According to Sarah Stanley Fallaw, director of research for the Affluent Market Institute and co-author of "The Next Millionaire Next Door: Enduring Strategies for Building Wealth", anyone who possesses a certain set of characteristics is likely to become wealthy.
To identify characteristics most predictive of net worth, Stanley Fallaw conducted two studies that included a group of individuals with a net worth ranging from $US100,000 to $US1 million and a group of well over 600 millionaires.
She found that six behaviours, which she called "wealth factors," are related to net worth potential, regardless of age or income:
- Frugality - or a commitment to saving, spending less, and sticking to a budget
- Confidence - in financial management, investing, and household leadership
- Responsibility - which involves accepting your role in financial outcomes and believing that luck plays little role
- Planning - or setting goals for your financial future
- Focus - on seeing tasks through to their completion without being distracted
- Social indifference - not succumbing to social pressure to buy the latest thing
Frugality came up several times during Stanley Fallaw's research - many of the millionaires she interviewed stressed the freedom that comes with spending below their means. Being frugal was one of three key ways they achieved financial independence.
"Spending above your means, spending instead of saving for retirement, spending in anticipation of becoming wealthy makes you a slave to the paycheck, even with a stellar level of income,"
To properly build wealth, experts recommend saving 20% of your income and living off the remaining 80%.
It also takes confidence to invest properly - instead of making investing decisions with your emotions, you should leave your investments alone and focus on a long-term investment plan.
Like Stanley Fallaw, Chris Hogan, author of "Everyday Millionaires: How Ordinary People Built Extraordinary Wealth - and How You Can Too," also found that many millionaires take on personal responsibility and most also happen to be self-made, meaning they didn't acquire their wealth through luck.
"[Millionaires] don't count on anyone else to make them rich, and they don't blame anyone else if they fall short. They focus on things they can control and align their daily habits to the goals they have set for themselves."
He also found that they're goal-oriented and hard workers, which enable them to plan financially and focus on seeing those plans through. 92% of the millionaires he surveyed developed a long-term plan for their money, and 97% almost always achieve the goals they set for themselves.
These behaviours make it easy for them to be socially indifferent. They resist the lifestyle creep, the tendency to spend more whenever one earns more. Essentially, they don't feel pressured "to keep up with the Joneses."
As Hogan puts it, they "avoid distractions and the 'shiny object syndrome' the general population suffers from because millionaires aren't focused on what might make them happy today; they're focused on their long-term wealth-building plan."