- Building wealth requires a different way of thinking.
- Erin Lowry, founder of BrokeMillennial.com and author of “Broke Millennial Takes on Investing” asked experts about what the wealthy are doing differently, and what the average millennial should know.
- They said the wealthy think strategically and about the long-term – they save early to reach their target number and practice patience during the process.
- Visit BusinessInsider.com for more stories.
It takes a certain kind of mindset to build wealth.
Just ask Erin Lowry, personal finance expert, founder of BrokeMillennial.com, and author, who talked to dozens of people with backgrounds in the financial services and wealth management industries for her most recent book, “Broke Millennial Takes on Investing: A Beginner’s Guide to Leveling Up Your Money.”
She asked them a key question to help put millennials on the path to becoming self-made millionaires: “What are the wealthy doing differently that the average millennial should know?”
According to them, the typical millionaire thinks strategically and about the long-term – they start saving early to work towards a target number at which they can reach financial independence, and they’re patient during the process. The wealthy are aware that “getting rich” isn’t a fast process and that it takes time to build wealth.
Here’s what the experts said the wealthy are doing – and millennials should be doing.
They think about longevity.
- Icon Sportswire/Getty Images
“Wealthy people value legacy,” Ashley Fox, who previously worked at JPMorgan Chase with clients who had $25 million-plus assets, told Lowry. Fox is currently a financial education specialist and founder of Empify. “Everything they do is not for today. For instance, people say, ‘I want to buy stocks. I want to make money real quick.’ Everything is temporary, whereas wealthy people think of longevity.”
She continued: “I think we get so consumed with getting rich quick for a temporary fix, and I think that wealth is generational; rich is having a lot of money right now. Wealthy people focus on the preservation of assets and the protection of their assets.”
They’re strategic when it comes to choosing a growing industry or company.
- Sean M. Haffey/Getty
“I know very few people who inherited money,” Sallie Krawcheck, co-founder and CEO of Ellevest and previous CEO of Merrill Lynch Wealth Management and Smith Barney, told Lowry. “The people I know oftentimes got into the right business line at the right time and worked their tails off.”
According to Krawcheck, it’s easier to be successful and build wealth if you’re in a company, business, or country that’s growing. We don’t emphasize enough that it’s important to pick the right company or the right industry, she said.
She added: “If you’re in a company that grows 10% a year and you are average, you’re growing at 10 percent a year. If, on the other hand, you’re at a company that’s shrinking 10% a year, you have to be 10% better than everybody else in order to stay still. Then to really grow, you have to be 20% or 30% better than everybody else – and nobody is.”
They start saving early and consistently.
- Jason McCawley/Getty Images
According to Colleen Jaconetti, CPA, CFP, and senior investment analyst at Vanguard Investment Strategy Group, millennials should save early and often.
“People don’t amass a ton of wealth without saving,” she told Lowry. “Being knowledgeable about what you’re investing in and the cost of what you’re investing in makes a big difference. I wouldn’t say from an investment perspective that people who are very wealthy do anything differently. They still need to broadly diversify. They still don’t want to overpay for the quality of products they’re receiving. They’re just in a different spot as far as they may or may not have debt.”
They practice patience.
- Alan Crowhurst/Getty Images
“Patience. Many of these people did not build their wealth overnight,” Douglas Boneparth, CFP and founder of Bone Fide Wealth, told Lowry. “The amount of time, energy, and money – meaning their own investment in themselves and in their businesses – should be the focus.”
Instead of getting caught up in the allure that someone’s wealthy, he said, you should ask yourself how they reached that level of success and figure out how to replicate it in the context of your own life.
“Every time someone goes by in a nice Porsche, I used to think, ‘Oh, that guy’s lucky.’ Now I think, “They worked their ass off.’ Or ‘All flash and no cash,'” he said.
They set a number to achieve financial independence and work towards it.
“I think they just build wealth,” Jennifer Barrett, financial journalist and Chief Education Officer for Acorns, told Lowry. “That is part of the strategy from the get-go. It’s this idea of ‘getting by’ versus ‘building wealth.’ It’s not just in the mind-set, but there is a lot of it inherent in the mind-set. If you feel like you’re getting by paycheck to paycheck, it’s a struggle, then you’re not building toward something.”
She continued: “You’re stuck in one place treading water. For the wealthy, from the beginning, the idea is ‘How do I take what I have and build more from that? How do I put this money to work for me?'”
The wealthy don’t just put money aside, she said – they pick a real number at which they could achieve financial independence and work toward it.
As she put it, “You have to stop thinking about your situation as being paycheck-to-paycheck survival mode and really sit down and figure out how you can start getting ahead today.”