By Nirdev Desai
A wise person once said, “Take care of your pennies and the dollars will take care of themselves.” However, saving and investing seems increasingly difficult in the current post-pandemic environment. Recently, it was announced that Amazon CEO Jeff Bezos will retire on a lump sum of $ 197 billion, or 739,489 times the median retirement fortune of Americans. However, unlike Bezos – who will soon pursue his lifelong ambition to travel to space – many cannot afford to pursue their dreams during their golden years.
The extraordinary adventure of retirement raises an important question: How does a “normal” person go about achieving true wealth, and are they the only alternatives to inheriting your wealth or becoming a business tycoon? For many of us, none of these options are realistic. Many would argue that becoming a dollar millionaire provides a good indicator of being truly comfortable financially, and that can seem like a stiff target. According to the World Wealth Report, only 1 in 380 people reach this position. However, what is really interesting is how these people became millionaires. Here, the evidence often goes against what one might expect.
A lot of people don’t realize that most dollar millionaires aren’t like Bezos, Musk, and other successful entrepreneurs. They also didn’t earn their place on the list by a legacy. 88% of dollar millionaires are self-made, and are on average 61 years old (source: Fidelity Investments).
Author Thomas Corley has argued that much of the success of self-made millionaires is due to what he called “rich habits,” providing important evidence that being rich is also a behavioral choice. Corley’s research also shows that millionaires can also be divided into two groups:
- Savers-investors, whom he describes as a typical employee who saves diligently (typically around 20% of gross income) over his entire professional career, and invests those savings for the long term.
- Dreamy entrepreneurs, who create wealth by taking substantial risks themselves, and the majority of them have failed at least once.
What seems clear, however, is that wealth creation is not just a question of means, but also a question of mindset. Healthy savings habits are the key to success. For the average person, this only happens after a four-decade career, and many who do get there are unwilling to retire. Rather than calling it retirement, they call it financial freedom. However, what seems clear is that building wealth is not an overnight trip, nor accidental, nor just a matter of luck.
Savings Month reminds us that building real wealth begins with a conscious decision to change our approach to our finances. Saving with a goal should be the starting point for anyone who wants to change their bottom line and ultimately achieve financial freedom. Engaging with a trusted financial planner can help you clarify your goals and put a plan in place to help you get there. Most importantly, it’s time we realized that saving and investing successfully is a decades-long journey that begins with everyday choices.
Nirdev Desai is the Sales Director of PSG Wealth