 percent.”
- Rich people don’t gamble. “Every week, 77 percent of those who struggle financially play the lottery.”
- Rich people read every day. “Among wealthy people, 88 percent read 30 minutes or more every day.”
- Rich people spend less time in front of screens. “Two-thirds of wealthy people watch less than an hour of TV a day and almost that many…spend less than an hour a day on the Internet.” On the other hand, “77 percent of those struggling financially spend an hour or more a day watching TV, and 74 percent spend an hour or more a day using the Internet recreationally.”
- Rich people control their emotions. “Loose lips are a habit for 69 percent of those who struggle financially. Conversely, 94 percent of wealthy people filter their emotions.”
- Rich people network and volunteer regularly. “Almost three-quarters of wealthy people network and volunteer a minimum of five hours a month. Among those struggling financially, only one in 10 does this.”
- Rich people work harder. “Unsuccessful people have ‘it’s not in my job description’ syndrome…Successful people work hard to achieve the mutual goals of their employers or their businesses.”
- Rich people set goals; poor people make wishes. “Every year, 70 percent of the wealthy pursue at least one major goal. Only 3 percent of those struggling to make ends meet do this.”
- Rich people avoid procrastination. “Successful people understand that procrastination impairs quality; creates dissatisfied employers, customers or clients; and damages other nonbusiness relationships.”
- Rich people talk less and listen more. “Wealthy people are good communicators because they are good listeners. They understand that you can learn and educate yourself only by listening to what other people have to say.”
- Rich people avoid toxic relationships. “Of wealthy, successful people, 86 percent associate with other successful people. But 96 percent of those struggling financially stick with others struggling financially.”
- Rich people don’t give up. Wealth individuals “simply do not quit chasing their big goals. Those who struggle financially stop short.”
- Rich people set aside limiting beliefs. “Almost four out of five wealthy people attribute their success in life to their beliefs.” They pursue personal development.
- Rich people have mentors. “Finding such a teacher is one of the best and least painful ways to become rich.”
- Rich people make their own luck. “Successful people create their own unique type of good luck. Their positive habits lead to opportunities such as promotions, bonuses, new business and good health.”
- Rich people know their main purpose. “It’s the last Rich Habit, but it might be the most important. Those people who pursue a dream or a main purpose in life are by far the wealthiest and happiest among us.”
I’d love to see the raw data that led Corley to make these conclusions but I don’t think his book includes that info. From what I can tell, it’s written as a story, sort of like The Wealthy Barber.
I did find other articles about Corley at Business Insider (some stats included) and Entrepreneur (no stats), but I can’t find anything about his actual methodology and the results of the study. Even the Rich Habits website is short on info.
Have any of you read Rich Habits? What’d you think? Does Corley share data from his research?
The Secrets of the Millionaire Mind
When I first decided to become a money boss in 2006, I devoured every book about personal finance that I could find. One volume that had a profound influence on my future financial philosophy was The Secrets of the Millionaire Mind by T. Harv Eker.
Eker believes that we each possess a “financial blueprint”, an internal script that dictates how we relate to money. Our blueprints are created through lifelong exposure to money messages from people around us, especially our family and friends, and from our country’s culture and mass media. (I agree with Eker. One of my first articles here at Money Boss was about money blueprints.)
Eker says the unfortunate truth is that most of us have faulty blueprints that prevent us from building wealth.
“Money is a result, wealth is a result, health is a result, illness is a result, your weight is a result. We live in a world of cause and effect,” writes Eker. “A lack of money is never, ever, ever a problem. A lack of money is merely a symptom of what is going on underneath.” (This echoes my advice that debt reduction is a side effect of doing the right things and ought not be a goal in and of itself.)
At the core of Millionaire Mind are Eker’s “wealth files”, a list of seventeen ways in which the financial blueprints of the wealthy differ from those of the poor and the middle-class. According to Eker:
- Rich people believe: “I create my life.” Poor people believe: “Life happens to me.”
- Rich people play the money game to win. Poor people play the money game to not lose.
- Rich people are committed to being rich. Poor people want to be rich.
- Rich people think big. Poor people think small.
