Thomas C. Corley, author of Rich Habits, who has devoted himself to studying people with a net worth of more than 3.2 million dollars, is back with a new article in which he goes through some ideas that the middle class and the poor take for granted but that, for him, are nothing more than myths, at least judging by what these people told him and what he was able to observe for himself.
Clearly, the rich understand money very differently, not to mention the differences between how the rich and the poor think. This time, these would be some of the most common myths about money, and we need to discard them if we want to prosper financially.
4 money myths I uncovered by studying the rich
1. Investing in the stock market is just gambling, and very risky
As we have explained on several occasions, if we take the 400 richest people on the Forbes list, there isn’t one who hasn’t bought shares to increase their wealth. A net worth of more than 1,000 million can only be achieved with shares.
There’s no other way. Often it’s done by buying shares in your own company.
But since we’re talking about low-profile millionaires, the kind Thomas J. Stanley also writes about in The Millionaire Next Door, Corley says these people likewise make most of their wealth by investing their savings in shares.
Before buying shares in any company, 36% of the millionaires Corley analysed study the company thoroughly, including its finances and balance sheets, looking for its strengths and weaknesses.
Once they have studied the company, they consult a financial adviser to make sure their analysis is correct. If they see the company’s finances have improved, they buy more shares. If they see an opportunity to buy more cheaply, they buy more shares, but if they see the company’s finances have got worse, they don’t hesitate to sell.
Is the stock market a game?
Only if you don’t know what you’re doing. Is the stock market very risky? As risky as jumping into a swimming pool: it depends on whether the pool has water in it and, if it does, whether you know how to swim. If those two conditions aren’t met, even swimming becomes very dangerous. The same goes for investing in the stock market.
And people who jump into the markets often do so without doing their own research, swayed by other people’s tips or by internet forums, and they also forget that investing isn’t for getting rich overnight. That’s what casinos are for, and if you treat the stock market like a casino, you will lose. Guaranteed.
(See: 11 simple tips for investing in the stock market)
2. All debt is bad
51% of the millionaires Corley analysed were business owners. They started their own company and took risks. And building your own company often means taking on debt.
Debt is neither good nor bad. What is good or bad is what you use the debt for. If you take on debt to start, develop or expand your own business, you are spending the money on a potential asset, so we could say that rather than getting into debt, we are making an investment.
See also: Bonds or shares in a crisis: where the experts advise investing
That’s what is called good debt. However, if the time comes when you use debt to fund the losses of a badly run company, then we’re into bad debt, because you have to be persistent but not stubborn. They often look like the same thing, but they are two very different things.
Running up credit card debt to go on holiday is bad debt, as well as living beyond your means.
(See: 5 signs you’re living beyond your means)
3. You need luck to get rich
The poor’s or the middle class’s consolation for why a rich person is rich and we aren’t is usually put down to luck. “They got lucky.”
We devoted a very long article to the impact of luck on business, where we concluded that, yes, the rich have been lucky. But most poor people are destined to have bad luck.
There’s a difference between luck and the opportunity for luck
Let me explain it so it’s clear. Suppose the goal is to meet and win over a girl in less than three weeks, and our candidates go about it like this:
- Candidate 1 stays at home for those three weeks because, as we all know, good things come to those who wait.
- Candidate 2 goes out every day of the first week to cafés, pubs and clubs, signs up for online dating services and starts striking up conversations with every girl he meets.
Which of these candidates is most likely to win over a girl? The other one will say the second candidate got lucky. And of course he got lucky, because plenty of people do the same as the second candidate and don’t manage it. But he created more opportunities than the other one.
The rich aren’t just lucky: they create more opportunities thanks to a series of daily habits. They have also read, they have done their research and they don’t mind taking risks. So even if luck depended purely on chance, you can’t win the lottery if you don’t buy a ticket.
It’s not that they happen to be in the right place at exactly the right time (although that happens too). If anything sets successful entrepreneurs apart, it’s that they don’t wait for opportunities: they keep creating them. That’s why, even if luck were out looking for candidates, it would never find a lot of people.
4. The pursuit of wealth is only for the greedy
Although being ambitious (having ambitions) shouldn’t be a bad thing, 93% of the millionaires Corley analysed were doing what they loved long before success and wealth arrived.
It took them an average of 32 years to build their wealth, so the vast majority of them don’t think greed was what motivated them to do what they did to become rich.
Most of them admit that the wealth was simply the result of years of dedication to something they were passionate about.
Featured image: Czeva, CC BY-SA 4.0, via Wikimedia Commons.
