I recently read the New York times best seller, The Millionaire Next Door by Thomas J Stanley. In it, Stanley reveals how little we actually know about millionaires. Most of us think of them coming from inherited money or working for large multinationals. The reality was, a large amount of them came from living within their means, saving the rest and not being flash with their money.
While reading this book, Stanley’s daughter, Sarah Fallaw, was on Michael Kitces Financial Advisor Success Podcast, talking about her company Data Points, which continues on the work of her father.
40 years of research has shown how our behaviours can impact on our financial success over time. Data Points helps us understand our financial patterns of behaviour through their psychometric tests, which measure patterns of behaviour that relate to future financial success.
It is by understanding our wealth behaviours that we can identify which areas we are strong in and what areas require work. By improving these behaviours, we can improve our chances of financial success in the future and achieve financial independence.
Frugality – Living below your means is a critical factor in building wealth. Spending habits significantly affect your ability to accumulate wealth.
Confidence – Confidence refers to the level of assurance you have in the financial decisions that you make.
Responsibility – Regardless of your role in money management, taking responsibility for the financial outcomes of your household is related to overall net worth. In other words, those who can build wealth over time often report feeling a strong sense of responsibility and ownership about the outcomes related to their finances.
Planning & Monitoring – Wealth accumulation is a focused and thought-out process: planning, setting goals, monitoring income and expenses and ensuring that spending and savings plans are met.
Focus – Setting and reaching goals requires discipline and focus. Those that are effective at building wealth over time are able to meet goals through a disciplined approach that effectively manages distractions and the use of technology in their daily lives.
Social Indifference – Financially successful individuals are not nearly as influenced as their peers in terms of the impact that the spending behaviors of others have on their own consumption behaviors.
We are now including the Building Wealth Assessment are part of our financial planning process and I believe it will play a crucial role in helping our financial planning clients to achieve financial independence.
If you have any questions, drop me an email at steven@bluewaterfp.ie