I spent five years studying the daily activities of wealthy individuals. I learned so many things that I’ve spent the better part of seven years sharing that information to help those who were struggling financially pull themselves out of the abyss that is poverty. One of the many things I learned is that self-made millionaires have a very different understanding about money than everyone else. I’d like to share some of the myth’s about money I uncovered in my research.
Myth #1 Are Your Investing or Are You Gambling?
Thirty-six percent of the self-made millionaires in my study were what I like to call Home Depot Investors. These individuals made most of their wealth by investing in stocks in individual companies. Before they purchased any stock they would pour over the financials of each potential investment looking for strengths and weaknesses. Then they would confer with a financial advisor to make sure their financial due diligence was correct. They did their homework. And their homework did not end after they purchased a stock. They continued to monitor the financials of each company they invested in. If the financials got better, they invested more money. If the financials got worse, they sold their stock. Sounds a lot like Warren Buffet, doesn’t it? To these self-made millionaires, if you did not do your homework, you were not investing, you were gambling.
Myth #2 There’s Good Debt and Then There’s Bad Debt
Fifty-one percent of the self-made millionaires in my study were entrepreneurs. They started up companies and then ran them as if their life depended on it. They took risks that would make most cower in fear. And they did not shy away from debt. In fact, many took on enormous debt to start, grow or expand their businesses. They used debt to create a business asset that would eventually generate significant profits and make them rich. And that’s good debt. Bad debt is debt that is used to finance losses in the business after the start-up period was long gone. Losses mean you’re not running your business correctly. And using debt to finance a poorly managed company is bad debt.
Myth #3 You Need Luck to be Rich
There is a difference between random luck and Opportunity Luck. To the rich haters out there, random luck is why the rich are rich. Not so. Opportunity Luck is why the rich are rich. Opportunity Luck is a unique type of luck the rich create as a result of having good daily habits. When you have good daily habits, you magnify the opportunity for luck to occur. Good daily habits are nothing more than automated persistent behaviors that help get you closer to achieving the goals behind your dreams. Good daily habits attract Opportunity Luck.
Myth #4 The Pursuit of Wealth is Nothing But Greed
Ninety-three percent of the wealthy in my study either liked or loved what they did for a living, long before wealth and success came along. It took the average millionaire in my study thirty-two years to accumulate their wealth. Ninety-seven percent of the wealthy in my study said greed was not a motivating factor in doing what they did for a living. They did what they did because they liked or loved it, not because they were on some mission to become a millionaire.
Myth #5 A Penny Saved is a Penny Earned
A penny invested is ten pennies earned. The rich in my study invested their money in one or more of these three places: their own business, stock in other companies (see Myth #1 above), or real estate. If you really want to be rich, you must invest your money.