For all the Lions out there who are working hard on building wealth and creating a legacy for their family, there are seven habits and behaviors you should constantly keep in mind on your path to building generational wealth. It is not an easy process and it doesn’t happen on its own. People are passed down beliefs about finances from their families, their friends, and the media. Lots of these thoughts are often destructive to wealth generation. Mastering the seven habits and behaviors listed below will provide massive benefits on your path to riches.
Developing a laser focus on your finances
In Robert Kiyosaki’s Rich Dad Poor Dad, he compares money to a jealous lover. If you don’t provide it with love and attention, it is going to leave you for someone who wants it more. This is more true for an entrepreneur than the average person. As your business ventures and ideas start coming to life, your finances will become more and more complicated. You will start having more investments, money in different accounts, and money coming in from more and more sources. Keeping track of your money and providing it with a laser focus is a great habit that will help you accumulate wealth.
On a monthly or minimally quarterly basis, you should review and update your financial statements including your balance sheet and income statement. Whether you do this service yourself or outsource it to an accountant, it will provide you invaluable insights into your financial performance and position. This information will help you make the best decisions to achieve your goals. If you are spending more than you are making, you need to know this promptly and then change your spending habits to be aligned with your financial goals. Additionally, this information will reveal if your money is being put to work in it’s highest and best use. Grant Cardone talks about how he saved too much of his money. He is talking about having too much money put into low yield investments when it should have been in different types of deals making him more money. Paying attention to your money and making sure you are using it economically is a key habit to developing wealth.
Making a plan for wealth and consistently reviewing it
Zig Ziglar said, “If you aim at nothing, you will hit it every time.” The same is true for money. Too many times, I talk to people who have never thought about their financial game plan. While developing wealth is largely a result of hard work and providing massive value to your customers, your wealth will not grow as effectively if at all if you do not have a gameplan. Your plan should revolve around a combination of the following:
● Increasing income
● Setting aside increasing amounts of income
● Investing income into profitable enterprises
You should have a plan for each aspect of this game plan. What can you do to increase your income? If you own a business, you must either serve more customers, solve higher value problems, or cut back on expenses. If you work in someone else’s business, you must provide better service to your customers and find a way to make the business more profitable. Your ability to make changes in these areas will lead to more money in your bank account.
To set aside more money, you need to take a good luck at what you are spending money on. If you make $1,000,000 per month but spend $1,100,000 each month, you are not going to grow any closer to wealth. No matter what your income is today, you must spend less than you make. This is the only way to follow up with the next part of the game plan.
Investing into profitable enterprises means taking your money and putting it into a vehicle that will allow that money to grow. What this means to you could mean many different things. You might want to hire a business coach or consultant to help you increase your sales, buy real estate that produces income, invest in start-up businesses for equity or debt interests in the business for a return, or buy into the stock market. All of these are common and traditional ways of investing money and it is important that you thoroughly understand whatever it is that you invest your money into.
It is important to consistently review your plan and make sure that you are staying on track. You will inevitably have results, either good or bad, and it is important to review your progress so you can adjust course if you are not heading in your desired direction.
Developing relationships with people who are trustworthy
As you continually increase your wealth and make more and more money, it is inevitable that more and more people will try to sell you on their product or service. Professional athletes notoriously trust the wrong people costing them millions and millions of dollars. It is reported on the news time and time again that professional athletes buy into shady investments and end up losing massive amounts of their wealth. This habit is harder to develop but it is critical that the people you let into your financial circle are qualified for their positions. I have heard several stories about entrepreneurs having one of their financial advisors embezzle money from them. Part of this was probably due to their lack of focus on their financials but it was also caused by trusting the wrong person. Regardless, putting trust into the wrong person can end up costing massive amounts of money.
Spending less than you make
It is reported that at one point in Shaquille O’Niel’s basketball career, he was spending over $800,000 per month or $9,600,000 on an annual basis. During the 2006-2007 season, Shaq’s salary was $20,000,000, which after tax (39%) would leave him with approximately $12,000,000. If something were to have happened to Shaq at the end of his contract, he would have run out of money within 3 months. The expensive exotic car and fully loaded mansion won’t mean much if you find yourself handing over the keys and packing the boxes downgrading houses.
It is much more calming and grounding to make financial decisions from a position of power and intention. Spending recklessly and without a plan is a sure fire way to lose all the money you have worked so hard to earn. This is such a simple truth but one of the most important in any person’s pursuit of wealth. Even people on the lowest levels of income have become millionaires from their disciplined habits and the massive power of compounding interest.
Being protective of your assets
It is common for people of wealth to feel pressure from friends and family about borrowing or giving them money. Being generous is an amazing thing and a virtue to strive for. However, people can only genuinely be generous if it is not causing them harm. Every time you take a flight, there is a reminder that in the event of a loss of cabin pressure, you must help yourself first before helping other people. The same principle holds true for helping family and friends with your time and money. If providing them with an easy fix of money is damaging your financial health, you are not in a position to be generous and should not be offering your assistance. You must take care of the wealth that you have developed and not let others damage what you have worked hard for.
Developing an understanding of the language of finance
The language of business and money can be ambiguous and difficult to understand. An MBA could spend 6 years of focused studying learning all of the intricacies and details of finance and business administration. A lot of the terms that a financial professional would consider common are foreign and confusing to an outsider. When entrepreneurs start raking in the dough, they face a lot of financial risks if they are not well versed in financial terminology. In the third part of the plan described above, when investing into profitable enterprise it is critical that you have a deep understanding of what it is that you are investing in or have a highly trustable person on your team helping you make the decisions. Contracts and financial management can be full of what seems to be jiberish and asking for help or seeking knowledge to decipher this language will help to make your wealth last.
Understanding your investments
Do you know which investments you own? What is the management fee associated with this investment? What is the investment designed to do? Is your investment in a business’s debt or their equity? Do you know what the financial position is of this company? Investing and finance are vastly complex topics that you or an advisor must understand and continuously focus on. Are you getting a preferred return as an insider or are your returns capped at a certain percentage? Understanding how your money is working for you to grow your wealth is critical. The average employee invests into their company’s 401(k) plan and doesn’t do any investigation of their investment beyond checking the box to opt into the plan. While it is good that they are making a decision to set aside some of their income, it is not enough to leave it at that. To be a true Lion financially, you should know the details of your investments and know if it best suited for you and your goals. You should have clarity and understanding knowing how your money is working for you to grow your wealth.
If you have any questions or want to develop a personalized game plan to take your life and finances to the next level, please connect with me on my website Wealth Warriors.