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Five Traits of Wealthy People Do You Have The Traits of The Wealthy?
Maybe you are already wealthy or maybe you are on your way. Maybe you are concerned about your financial future, especially with all the bad news we see daily pushed by media outlets that profit off of panic. Maybe you are the type that struggles with money.
After 20+ years of working with individuals and couples, I have determined there are 5 traits wealthy people typically have versus those that struggle with money. Now there is a level in between. Financially wealthy is defined as having over $1.9 million in net worth. Many people with a net worth below that are not struggling with money. I would venture an educated guess that they still have these same traits even though they haven’t reached that level. The question is do you have the traits that are common among those that became wealthy? Here are the 5 traits most common among those that have wealth:
Not only my own experience but studies show that wealthy people are risk takers. This needs to be clarified though because there is smart risk and speculative/poor risk. Smart risk is when you have calculated the odds and feel confident that the downside is worth taking on the risk. Poor risk is either ignoring the downside due to arrogance and greed or not understanding the downside. This isn’t only seen in investing but in career choices.
Wealthy people tend to be much more optimistic. This is highly related to being risk takers. If you are overly pessimistic, not many risks will appear to be worth taking. Also, optimistic people are more self-motivated than pessimists, which helps in any career.
Investing with a Purpose
Most wealthy people did not make their wealth via short-term investing but rather enhanced their wealth with long-term investments. The stock market really was never intended to be a get rich quick scheme. There are some bubbles that made people rich, and also very poor if they didn’t recognize it was a bubble, but in a high percentage of the time the wealthy either earned it via in business or received it via inheritance. When I write investments, I am specifically speaking of buying individual stocks or funds, not investments in private businesses. Same goes for real estate. One can become very wealthy investing in private real estate, not typically investing in real estate stocks or funds via the stock market. The stock market is designed to provide long-term high single digit to low double-digit returns. Obviously, with a long-term view and a plan, one can become wealthy with an investment portfolio. However, get rich quick schemes more often make people poorer.
This is not necessarily a vision regarding starting a business but more importantly a vision for their life, which typically involves a long-term plan. In my experience, those with a plan are better equipped to handle the tough times because they know the tough times have been planned in. Better said, through stress testing or running different models, there is a better understanding that they can handle the tough times, which causes less panic. In investing, that means less selling out and going all cash which has been proven many times to be a bad plan. Confidence equals poise.
This shouldn’t be a surprise to anyone. Discipline is a trait that helps in most every aspect in life, including health choices, investing, spiritually, family and friends, and finally a career. Like a vision, discipline keeps people from over-reacting and making emotional decisions versus well thought out actions. Emotional decisions in regards to wealth, especially investing, typically do not work out well. Most of the time when I discuss emotional investing with people, they primarily think fear. Greed is just as costly.
These 5 traits are from my experience. I wanted to see if my experiences were supported by actual research so I looked it up. One trait in several studies that I didn’t mention, and quite frankly haven’t seen in my experience, is being an extrovert. This makes sense due to extroverts typically being more positive but I have had many very wealthy clients that I would not classify as extroverts. On the flip side, the traits I mentioned that most definitely are supported by research include risk taking, optimistic and having a long-term vision.
What do you think? Do you see these traits in yourself and/or those you admire in wealthy positions? Can you think of any traits I might have overlooked? While this article is intended to be in fun, it’s worth pointing out that none of these traits are exclusively innate (except maybe optimism, but we can try). No one is expected to have every risk prudently calculated or every detail of a long-term plan figured out in the beginning. That is where we come in as your Wealth Advisor. As long as you have the initiative and foresight to reach out to a professional, we can help you become educated, empowered and confident in your financial future.