A little while ago, my Dad sent me an interesting read on Business Insider discussing wealth factors. Read more here.
The article discusses survey results of 600 American millionaires. I’m not aware of how the survey result data were collected, filtered, and cleaned, but they state they found 6 common factors among the millionaires which, regardless of geographic location, would come in handy here in Canada too. Here they are:
Surprised? Probably not. In any case, it’s nice to reaffirm some fundamentals to support staying on track. It comes as no surprise that frugality, being conscious about expenditure, taking responsibility for your finances, and avoiding social pressures are key drivers. Of course these fundamentals are discussed at length on any finance blog.
Saving & Pragmatism
You need to know where your money is going – ensure you’re saving a good chunk of your earnings. The article notes “experts” recommend a 20% savings rate – I definitely target a higher percentage; on pace for 50%+ this upcoming year. Part of boosting savings rates comes from avoiding lifestyle inflation and socking away your salary increases. When you hit an acceptable utility for expenditure level, the majority of new money, if not all, should be stashed. Being pragmatic and not succumbing to social pressures (E.g. FOMO) is also key to saving.
It’s not difficult to implement, you just need to avoid useless shit. Do it for your future-self’s reduced financial stress and ultimate liberation, and do it for your present-self’s peace of mind and happiness. Make sure you’re questioning and rationalizing why you want to spend that dollar. You’ll probably ramp up your savings rate very very quickly.
Knowledge & Responsibility
The other major category to me is a thirst for knowledge, setting your goals, and knowing what you are responsible for.
It’s important to always be a student in life regardless of the facet. Personal finance is no different. Reading books, blogs, expert opinions and talking with other enthusiasts is critical to bettering yourself. It’s always a happy experience to tack-on more knowledge!
As you increase your understanding, it’s easier to set short and long-term goals. Know what your target savings rate is for the upcoming few years, ways to maximize happiness without wasteful expenditure, strip out excess, and be able to project your financial position down the road.
Finally, you need to be able to take responsibility for things within your control.
- Control of your daily expenses and any excess? Yes. Abrupt family emergencies? Probably not.
- How much you’re stashing away for investing and asset allocation? Yes. When and the magnitude of an equity crash? No.
Figure out what you can control, and put the onus on yourself to be better.
I do my personal best to stay on track with my goals. While I’m not financially independent yet, I know I’ve taken major strides over the last 2 years and will continue to build my knowledge and discipline!