Ever find yourself wondering how people get really rich? If one isn’t born into wealth, are certain strategies and personalities traits beneficial to accumulating a lot of money? While there isn’t one magic formula to growing assets, there are certain characteristics of the wealthy that stand out. Studying and mirroring these traits could be beneficial in growing your own wealth.
In 2014, Spectrem Group analyzed 132,000 investors in America that had a net worth of $25 million or more, excluding their primary residence. The purpose of the study was to uncover trends in this group’s demographics, reveal any fears they may have, and to identify the top characteristics commonly found amongst the super wealthy. The study revealed 10 factors to obtaining assets, the top five characteristics being hard work, education, smart investing, taking risks, and frugality. These traits were consistently ranked as the top five factors in two earlier studies as well. Let’s explore the top five characteristics from the study further.
1) Hard Work Can Lead To High Achievements
If you want to become super wealthy, don’t expect it to be easy. The typical multi-millionaire doesn’t walk into the office and simply punch in from 9am to 5pm doing the least amount of work possible. Instead, the energetic and hard working personality traits of many wealthy individuals propel them to go well beyond a 40-hour workweek. That can mean working a hectic and intense 60 to 80 hours per week.
This could partly be due to the entrepreneurial spirit of these individuals. They often desire for success, and have confidence, high energy, and want to make their own decisions. Perhaps this is why nearly two-thirds of the super rich are running their own businesses. It’s exciting to work hard when you have skin in the game and the freedom to make your own choices. And it’s also easy to end up working a lot of hours when you’re the one at the helm and doing something you genuinely care about.
2) Education Is Highly Valued
An impressive 78% of the wealthy attribute their success to education. So, even though, there are wealthy individuals like Mark Zuckerberg and Michael Dell who never finished college, their nontraditional routes to success are rare. Most multi-millionaires completed college, value the education they received, and believe it contributed to their ability to accumulate great wealth.
Studies have shown that approximately 93% of the CEOs of Fortune 500 companies received bachelor’s degrees. And roughly 78% of those CEOs also completed graduate degrees. Those numbers indicate that beyond the wealthy individuals’ beliefs, education is also well regarded in the workplace. Having multiple degrees can also increase one’s chances of achieving an executive role at a corporation with top compensation.
3) Smart Investing For Bigger Gains
According to Thomas J. Stanley, the author of “The Millionaire Next Door,” many millionaires don’t necessarily earn a high income, but they invest a large amount of their income for the long-term. On average, they invest nearly 20% of their income into the market in the hopes of a profitable gain.
Spectrum’s study referenced above also found that 70% of the $25+ million investors felt that investing and saving their money was more rewarding than spending it. So it shouldn’t be overlooked that making smart decisions and investing can lead to greater wealth.
The inspirational billionaire Warren Buffett purchased his first shares of stock at eleven years old and was hooked for life. Since that first investment, he has built his empire to $72 billion dollars and is currently the 2nd richest man in the world (behind Bill Gates). Starting early and investing wisely is a powerful combination to put you on the road to gathering substantial wealth.
4) Taking Risks Can Make A Difference
Another characteristic of the wealthy is they’re willing to take risks from time to time and usually are not impulsive in making decisions. In other words, those that are focused on building and maintaining great wealth are skilled at gathering and analyzing information to help them determine when to say yes or when to walk away.
Spectrum’s study showed that the percentage of millionaires with $25M or more that attribute risk-taking as a major part of their success has decreased from 74% in 2012 down to 63% in 2014. But even at 63%, taking calculated risks is still a significant factor that shouldn’t be overlooked.
5) Frugality Pays Off
A fifth characteristic of the wealthy is frugality. This simplistic quality makes sense because it takes spending a great deal less than you earn in order to help accumulate wealth. Even if you can achieve earning a high income, it won’t make much of an impact if you frivolously go out and spend it all.
CNN Money reported on the frugal nature of the wealthy when they showed that many millionaires do not bump up their lifestyle with income increases. They even tend to wear the same clothes from when they earned less. By staying frugal, avoiding wasteful spending, and shunning lifestyle inflation, millionaires are able to put a larger amount of their income into building assets and investments.
Warren Buffett is not only a prime example of smart investing, but also one of frugality. Even though he could easily afford to buy multiple, enormous properties on private islands for mega millions, Buffett still lives in the same house that he purchased in 1958 for only $31,500. That comes as quite a shock to most people since Buffett has the means to live in a much more extravagant house with a large number of vacation properties. But Buffett has remained happily content with this long-term home and considers it to be one of his best investments. He could afford it when he purchased it, and his family has built a lot of happy memories that are worth more than what can be found in a large estate.
Takeaways from the Multi-Millionaires
These top five characteristics of the wealthy may sound simple and straightforward, but mastering them all simultaneously is easier said than done. If you aspire to build your wealth like the multi-millionaires, focus on hard work, education, smart investing, risk-taking, and frugality. With enough patience, persistence, and skill, you too could be on your way to greater wealth.
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