Just about everyone wants to be rich. The power of financial independence is incredibly alluring. Unfortunately for most people, they simply will never get there and for a variety of reasons, including economic opportunity, education, job skills, and others. The frank reality, however, is that it's your mind-set that could be the biggest predictor of whether you'll become a millionaire.
Looking for signs that you're destined to join the ranks of the wealthy? Here's a closer look at what three of our top contributors have to say about the subject.
Todd Campbell: Are you the kind of person who sees an opportunity and then takes action to take advantage of it? If so, congratulations, because it's that kind of action-oriented mind-set that can propel you to financial freedom.
For example, it's been proven time and time again that long-term investing can produce significantly more wealth than short term trading, yet many Americans fail to make the most of their best long-term investment vehicle: their workplace retirement plan.
Do you contribute to your plan? If so, do you contribute 10% of your income? More? Less? Considering that someone who contributes 10% of their $40,000 in income to a 401(k) plan at a 6% return has $311,572 more after 35 years than one who contributes 3%, underutilizing retirement plans is a surefire way to derail you on your way to millionaire status.
That's a pretty awe-inspiring revelation, but the real question is: What will you do now that you know this fact? Taking action to maximize the amount you set away is the only way to realize this opportunity, so now may be the time to show just how action-oriented of a person you are!
Dan Caplinger: The clearest sign to me that someone has the potential to become a millionaire is the ability to defer gratification and think instead of longer-term needs and goals. Frankly, it takes a massive leap of faith for someone in their 20s to put hard-earned money aside with the intent of never touching it for 40 years or more. It requires the hope that investments will perform well enough to produce vital financial resources for the future, and it often involves sacrificing things that you'd happy be able to spend money on in the near term instead.
The common traits that many millionaires have -- living below their means, investing regularly, and choosing not to flaunt their wealth -- stand in stark contrast to the way most Americans manage their finances, and that shows up in scary statistics about the general lack of readiness for retirement among the general population. Stories of how people with modest incomes have created fortunes are more common than many think, but because they aren't as sensational as winning the lottery or creating a successful business, they don't get as much attention.
If you have the will to think for the long term even at the expense of immediate concerns, then you have the makings of a millionaire in your grasp.
Jason Hall: Dan and Todd both point out some important aspects of the mind-set it takes to grow wealth. At the same time, one of the mind-sets that very well could prevent you from becoming a millionaire is simply wanting to be rich because of the association with prestige that people think comes along with it. If you want to be a millionaire, you probably won't get there if you're trying to live like a millionaire.
As Dan points out, deferring gratification is one of the most important steps to becoming a millionaire. The reality is, building wealth generally takes a lot of time. Even Warren Buffett, one of the richest people alive and arguably the best investor ever, created more than 80% of his vast wealth after he turned 50.
In other words, your resources are limited, and time may be the most important one you have. If you truly want to be rich, invest your resources wisely. That includes funding your retirement savings early and often, investing in yourself through continuing education to improve your income prospects, while simultaneously minimizing expenses and debt. And be prepared to do it for decades before the real wealth starts rolling in.
Do you have a long-term plan on how you'll generate your wealth, and is it working? Oil baron T. Boone Pickens once told me, "A fool with a plan can beat a genius without a plan."
So, what's your plan?