The 3 Major Things That Separate People Who Are Financially Successful From Those Who Aren't

 

The 3 Major Things That Separate People Who Are Financially Successful From Those Who Aren't

                 

Has it really ever crossed your mind to consider what it takes to become wealthy?

If you don't have a wealthy parent who can leave you a large amount of money or aren't on track to become the next Silicon Valley tech startup wunderkind, you're probably on the same road as the rest of us:

So, then, to really become financially successful, here's a 3 = step plan to implement beginning now

Step 1:

Acquire skills, earn good money while you are young before you hit your 50s when the income is likely to plateau

Step 2:

Spend a fraction of what you make and save the rest.

Step 3:

Invest a significant portion of your savings wisely.

Yes, there's more to it, but the three-step plan outlines the most important steps you'll need to take. You will become wealthy if you follow this advice.

So, why are there so few people who succeed financially?

When it comes to money, not everyone thinks and acts the same way. And, indeed, each person's situation is a little different from the next.

However, most financially successful people — those who have converted a decent income into increasing net worth through savings and investments — have a few things in common.

Here are three of the characteristics that distinguish the financially stable from those that seem to be financially stranded.

1.   They Are Proactive Rather Than Reactive.

Proactivity is perhaps the most significant financial success factor.

People who are careful about their finances are more likely to develop, build, and maintain wealth than those who respond to events after they have occurred.

People who struggle financially, despite having good incomes, do so because they do not plan; they do not think ahead; they do not consider where they want to be in 5 years, so they never begin making the required moves today to prepare themselves for what they want tomorrow.

Many that are proactive, on the other hand, make plans. They plan ahead of time.

They take time to daydream about the future and then work backwards from there to figure out what steps they need to take right now to turn those fantasies into reality.

Here are some examples of how that proactivity could manifest itself in the real world.

People who are financially stable have a tendency to...

a.   Create an emergency fund to cover unforeseen costs.

They may not know exactly what they'll do with the money, but they know it's fair to expect things to go wrong (or at least not as planned), which will necessitate some extra cash.

b.   Make space for investments in their cash flow.

Even if retirement is still a long way off — or even if they don't want to “retire” in the conventional sense — They understand that working for a living would be impossible one day (whether by choice, necessity, or trend, like aging out of the workforce). As a result, they spend less than they earn per month, allowing them to save money for the future.

Even if they don't know what the target is, they may contribute to it. It's unrealistic to presume to know exactly what you want for your life in 30 years, let alone in the next 10, or even 5.

However, financially successful people recognize that no matter where they end up, they'll need money to support their aspirations or lifestyle.

So, even though they don't have clear goals, they save and invest to create wealth.

2.   They have a positive mindset rather than a pessimistic one.

Did you know that your circumstances only account for about 10% of the factors that decide how you will respond or feel in a given situation?

For example, if you lose your job unexpectedly, the actual occurrence of losing your job has only a 10% impact on how you respond or feel about it.

About half of our reactions are determined by our genes, so if you're instinctively inclined to be cynical or sad, like some people are, you might have to try harder than others to find the positive lining in a bad situation.

However, you are responsible for 40% of your reaction. It's under your command. You have complete control over how you feel, react, and respond. That gives you a lot of control over how your life unfolds.

Brian Portnoy's book The Geometry of Wealth taught me about this breakdown. It reminded me of another characteristic that distinguishes financially successful people from those who are struggling:

Positive thinking is a trait of successful people.

When anything "evil" happens to them, they are more likely to react positively and productively rather than negatively and self-defeatingly.

This isn't just a cliche; optimism seems to play a role in the success of entrepreneurs, business leaders, and affluent people.

Take a look at some of the following articles on the subject:

If you want to be competitive, you should be positive, according to CNBC.

According to an article on PsychologyToday, there are four reasons why optimism is beneficial to entrepreneurs.

Positive teams, according to HBR, are more active.

You're more likely to look for opportunities if you keep a positive attitude.

 When you're down in the dumps, it's difficult to see anything but doom and gloom ahead of you.

There's a theoretical explanation for this. The phenomenon is known as the Baader-Meinhof effect (or as more commonly called, the frequency or recency illusion).

When you think about or remember something, your brain appears to pay more attention to it and, as a result, thinks or notices more of the same than before, even though the probability or sum of that thing hasn't changed.

When you go to buy a specific make, model, and color of vehicle, this is a typical example of this in motion. You see the same car everywhere all of a sudden. But it's not because the number of cars has increased; it's because your brain has been conditioned to notice them (since you bought one yourself).

Apply this to your personal finances. Guess what the brain notices if you train it to look for encouraging signals, opportunities, and healthy habits? It's the same old story.

However, the inverse is also valid. Your brain will react by giving you more pessimistic, worst-case scenario thoughts if you think negatively and expect the worst.

PS: If "think positively" doesn't work for you, try rephrasing your weaknesses or negativity.

It doesn't have to be all rainbows, butterflies, and fuzzy ideas. This is about a mindset shift; a change in how you view what happens to you. Apply whatever phrasing that does work to arrive at the same conclusion that it's  all about a mindset shift; a change in perception of  what happens to you.

3.   They ask questions rather than making assumptions about the answers.

The third significant factor that distinguishes most financially successful people from those who are struggling financially?

Good people have a proclivity for asking questions.

They don't think they know anything. They're intelligent, driven, and competent, but they're still self-aware enough to recognize that they don't know all.

People aren't born with the ability to manage their finances. People who are financially savvy aren't born with it. They figured it out. They had firsthand knowledge. They inquired and listened.

Admitting you don't know anything or that you're unsure isn't a sign of weakness. In reality, it's your overconfidence in your own abilities, as well as all of your assumptions about what you know, that will get you into trouble.

It's powerful to admit what you don't know, and also to admit that there are certain stuff you don't know you don't know. Instead of acting on false assumptions, incomplete knowledge, or poor advice, it puts you in a position to actually find the real answers.

Simply seeking clarity can have a significant impact on your financial situation.

Asking for assistance, advice, or encouragement can mean the difference between making a huge, expensive mistake and getting on the right track early on to optimize your potential.

Small victories, such as getting the one thing right, compound exponentially over time. The concept of marginal improvements is explained by James Clear, who claims that if you actually concentrate on making gradual progress, you can progress faster (rather than trying to knock it out of the park once).

Financially successful people don't only think they're doing something right and just care about money when something major happens.

They are always asking themselves, "How can I make this tiny change and improve by 1%?"

Instead of assuming, ask. While you're at it, consider the future. Be positive in your approach. Also, keep a good attitude.

If you want to build your own financial success, they're all good steps to take.

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