The Secret to Building WealthBy Jesse Giordano, CFP® | May 29, 2019
Building and sustaining wealth over the long term isn’t about winning the lottery, coming into an inheritance, or falling back on a trust fund. Every one of us has the power to establish long-lasting, healthy streams of income that lay the groundwork for elevated net worth.
How? It turns out we’re more in control of our financial destiny than many of us think.
The answer is our financial behavior. It’s a simple thing we’re fully capable of managing—it’s also the number one predictor of wealth. Groundbreaking research conducted by Sarah Stanley Fallaw, author of The Next Millionaire Next Door: Enduring Strategies for Building Wealth, found that the majority of millionaires have one thing in common: They use their financial behavior to create wealth that’s built to last. Interestingly, but not surprisingly, the top three financial behaviors of millionaires are:
- Spending below their means
- Exploring a side gig
- Eventually moving to self-employed work
Good or bad, our financial behavior is what shapes our financial habits. And habits, as we all know, have a way of enduring. There’s also a growing body of researching drawing a strong link between our financial habits and our overall happiness. One 2018 Northwestern Mutual study found money to be the leading cause of stress for Americans. What’s more, 41 percent are stressed out over retirement planning.
The antidote is tweaking our financial behavior. Cultivating the habit of routinely saving for the future not only reduces stress; it also puts systems in place for building our wealth. This directly translates to the way we invest. Research shows that being a great investor is less about timing the markets and more about our mindset. More specifically, what makes a successful investor is the ability to reflect on their past financial behavior, recognize how their personality and habits have influenced their investing strategies, and make a plan for how they’ll leverage this wisdom to grow their wealth going forward.
Our financial behavior, hands down, is the single best predictor of whether or not we’ll be successful in accumulating wealth. Using it to our advantage in order to take charge of our future requires some financial excavation on our part. How financially literate are you? Do you feel confident and in control of your money, or is the opposite true? Do you live within your means? Do you have a plan in place for working toward your long-term financial goals? Believe it or not, simple questions like these, which reveal personal traits around money, have the power to accurately predict wealth.
Taking a deep dive into these traits—then using them to inform your financial behavior—doesn’t have to be intimidating or complex. Opal Wealth Advisors’ Wealth Building Assessment provides an effortless snapshot in about 10 minutes. The straightforward test is designed to uncover your money habits and, most importantly, how they’re contributing to your financial success (or pitfalls). Personalized insights serve double duty, celebrating your strong habits and shining a light on behaviors that are standing in the way of building wealth.
Creating and sustaining long-term wealth doesn’t happen overnight. More often than not, it’s a slow build that requires your attention, positive habits, and a plan for monitoring your progress and course correcting as needed. In other words, it requires some degree of patience and self-forgiveness. The latter may sound a bit out of left field, but hear us out. Changing our behavior, while simple in and of itself, isn’t always easy, especially if you have to unlearn long-held habits that aren’t serving you. BJ Fogg, Ph.D., a behavior scientist at Stanford University, says successful behavior change comes down to three key factors:
- Getting specific
- Making it easy
- Triggering the desired behavior
Accountability is the other part of the equation. This includes holding yourself accountable as well as creating systems to keep you chugging along—even when it feels tough. Going from living way above your means to living within a budget in order to build your wealth, for example, may feel challenging at first. Opal Wealth Advisors leans on the latest behavioral finance research to help investors of all stripes feel confident, empowered, and positioned for growth.
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