Far too many people don’t understand the powerful concept of “radical responsibility.”
It means taking ownership of every sphere of your life – from your health and wellbeing, to your business and personal relationships, to your saving and investment goals.
Why is this so important?
Because if you blame your current situation on other people, bad luck, or lousy circumstances, you relinquish all your power.
Your ability to change others’ behavior – not to mention “society” or “the culture” – is minimal. But your power to change yourself is almost limitless.
So take Gandhi’s sage advice and “Be the change you wish to see in the world.”
This is where you can make a real difference, particularly when it comes to saving and investing.
Don’t listen to the siren song of the pessimists and complainers who insist that this is no longer the land of opportunity, that the American Dream is dead, and that the little guy doesn’t have a chance.
Most of the rich – and even the super-rich – in this country did not get where they are through a generous inheritance or family connections.
Forbes notes that only 7% of the men and women on its list of the world’s 400 richest people inherited their wealth.
And Dr. Thomas Stanley – the social scientist who devoted his life to studying the habits and behavior of America’s high net worth individuals (the so-called 1%) – discovered that the vast majority had no special connections.
Approximately 85% of them built their own fortunes. And 68% received no inheritance, gifts, estates, and/or trusts.
Many believe that millionaires have advanced degrees from prestigious universities.
Some do. But while there is a direct correlation between educational attainment and lifetime earnings, the nation’s most highly-educated individuals do not have the highest net worth.
Most millionaires have a college education. But many were dropouts, B or C students, or learned a high-paying technical skill that created opportunities for greater compensation down the road.
People typically assume that most millionaires are business owners. (After all, you can’t get rich working for somebody else, right?)
Not so. Stanley discovered that 72% of millionaires in this country do not own a business and are not self-employed.
People tend to believe that the middle and lower classes work far longer hours than the rich. Wrong again.
According to the Census Bureau, 75% of households in the top quintile have two workers. Less than 5% do in the bottom quintile. For every hour worked by a poor household, a rich household works five hours.
No quintile works more hours than the richest.
Most people think the wealthy are big spenders. And, of course, the glittering rich – those with a net worth above the eight-figure mark – often are.
But Stanley discovered that the average millionaire in this country doesn’t own a second home, has never owned a boat, is more likely to wear a Timex than a Rolex, drives a Mazda rather than a Mercedes, and spends very little on prestige brands and luxury items.
The true common denominator is that millionaires develop habits conducive to asset accumulation.
In his classic best selling book The Millionaire Next Door, Stanley lists seven attributes of the affluent:
- They live well below their means. Most of us quickly learn that expenses rise to meet the income available. But millionaires tend to maximize their income, minimize their expenses, and religiously save and invest the difference.
- They allocate their time, energy, and money efficiently, in ways conducive to building wealth. As the old saying goes, “Rich people plan for three generations. Poor people plan for Saturday night.”
- They believe that financial independence is more important than displaying high social status. So who is buying all those luxury cars, powerboats, top-shelf wines, and expensive bling from Tiffany? “Wanna-be’s” or “aspirationals.” These are folks who have high incomes – and the desire to appear rich – but can’t get there thanks to their spending habits. (The Texas term is “All hat, no cattle.”)
- Their parents did not provide economic outpatient care. They learned responsibility, frugality, and self-reliance at an early age.
- Their adult children are economically self-sufficient. Take note if you currently have a millennial living in your basement.
- They are proficient in targeting market opportunities. In our competitive economy, success accrues to those who figure out what people want or need and then move heaven and earth to deliver it. That’s the beauty of capitalism. It says you can have whatever you want if you just provide enough other people with what they want.
- They chose the right occupation. If your fervent desire is to be an archaeologist, a hairdresser, or a high school basketball coach, more power to you. You will fill an important need and might live a thoroughly enjoyable life the rest of us can only envy. Yet recognize that some professions are more conducive to wealth building than others.
What careers are in greatest demand today? Carpenters, electricians, plumbers, engineers, computer support specialists, software developers, healthcare workers, sales representatives, doctors and registered nurses, to name just a few.
If wealth accumulation interests your kids and grandkids, have them look at this list before declaring a major in women’s studies or sociology.
In short, the path to financial freedom is well understood. The sad fact is most people just don’t know it – or can’t decide where to begin.