When I began my Rich Habits Study, I wanted to know the answer to one question: Why are some people rich and other people poor?
Five years and over 350 interviews later, I finished my research.
One of the most valuable things I learned is that there are only two ways to become rich:
- Live below your means (spend less than you earn).
- Expand your means (earn more than you spend).
For the vast majority who are unwilling to take the risks associated with expanding your means, you are left with the only other remaining option — live below your means. I won’t bore you with what that means, as you no doubt get the concept.
But I thought I’d highlight one of the Poverty Habits I uncovered in my study that derail most in the United States. Some call it keeping up with the Joneses. I like to call it poverty by association.
And here lies the most important advice I can give you about money: You have to avoid poverty by association.
We pick up most of our habits from the influencers in our environment: parents, teachers, family, friends, work colleagues, neighbors, mentors, celebrities, and coaches. What I uncovered in my research was that most of us were never taught the habit of living below your means. It seems very few like to talk about money.
As a result, it is very likely that most of the individuals you associate with on a regular basis are as deficient as you are in managing their money. They very likely have bad spending and savings habits that are dragging you down with them. A night out on the town with a friend can become an unexpected $300 whirlwind, and vacations can turn into investments.
Think long and hard about the effect your friends, and those you associate with on a daily basis, are having on your spending and savings habits. If you hang out with spendthrifts, there’s a good chance you could become one yourself.
One of the hallmarks of the self-made millionaires in my study was the conscious effort they made to associate with like-minded individuals. If a close relationship was a spendthrift, they limited how much time they spent with those individuals.
If you want to adopt good money habits, you need to associate with individuals who possess those habits, and you need to disassociate yourself from those who do not. If all of the close associations you make in life share your desire to live below your means, it is highly probable that their good money habits will become your good money habits.
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