Financial success takes a long time. In my Rich Habits Study it took the average self-made millionaire 32 years to become “rich”. When I began my study I wanted to know the answer to one question: why are some people rich and other people poor? Five years, and 51,984 questions later I learned the answer – your daily habits. Habits dictate your circumstances in life. This is a truly groundbreaking discovery. Habits affect just about every aspect of your life. And there are many shades of habits. We have money habits, eating habits, drinking habits, exercise habits, sleeping habits, downtime habits, work-time habits, reading habits, relationship habits, happiness habits and thinking habits. We have morning habits, afternoon habits and nighttime habits. According to a 2006 Duke study, 40% of our daily activities and thinking are habits.
Money habits have the most profound impact on your financial circumstances. These can be broken down into two sub-categories: spending habits and savings habits. Many of the self-made millionaires in my study were able to accumulate their wealth by virtue of having learned good money habits from either their parents or some mentor in life. When you have good money habits, you spend less than you make and save the difference. Over time, this savings grows and compounds. Those who dutifully live below their means for much of their lives are able to accumulate significant amounts of wealth. Some are even able to accumulate millions.
But most, unfortunately, do not have good money habits. How do I know? In a 2013 survey conducted by the Associated Press, they found that 80% of America’s adults struggled with poverty or were near-poverty, just one paycheck from their lives completely unraveling. No safety net, little to no savings, every day just trying to keep up with their bills and credit card payments. One of the culprits for this is a Poverty Habits I uncovered in my research that derails most in the United States. Some call it keeping up with the Jone’s. I like to call it Poverty by Association.
We pick up most of our habits from those in our environment: parents, teachers, family, friends, work colleagues, neighbors, mentors, celebrities, coaches, etc. What I uncovered in my research was that most were never taught by these “influencers” the habit of Living Below Your Means. It unfortunate, but very few like to talk about money. If no one around you is talking about money, if your parents and your teachers are not teaching you good money habits, then you are adrift in a sea of financial uncertainty. As a result, it is highly probable that many of the individuals you associate with on a regular basis are as deficient as you are in managing their money. They very likely have bad spending and savings habits that are dragging you down with them. A night out on the town with a friend can become an unexpected $300 whirlwind and a vacation can turn into an investment. Think long and hard about the affect your friends, and those you associate with on a daily basis, are having on your spending and savings habits. If you hang out with spendthrifts, there’s a good chance you will become one yourself.
One of the hallmarks of the self-made millionaires in my study was the conscious effort they made to associate with like-minded individuals. If a close relationship was a spendthrift, they limited how much time they spent with those individuals. If a close relationship was conscientious with their money, they increased the amount of time they spent with those individuals. If you want to adopt good money habits, you need to associate with individuals who possess those habits and you need to disassociate yourself from those who do not. If all of the close associations you make in life share your desire to live below your means, it is highly probable their good money habits will become your good money habits.