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Franklin Prosperity Report: Seven Millionaires Reveal Habits for a Lifetime of Wealth

By    |   Friday, 31 January 2014 03:54 PM

Humans, as we know, are creatures of habit. We easily fall into patterns and cling to our established ways of doing things. Day after day, we repeat our behaviors, our methods, and our rituals that give us comfort in a very uncertain world. But at some point, it’s smart to stop, look at your own habits, and ask yourself this: “Are you where you want to be in life? Is your nest egg growing? Are you on the path to financial freedom?”

If not, you probably need to change your routine. After all, it’s your own actions that forge the path toward success, or simply keep digging you deeper into a rut that you can’t escape.

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Making changes for the better, then, requires a commitment on your part to reformulate your daily patterns and to establish new habits. Like someone concerned about his or her health who vows to start exercising and eating right, you have to make a promise to yourself to make better financial decisions, starting today, and then stick to it.

That’s the bad news. Change can be hard. It can take some strong mental efforts to break free of your particular way of doing things. But now the good news — just as those bad habits were learned over time, good practices can be learned, too, and then ingrained into your life.

According to financial adviser and wealth researcher Tom Corley, CPA, the path to financial success is clearly marked by behaviors that anyone can learn and emulate. Over several years, Corley interviewed hundreds of rich and poor people about their financial practices and habits. He found a difference “the size of the Grand Canyon” in the way the two groups view and manage money. An example: One hundred percent of the rich save 10 percent or more of their net income; only 5 percent of the poor do.

That observation is just a start. To learn more about the money habits of the wealthy, our editors asked seven millionaires to share what they thought of as their most important money management practice that helped to grow and secure their wealth. Here’s what they had to say.

“Read omnivorously. Use your money to create more money.” —
Robert Smith

Corley’s research shows that 85 percent of the rich read two or more education or career-related books per month; only 15 percent of the poor do. That fits with the experience of millionaire Robert Smith, founder of Champion Media Worldwide, a full-service public relations and marketing firm.

Smith, who started out poor, believed that reading books about how to attain wealth, written by the wealthy, was essential to success. “I didn’t know any millionaires,” he says. “I’d read a book and write to the author in care of the publishers or find them on the Internet and email them.”

Some of the millionaires he contacted agreed to act as Smith’s long-distance mentors. “There are a lot of opportunities to learn,” Smith counsels. “Try to find information in a book, online, and attend seminars where people actually teach you how to do what they’ve done.”

The other behavior Smith advises would-be millionaires to adopt is learning how to retain the wealth they create and using it to create more. “Most lottery winners go broke because they don’t know how to manage money,” Smith observes. “Same thing with professional athletes who get multimillion-dollar contracts. Within five years, 95 percent of them are broke. It’s not just about getting the money. It’s about what you do once you’ve got it. Without the mindset, you lose it.”

“Stay agile, and provide investors with evidence and vision.” — Paul LeJoy

Real estate investor Paul LeJoy bought his first home for $280,000 in 2001, shortly after emigrating from Taiwan. He sold it four months later for $400,000. Two years later, he’d acquired a real estate license, and in 2007 launched Pacific Realty Partners in Newark, Calif., now worth $50 million.

When the real estate market started tanking in 2007, LeJoy immediately began contacting banks and asset management companies to get them to invest in his expertise by hiring him to provide broker price opinions (BPO). Soon he had secured not only BPO work but also listings to sell bank-owned homes. “People are always looking for leaders and leadership,” he says. “Provide that and investors will provide you with money.”

LeJoy makes the point that getting investors requires a good track record and a vision. “Investors want a profit on their money,” he says. “My track record told them what the future might look like. My vision is creating wealth and relationships that last, so they felt encouraged to ally with me. Because in the past I have been honest with them, people know I will be honest in the future.”

Tact is another quality LeJoy firmly espouses, one that dovetails neatly into another Corley finding: Only 6 percent of millionaires speak their minds, while 69 percent of the poor do. “The wealthy told me it’s a good idea to censor what starts in your head and comes out your mouth because if you don’t, you risk insulting someone or putting your foot in your mouth,” Corley says. “Speaking your mind too freely is a bad habit that could cost you a lot of money.”

“Buy used, not new.” — Marshall Brain

Corley found that while 69 percent of the poor he interviewed would buy a new car if they could, a mere 6 percent of the wealthy considered a new car worth buying. Millionaire Marshall Brain, author and founder of the HowStuffWorks website (howstuffworks.com), emphatically agrees.

We are so bombarded by car marketing that encourages us to buy a new car that many people mistake the ads for axioms, notes Brain — to the point that they believe buying new is a smart financial move. “We are programmed to believe that as our income goes up, the cost of the car we own should follow in lockstep,” he says. “We are also programmed to believe that expensive cars will make us happier.”

The fact is, he counters, “These ads are not true. An expensive car does not buy happiness, and there is no law of nature that says you have to buy one.”