- Rich people focus on opportunities. Poor people focus on obstacles.
- Rich people admire other rich and successful people. Poor people resent rich and successful people.
- Rich people associate with positive, successful people. Poor people associate with negative or unsuccessful people.
- Rich people are willing to promote themselves and their value. Poor people think negatively about selling and promotion.
- Rich people are bigger than their problems. Poor people are smaller than their problems.
- Rich people are excellent receivers. Poor people are poor receivers.
- Rich people choose to get paid based on results. Poor people choose to get paid based on time.
- Rich people think “both”. Poor people think “either/or”.
- Rich people focus on their net worth. Poor people focus on their working income.
- Rich people manage their money well. Poor people mismanage their money well.
- Rich people have their money work hard for them. Poor people work hard for their money.
- Rich people act in spite of fear. Poor people let fear stop them.
- Rich people constantly learn and grow. Poor people think they already know.
“When the subconscious mind must choose between deeply rooted emotions and logic, emotions will almost always win,” writes Eker. Even if you know what you ought to do intellectually, it can be tough to do it because your money blueprint controls your thoughts and behavior. To change your habits, you have to work consciously and constantly to create a new plan. This takes time and practice.
Eker says that most people are motivated to make money out of fear. People don’t call it fear, though. They say they’re motivated by security. Eker notes — correctly — that fear and security are essentially two sides of the same coin. The tough truth is that money doesn’t dissolve fear.
Fear is not just a problem, it’s a habit. Therefore, making more money will only change the kind of fear we have. When we were broke, we were most likely afraid we’d never make it or never have enough. Once we make it, however, our fear usually changes to “What if I lose what I’ve made?”
Next week, I’ll share a huge article about facing and fighting fear. For now, let’s look at another comparison of haves and have-nots.
Millionaires vs. the Middle Class
In The Top 10 Distinctions Between Millionaires and the Middle Class, Keith Cameron Smith also makes an attempt to delineate the difference between the rich and the rest of us.
His ten “distinctions” — in order of importance — are:
- Millionaires think long-term. The middle class thinks short-term.
- Millionaires talk about ideas. The middle class talks about things and people.
- Millionaires embrace change. The middle class is threatened by change.
- Millionaires take calculated risks. The middle class is afraid to take risks.
- Millionaires continually learn and grow. The middle class thinks learning ended with school.
- Millionaires work for profits. The middle class works for wages.
- Millionaires believe they must be generous. The middle class believes it can’t afford to give.
- Millionaires have multiple sources of income. The middle class has only one or two.
- Millionaires focus on increasing their wealth. The middle class focuses on increasing its paychecks.
- Millionaires ask themselves empowering questions. Middle-class people ask themselves disempowering questions.
Some of the items on Smith’s list seem to be derived from Eker’s philosophy. But although there are similarities, Eker’s list gives me warm fuzzies and Smith’s list doesn’t. I’m not sure why.
Maybe the difference is this: From my experience (and your experience may be different), Eker’s many distinctions hold true (at least in the U.S.). I’ve seen the differences he describes in my own life. But I’m not convinced that the differences Smith lists do hold up.
For instance, I know lots of poor people who talk about ideas rather than things and people, and many of the same folks embrace change. A lot of my friends love learning but they’re not millionaires. And haven’t we seen statistics that show, based on a percentage of income, poor people give more than the rich do?
There are differences between the mindsets of the rich and the poor, of this I’m sure. But I think they’re closer to Eker’s list than to Smith’s.
Without taking anything away from personal responsibility (which you all know I think is vital to success), I’d like to suggest that both authors are too quick to dismiss systemic causes of poverty. Perhaps neither of them has ever actually been poor. Some of their criticisms make sense, but some seem to come from people who’ve lived lives of privilege.
“Rich people act in spite of fear,” Eker writes. “Poor people let fear stop them.” Why is that? Could it be that the rich can act in spite of fear because they have a safety net?
There’s no question that wealth brings opportunities, both in the U.S. and in other countries. Those with money have more choices. The rich can take risks, and they’re often rewarded for taking them. (Thus, “the rich get richer”.) I have so many more options now than I ever did when I was a boy, when my family was poor. I’m one of the lucky ones who has managed to make good. Yes, a lot of that was through hard work, but there’s no question that I’ve been lucky. And I think this element of “luck” is something that both Eker and Smith miss.
