This is an excerpt from Dollar Scholar, the Money newsletter where managing editor Julia Glum provides essential modern financial lessons you NEED to know. Don’t miss the next issue! Sign up at money.com/subscribe and join our thriving community of over 160,000 Scholars.
CEO of Spanx, Sara Blakely, practices a unique fake commute to kickstart her day. Meanwhile, Goop CEO Gwyneth Paltrow engages in open-eye meditation, and Los York CEO Seth Epstein begins his mornings with three peeled hard-boiled eggs right at his desk.
The daily routines of successful individuals can often seem peculiar, yet they reflect effective strategies. After all, these high achievers must be doing something right. Right? (They certainly aren’t eagerly waiting for the next sale at Bath and Body Works to replenish their collection of eucalyptus spearmint candles.)
While I may skip the open-eye meditation, I have recently pondered the potential of emulating the successful blueprints of ultra-high-net-worth (UHNW) Americans in my own life.
Understanding the Key Traits of Wealthy Individuals
Wealthy People Are Experts in Differentiation and Prioritization
As highlighted by Mary Clements Evans, author of Emotionally Invested, financial prosperity is linked to four critical factors: what I earn, what I spend, what I save, and what I invest. To navigate my financial landscape effectively, I must develop a comprehensive understanding and management strategy for each of these areas.
“One observation I’ve made with all my affluent clients is that they have an acute awareness of the distinctions between their needs, wants, and wishes,” she explains.
Clements Evans points out that wealthy individuals categorize their needs intelligently. For instance, if they possess a 10-year-old vehicle that remains functional, they recognize that purchasing a new one is more of a want than an immediate need. Furthermore, they prioritize these wants: if they desire a new car but are also considering a bathroom renovation, they will evaluate which goal holds greater significance and focus on that.
Frugality Is a Common Trait Among the Wealthy
In a comprehensive survey conducted by Tom Corley in 2009 involving 233 millionaires, an impressive 64% indicated that they live in “modest” homes, while 55% expressed a preference for purchasing used cars. This indicates that frugality is a prevalent characteristic among affluent individuals.
Successful People Adhere to a Strategic Financial Plan
According to Jeremiah Barlow, the head of wealth solutions at Mercer Advisors, all of his UHNW clients share a commitment to a long-term financial perspective. They are clear about their goals and meticulously outline the steps necessary to achieve them. This approach helps them avoid impulsive reactions to fleeting news stories that could negatively impact their financial stability down the line.
“They maintain a clear vision of what they want to achieve, identify potential pitfalls, recognize uncertainties, and craft a comprehensive plan to navigate these challenges,” Barlow remarks.
In essence, wealthy individuals understand the importance of budgeting as well. Todd Kesterson, a principal at Kaufman Rossin, recounts how, in a previous role, he collaborated annually with a wealthy family to construct their yearly budget. They would detail anticipated expenses for each family member—such as clothing, travel, and household staff costs—creating a structured framework for their financial activities.
“They used the budget as both an educational and planning tool for the family,” Kesterson adds. “We would then convene quarterly to review the budget versus actual expenditures from the previous quarter.”
By adopting these budgeting best practices, I can also enhance my financial management skills.
Mathematical Analysis Is Key to Financial Success
Kesterson’s affluent clients also engage in a rolling cash forecast, which involves utilizing data to project expected earnings from their businesses and investments over the next 12 to 24 months while comparing it to their spending habits.
“Frankly, we frequently encounter clients who come to us stating, ‘I know I make between $2 million and $3 million annually. Yet, by year’s end, there’s hardly anything left,’” he shares. “Once they enlist our services, we begin by categorizing every transaction and developing a comprehensive profit and loss statement.”
Often, simply taking the time to conduct this straightforward analysis can lead to significant insights and revelations regarding their financial habits.
Seeking Professional Financial Guidance Is a Smart Move
Wealthy individuals often choose to outsource various financial responsibilities. They typically lack the time or inclination to navigate the complexities of real estate management, equity compensation, estate planning, investment strategies, and saving for education.
Therefore, they seek the expertise of professionals.
A survey conducted in June 2024 revealed that three-quarters of individuals with at least $500,000 in investable assets worked with a financial advisor, with 89% of these individuals acknowledging that their advisor contributed to their wealth accumulation in ways they couldn’t achieve alone. Moreover, a separate study indicated that two-thirds of wealthy Americans with advisors had multiple professionals assisting them, including attorneys, accountants, and private bankers.
This strategy is accessible to many. Banks and credit unions often employ staff who can provide financial advice to customers. I can also explore pro bono services through community organizations such as the Foundation for Financial Planning and Savvy Ladies or consider hiring a fee-only advisor.
“It’s within your reach, and it can genuinely benefit you,” Barlow emphasizes.
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