Brain and his wife, Leigh, lived for two years with just one car, an unusual move for a family of six living in suburbia. When that was no longer practical, they bought a second vehicle, a used yellow Toyota Yaris hatchback. “We bought it from a dealer who had repossessed it, so it had 6,000 miles on it and cost $11,000,” Brain says. “It is a tiny two-door car, but it can still carry up to four kids, a dog, and one adult.”

Brain says his new ride is not only economical but also fun to drive, sort of like driving a go-kart. “But the best part is the incredible amount of money it saves,” Brain says. The car gets great gas mileage. The tires on it are small and cheap. It hasn’t needed a bit of service (except oil changes) in 40,000 miles. Insurance is cheap.

“We did look at all kinds of cars instead of the Yaris,” Brain admits. “Corvettes, BMWs, Mercedes, even a Porsche Cayenne. I could buy seven or eight Yarises for the cost of a Cayenne. That’s an amazing statistic. My advice: Ignore all the programming attempted by car ads. We love our little Yaris, and it saves us a ton of money.”

“Take a risk in search of wealth.” — Wendy Robbins

Inventor and entrepreneur Wendy Robbinswent from being homeless to being a millionaire and starring alongside Kelly Ripa in the TV series “Homemade Millionaire,” all because of a small scalp massager she designed called the Tingler.

Robbins says she and her partner took risks, which is another of Corley’s millionaire benchmarks: 63 percent of the wealthy he studied took a business risk. Only 6 percent of the poor did so.

Robbins freely acknowledges she made numerous mistakes along the way, which led her to open a coaching business for potential millionaires to help them avoid the pitfalls that befell her.

“We were undercapitalized, didn’t know what we were doing, trusted the wrong people, and learned a lot of hard lessons,” Robbins says. “I took my first order on a paper napkin. We couldn’t take credit cards and almost had to pretend that we had a product in order to find a manufacturer.”

Today, in addition to her coaching business, Robbins is creating a new crowdfunding website called Red Capes that allows visitors to invest in ideas and get gifts in return.

“I like that we make it easy to be a superhero,” Robbins says. “You present what you want to do — create a heartfelt video and include documents or testimonials — whatever helps your case, and we make it easy for you to raise money.

“I like the idea of investing in people’s dreams, ideas, and inventions,” she adds. “I am particularly interested in helping people with causes, unique solutions, and green technology. We don’t need traditional banks. This is why I am also doing business development/strategic alliance deals with startups and technology companies for an equity position. If you are in a position to do this for entrepreneurs, I believe this is a fantastic moneymaking win-win.”

“Volunteer to help.” — Thomas J. Madden

According to Corley, 72 percent of the rich volunteer five or more hours a month. Only 12 percent of the poor do. Moreover, the wealthy don’t give simply in order to get. They give because helping others is the right thing to do. “Throughout my career, I’ve always known that the more you give, the more you get back,” says Thomas J. Madden, founder and chairman of TransMedia Group, a global public relations firm based in Boca Raton, Fla.

The mindset should go beyond charity. Back when Madden was working for NBC, he had an opportunity to help one of AT&T’s head sales guys who needed to be put in touch with someone who could make decisions about phone lines. “He sounded frustrated, so I made a few phone calls and promptly forgot about it,” Madden says. A few weeks later, Madden received a call from the same salesperson, only this time he sounded elated. “He said that, thanks to me, one of the top guys in NBC communications had gotten back to him. They worked everything out, and he was so grateful to me for my help that he said to just give him a call if I ever needed anything from AT&T.”

Months later, about the time Ma Bell was undergoing a traumatic court-ordered divestiture of all her operating companies, Madden left NBC to start his own public relations firm. He called the AT&T employee he’d helped and offered his services. A few days later, Madden received a call from AT&T’s public relations director, inviting him to meet with the company’s top execs. At that meeting, AT&T became TransMedia’s first client and a thriving business was born.

“You can always save money.” — Tyler Drew

According to Corley, 85 percent of the rich believe you can always save money. Only 2 percent of the poor share that belief. Tyler Drew belongs in the first group. Drew, who makes his living buying and selling houses at foreclosure and rental properties, became a millionaire at the ripe old age of 26 when he sold U.S. Best Repair Service in Irvine, Calif.,a startup company he founded to manage foreclosed properties.

One of Drew’s first jobs was as an assistant to a multimillionare mortgage broker. “He never paid full price for anything,” Drew says. “One of my first tasks for him was finding the lowest price on the only brand of iced tea he drank. It seemed really stupid to me. Why was saving a couple of bucks so important?”

Drew soon learned that his boss got the lowest price on everything he bought, including houses. “At the end of the day, (all the efforts) added up to hundreds of thousands of dollars in savings,” Drew says. “By following his example, I’ve saved well over half a million dollars myself thus far.” And just like that, it circles back to Ben Franklin’s ultimate mantra of frugality: “A penny saved is a penny earned.”

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