Ten Habits of Financially Successful People
Instead of defining the differences between rich people and poor people, I think it’s more constructive to look at what separates successful people from unsuccessful people. Maybe I’m picking nits, but in this case I think focusing on a financial scorecard misses the point. It’s possible to be successful and poor, and it’s possible to be rich and a fool.
I’ll admit there seems to be a strong correlation between wealth and success, but the two qualities don’t overlap precisely.
From looking at my own friends, and from thinking about the stories readers have sent me during the past decade — especially stories about how people have moved from debt to wealth — I’ve seen the following patterns.
- Successful people surround themselves with positive people. They limit their exposure to negativity and naysayers, preferring to spend time with folks who have can-do attitudes. They don’t have time to listen to the reasons something can’t be done; they’d rather find ways to make it happen.
- Successful people aren’t flummoxed by failure. They know that mistakes are inevitable and should be treated as stepping stones to success rather than signs of weakness or reasons to stop trying. (This is why it’s important not to praise achievement, but to praise effort. The former breeds fear of failure.)
- Successful people manage their time effectively. They recognize that minutes and seconds are a precious non-renewable resource. So, they set priorities and pursue them with passion. My successful friends seem to watch less television (and play fewer videogames) than my unsuccessful friends, for instance. There’s nothing inherently wrong with Game of Thrones or Hearthstone, but they suck up time that could be spent exercising or reading or taking a class.
- Successful people ignore the opinions of others. They don’t feel compelled to “keep up with the Joneses”. They limit their exposure to mass media not only because it allows them to be more productive, but also because it reduces the influence of advertising and the pressure of cultural norms. When investing, they don’t follow the herd. The wealthy people I know all drive older cars (many of them bought used!), dress modestly, and avoid conspicuous consumption.
- Successful people have direction. They act with purpose. They know why they’re working hard and saving money. They have a mission, even if it’s as simple as putting their kids through college, and their daily actions are aligned with their long-term goals. None of the folks I know who struggle with money have a clear idea of what they want to do with their lives.
- Successful people focus on big wins. Sure, they develop smart habits and pay attention to the small stuff. But they also understand that if they’re diligent with their dollars, then the pennies will take care of themselves. The average person economizes on the small things but isn’t willing to make sacrifices when it comes to housing, transportation, or income. And the folks who are broke all of the time? Well, they fritter away their pennies and their dollars.
- Successful people do what’s difficult. They don’t procrastinate. My friends with money work longer, harder, and smarter than my friends who have less. They practice deferred gratification, sacrificing small comforts today in order to obtain greater rewards tomorrow.
- Successful people make their own luck. They practice awareness so that they can recognize opportunities when they come along. Moreover, they act boldly, seizing these opportunities where others might hesitate to act.
- Successful people believe they’re responsible for their future. They’re proactive. They have an internal locus of control. That is, they understand that although it might not be their fault they’re in a given situation, it is their responsibility to change it.
- Successful people grow and change over time. They adapt. They evolve. They’re not afraid to entertain different points of view. Most importantly, they’re not afraid to change their minds. They seek knowledge and experience, and they allow the things they learn to mold them.
None of these differences is absolute, of course. Most people (including me) follow a few of these rules but not others. Or we adhere to certain rules part of the time. The most successful people I know do all of the things on this list; the least successful people do none of them.
I guess the bottom line is my friends who are successful with money (and life) take what they do seriously. Whether they know it or not, they’re money bosses. They treat their personal life as if it were a business. They act as both CEO and CFO, and they do their best to “grow the business” over time.
Your personal wealth is your real business; everything else just supports it.
What do you think? From your experience, what are the differences between the rich and the poor? What qualities separate successful money managers from those who remain broke? Given roughly similar backgrounds, why do some folks build wealth and others struggle to make ends meet? How do the rich think differently? What behaviors to the poor and the middle-class have that the rich do not? Or is it even possible to create distinctions like this? Does it all just come down to luck?