8 Habits of Successful Wealth Builders

Michael Masteron in Automatic Wealth suggests in his experience there are 8 common habits found in successful wealth builders:

1.) Work hard.
Makes sense to me. Working hard at your career or business should grow your income. The author mentions $130k as a good starting target. The early focus for me since graduating has been on my career. I am wrapping up a 2 year career development program and hope to see the benefits of this in my income in the next few years.

2.) They are good at what they do.
Again - makes sense to the point of obvious. A good salesperson is going to make a lot more than a bad one. I guess I am a good engineer although this reminds me I need to keep my skills sharp and take some training courses. I also need to continue to find ways to "shine".

3.) Develop multiple streams of income.
Nothing new here - everyone knows that "multiple streams of income" are key to wealth. I totally agree. I am working on it, but don't have much to show for it - I have a rental property, dividends and interest, and a small amount of income from my side business. I guess I really need to focus on how I can grow and multiply these streams more quickly. A big to do here.

4.) Live in relatively inexpensive homes.
Ok. I hadn't really picked up on this till I read it. The author says he lives in a house that comprises about 10% of his net worth. I had always thought I wanted a big main house. I think I am on board now and am thinking about shrinking my dream to a more moderate home that will just accommodate our needs.

5.) Moderate in spending.
Interesting. The author didn't say "frugal" - I am not sure why. I think the main point was to keep spending down while increasing your income. I feel I am extremely moderate in my spending, but it will be difficult to keep spending under control going forward with an upcoming wedding, new house, family, etc.

6.) They are extraordinary in saving.
I like to think I am currently extraordinary in saving - after all, last year I saved nearly 53% of my income. Not sure how I can improve this.

7.) They pay themselves first.
Ok I think most of us already read or know about David Bach's cure all tag line "pay yourself first" - however its good to see that this technique is on the money. I already max out my 401(k), ESPP, and have auto-monthly contributions to my Roth IRA.

8.) They count their money.
Now we are onto something. They count their money - I never heard this but it makes total sense. Take me for example - I now count my money each month with my monthly net worth reports. I can see how taking this monthly assessment has helped me - trying to account for my net worth growth or lack thereof is helping me meet and exceed my goals.

Nothing earth shattering, but I see one key area I need to focus on - multiple streams of income.

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Comments (16)

For number 4, another option it to increase your assets outside of your home, so that overall your dream home (with in reason) is still 10-15% of your networth. That would mean working a little harder on the other 7 habits.

Posted by Anonymous | November 15, 2006 1:12 PM

I also found #4 a shocker, after I read Millionaire Next Door I realize, the average millionaire stays in a 400K home

My dream home use to be about that much. But, in order for me to maintain my wealth, I will not go over 300K

Posted by moneymonk | November 15, 2006 1:17 PM

My wife and I have been married for a month and a half now, so I can really identify with your concerns about all of the money that goes into the wedding and other costs associated with marriage. And now we are buying a house, and here in the Washington, DC area, it is simply impossible to get a good house without spending a huge percentage of your income. I am 34 years old and have seen my savings dwindle more this year than ever before. The numbers are scary, but when I think about it, all of this spending is a positive for the future. Especially the house, where the down payment and closing costs will use up most of my savings (not counting retirement funds). But the house will get us out of our current renting situation, where we are throwing money away each month. I think your 53% savings is a testament to the ability of a single guy to live cheaply. Certainly you want to maximize your savings, but I will bet that once married you will not be able to repeat the 53% for a long time. (And that's okay!)

I'm curious to hear more about your rental property. (I don't think multiple streams of income is as obvious as you suggest -- I think the vast majority of folks out there get income from one source -- their job, and that's it.) Does it take much of your time? Do you find challenges to being a landlord? How do you deal with repair issues? Any good resources you could recommend for someone considering getting into rental property?

Posted by Doug G. | November 15, 2006 1:59 PM

See the rental property topic for most of my discussions on rental property.

Posted by 2million | November 15, 2006 5:34 PM

I need to get started writing personal finance books - it always amazes me how authors are able to say the same thing over and over, and still sell it. Of course, to get ahead financially one needs to live moderately and earn a good income. Seriously, in the entire book is there anything surprising? Similarly, in order to lose weight one needs to consume less calories than one expends. I could write weight loss books, also.

The 'multiple income streams' sounds like a Kiyosaki concept. I'm not sure that many people can develop sufficient expertise to be successful in multiple fields, including property management. The 'Millionaires Next Door' seem to ply most of their energy into their primary income stream; any other streams seem to be of the passive variety (stocks, fixed income, etc.) Is this what the book recommended?

Posted by CPA1298 | November 15, 2006 7:44 PM

Good list. Having a firm vision and plan should be part of the list. Good stuff 2million!

Posted by efipo.com | November 15, 2006 10:48 PM

Many concepts are not new, but they are still important to drill them into your head so you can be disciplined to meet those goals.

Posted by Nagel | November 16, 2006 6:48 AM

I agree that one needs to reinforce ideas. However, it is amazing to me that authors are still able to sell books with the same few concepts. It's a little ironic that people shell out who knows how many billions of dollars on personal finance books that preach saving money. Amazon.com currently has 53,996 books listed under the category "personal finance"; however, 27,024 of these deal with real estate and 'only' 1,289 concern "money management". Amazing.

Posted by CPA1928 | November 16, 2006 3:37 PM

Unfortunately, my house comprises nearly 70% of my net worth right now. We do have some other assets, but nothing like the scale of our house! I think many people are like that. So, it's a challenge. Either buy more assets or move to a less expensive house.

Posted by InvestorBlogger | November 16, 2006 9:36 PM

Efipo - wholeheartedly agree with having a plan for the future!

Posted by 2million | November 17, 2006 10:37 AM

These all make sense. $130k in job earnings though is very high for most people as it is 4 times average salaries. The only economics professors who make this much for example are full professors at the top schools in the most expensive cities like NYC and Boston.

Posted by Anonymous | November 18, 2006 10:27 AM

Sorry - previous comment was mine too and forgot to enter my details. The most important thing here is the moderate house. Many people think that a big house will get them rich and sometimes like during the recent housing bubble in some markets it can be great, but in the long-term it isn't a great investment. Renting is no more "throwing money away" than the interest, property taxes, and insurance on an owner occupied property and money thrown away. The key is not to spend more on the latter (after any tax deduction) than you might on the former.

Posted by moom | November 18, 2006 10:32 AM

53% Savings!? That's incredible, almost unbeliveable! Got to hand it to you from one frugal twenty something to another. You seem to have mastered living below your means.

Since I started tracking my dollar by dollar spending of my net pay two years ago, I saved just under 30% / month. Recently I started a better paying job and now save about 40% after taxes and expenses. I thought I was king of saving but in this financial game I'm rooting you and all twenty-somethings on.

Posted by Master Allan | November 28, 2006 12:23 AM

I like that post. Mainly I see, when people start earning serious money - they seriously start spending it fast again as well.

So for me the point 4,5 and 6 are all important, even *after* you figured out, how to improve your income streams.

;-)

Cheers,
Chris
http://www.nomad4ever.com

Posted by Chris | December 3, 2006 9:33 PM

All of the steps above apply to me with the exception of multiple streams of income. I tend to be a one-trick pony, but I learned my trick very well.

Posted by dcy | June 1, 2007 5:50 PM

I read that entire book on the ride to and back from a four-hour road trip to Miami. Michael made some great points. The concepts in the book were easy to grasp and very useful. I would definately recommend.

Posted by Nadege | November 15, 2007 9:42 PM