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Very, very rarely do people obtain two comas in their net worth by getting lucky. Unless you hit the lottery, the path to seven figures is usually a combination of hard work, disciplined spending, and intelligent investing. The real key is to avoid “lifestyle creep” aka lifestyle inflation — the age-old scenario where you spend more on frivolous things just because you’re making more.
Business Insider has a solid piece on the topic from Thomas C. Corley, accountant to many self-made millionaires:
Over the course of the five years I spent interviewing 233 wealthy individuals (177 of whom were self-made millionaires) with at least $160,000 in annual gross income and $3.2 million in net assets, as well as 128 people who had less than $35,000 in annual gross income and less than $5,000 in liquid assets, I found that lifestyle creep is a bad habit common among many who suddenly find themselves making more money.
The good habit — I call it the “Rich Habit” — is to forgo the desire to spend your money today and, instead, sock it away into savings and investments that grow in value and provide financial resources that can be used in the future to maintain your standard of living.That Rich Habit is called delayed gratification. You put off something you want today for something you want tomorrow: financial independence.
Delayed gratification is a habit that must be forged, because instant gratification is hardwired into the DNA of every human.
Delayed gratification is great advice, but Corley gets even granular with some buddy wisdom on financial success:
One of my oldest and dearest friends explained to me his rule for financial success:
“Same house, same spouse, same car.”
There’s a lot of wisdom in these words. What they really mean is that no matter what good fortune visits you in life, do not change your standard of living. Don’t supersize your life by buying things you really do not need.
Words to live by. There’s a pretty strong likelihood the dude who lives in that “Justification For Higher Education” house will soon have to declare bankruptcy and get one of those cars repo’d.
