Regular readers of this column and listeners to Smart Money Management know that I am the father of four sons. One of the things that my wife and I, like all parents, try to teach our kids is to learn from both the mistakes and successes of others who have achieved the things we want to achieve. This is an important thing to do with financial goals, and Alan, Jason and I spend a lot of time at the office studying the habits and routines of those who have achieved financial independence.
There are a few practices that many financially independent people share. First, they create multiple streams of income. You can think of this like fishing, if you have a few poles in the pond you have a better chance of catching a fish than if you have just one. For most of us, the first and most important source of income is from employment. Things like rental real estate or a portfolio of stocks and bonds may add income that could help to whether economic downturns or periods of unemployment. If you have a hobby you are passionate about you might consider ways to turn the hobby into a side business.
Second, self-made millionaires tend to spend more time contemplating what they want their lives to look like than average folks. They clearly define the dream, then set goals to make the dream a reality. To do this, write out in 500 words or less what your ideal life would be in five, 10 and 20 years. Some things to include might be what income you’d like to earn, what kind of house you’d like to live in, any educational goals you have, a plan to get out of debt, how to maintain your health and any big-ticket items you intend to buy like cars, boats and RVs. Use this document to make a bullet point list. Then establish specific, measurable goals around each dream, and take action to pursue those goals.
Another thing financially successful people do is avoid time-wasters. They tend to think of wasting time as more dangerous than financial risk. They figure they can always make more money, but wasted time is gone forever and can never be recouped. It’s important to take time to relax and recharge, but aimlessly flipping through the channels or scrolling through Facebook may be time that could be spent more productively. Of course, people can be time-wasters too, especially very negative people and people prone to drama.
Instead, the financially independent seek out at least one “success mentor” in life. These are people who do more than just influence your life in a positive way. They regularly and actively contribute by teaching you what to do and, even more importantly, what not to do. Many have more than one mentor and they can come from diverse sources and they can change with time and circumstance. Certainly, parents and teachers are among the first mentors, but colleagues and bosses are often among the most important. If you can’t find a “success mentor” for your particular dream, you can always find books and other media to help you zero in on what you want to accomplish.
Finally, and perhaps most importantly, a characteristic shared by self-made millionaires is persistence. They have typically failed at least once in business, but never give up on their dreams. Instead, they learn what lessons they can from the failure and move on. They tend to view failure as an opportunity to improve and as a necessary, if painful, step toward reaching their goals. It is precisely this determination and single-mindedness that helps to lead them to financial independence.
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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
LPL Financial, Alderfer Bergen & Co. and their affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
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