A recent entry from Inve$ment Moat$ got me thinking. It is entitled, 8 Redditors tells us how they amassed more than 1 million in Networth.
http://www.investmentmoats.com/wealth-building-2/8-redditors-tells-us-how-they-amass-more-than-1-million-in-networth/
(I like reading Kyith Ng's blog and recommend it highly. He has an agile mind.)
If you Goggle "how to become a millionaire" you will be deluged with a plethora of articles - everything from advertisements from shills to more prosaic pieces which document pathways followed by "just folks".
In the following discussion, I will focus on people who started with no savings and who managed to become millionaires on the basis of their own initiative.
A few common themes emerge:
Disciplined Saving
A trait shared by almost everyone (with the exception of a few entrepreneurs who "lucked out" with the next-best-thing) is the ability to accumulate a sizeable nest egg through the adoption of three habits:
- living below their means
- having a savings target
- exercising discipline
It is interesting to note that most self-made millionaires have life partners who share these traits.
The "savings" trait was common to all levels of employment income and it continued long after individuals had attained millionaire status.
Importantly, the "savings" trait started early. Adherents, therefore, had the wind of "compounding interest" at their backs.
In our case, we made a decision to live off one salary and bank the other. It was not difficult and we had a very high quality of life. We used the library for our reading, spent a lot of time with friends in cooking meals, managed to take trips to Europe every two years etc. Also, we were able to distinguish "needs" from "wants" - something we still do to this day. I follow an approach that I adopted during my childhood, a time when our family had little money. Whenever I wanted to buy something over and above meeting the necessities of basic life, I would defer the purchase for a month or two. It was amazing how the "wants" evaporated over time. And if I finally made a decision to buy, I would wait until I could find a bargain. We now have a more flexible approach to buying new things but we can afford to since we live well within our means.
Investing in Learning
Virtually everyone applied themselves to learning. There are two dimensions to this:
- investing in one's self
- learning how to invest
Many people upgraded their skills, either through addition formal education or by consciously searching out new employment to enhance their skill sets and broaden their networks. Increases in income were used to augment savings.
Virtually everyone learned to invest. The pathways varied greatly: some invested in real estate; others invested in market indices and stocks; others invested in their businesses. The common denominator is that everyone learned how to make their savings work for them and worked to enhance their skills over many years.
Speaking personally, years ago, I was job threatened as a result of a massive downsizing in government. As a response to this insecurity, I decided to amass a nest egg to sustain the family for several years until I reskilled and started a business of my own. I spent two hours a night (between 2:00 and 4:00 AM) in learning and returned to my "day job" in the daylight hours. I hated it at first, but over time, found that the journey was intellectually challenging and fulfilling. After eight years of sustained effort, the annual increase from our investments started to exceed my salary. The sense of freedom was immeasurable.
Having a Plan
Everyone had a "plan" i.e. a set of goals/targets to direct their efforts. "Plans" ranged from generalized visions to more formalized goals, objectives and tactics. The bottom line is that everyone had a conceptual framework to ground their outlook and focus their behaviour. They also had the discipline execute their plans.
Most monitored their "progress" diligently and learned from their mistakes. Most had the capacity to accept setbacks and the tenacity to continue through hard times. While it was unsaid, I think that most shared the traits of self confidence and an optimistic outlook on life.
The Most Important Part
Having money is a means to an end. My bet is that most self-made millionaires look at their net worth much in the same way as they look at a thermometer.
The measure of one's wealth is not to be conflated the measure of one's worth as a person.
It's all about how you feel about yourself and the conduct of your life: your relationships with friends, family and the broader community; your ability to see beyond yourself and empathize with the world around you, be it the sounds of the street to philosophical writings of the ancients - there is just so much to embrace.
The value of money as an enabler is highly over-rated. It is the outcome of a behaviour not the road to "salvation".
Most self-made millionaires would do largely the same things regardless of the size of their stash in the sense that their primary satisfactions are the result of their conduct: their time with children, the joys of a walk in the woods, the intellectual stimulation of encountering a new idea ...
So ... it's now almost spring time. As I was writing this article in the early morning hours, I heard the scampering of feet on the rooftop. I paused and looked out. In the beam of the flashlight gleamed two shiny eyes - a young raccoon. He moved a few inches closer to the window to get a better look at me - a well urbanized creature with no fear. Now that I've completed this note, I'll have to check the street. It's garbage day and the green bin is out on the curb - a target for plundering. Guess I'll have to revert to the summer habit of keeping that container in the shed before putting it out for morning collection. Ah ... the joys of urban wildlife ... and I wouldn't have it any other way.
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