We are what we repeatedly do. Excellence then, is not an act, but a habit. — Aristotle
We tend to define our lives by the big events: graduation, marriage, children, a big promotion, retirement. What often gets neglected are the little things we do every day, the little things that make the big events possible. As Aristotle said, it's what we “repeatedly do” that produces excellence. When it comes to money and wealth, what do you repeatedly do?
Financial security cannot be reduced to a simple formula. Like excellence, it is the result of your daily habits. An individual with high income who has poor daily habits will fail to find financial security. But a person with relatively low income can achieve financial freedom through the power of good habits. So what are the habits of wealth?
Hard Work
By working hard, old man, I hope to make something good one day. I haven't yet, but I am pursuing it and fighting for it. — Vincent van Gogh
Hard work is the habit first among equals. Achieving financial security is often the result of consistent diligence. We've all heard of individuals who found wealth through inheritance or the lottery, and these stories are the most memorable. What we rarely hear about, however, is the school teacher who works hard for 40 years and, along with some of the other habits below, manages to save $1 million or more on a salary that never exceeds $50,000 per year. Hard work enables us to appreciate all the more the financial security that it produces.
Modest Living
A just and reasonable modesty does not only recommend eloquence, but sets off every great talent which a man can be possessed of. — Joseph Addison
This habit is the great equalizer. Modest living can produce great wealth on a modest income. In contrast, frivolous uncontrolled spending can result in financial turmoil for the highest paid among us. My grandmother lived modestly. A nurse by education and training, her income was modest by the prevailing standards. Yet she managed to pay cash for her home and save enough for a generous retirement. More importantly, modest living produced a contentment in her that money just cannot buy.
Patience
But investors don't necessarily have the patience to wait for the great company with the great underlying economics at the right price. When Warren bought Dairy Queen, I joked, “He probably wanted to buy it when he was eight years old, but it wasn't the right price.” So he waited 50 years or so. — Mary Buffett
Shortcuts born out of impatience lengthen the trip. With wealth, impatience often leads to decisions with dire consequences. Patience, however, should not be equated with inaction or passivity. Rather, practicing the habit of patience produces thoughtful, long-term decisions that can produce wealth while minimizing risk. Warren Buffett epitomizes the patient investor. His investing success is often the result of patiently waiting for the right time to buy a stock or a company.
Perseverance
Life is difficult. This is the great truth, one of the greatest truths — it is a great truth because once we see this truth, we transcend it. — M. Scott Peck
If it were easy, everybody would do it. The fact is, obtaining financial security requires working through challenges. These range from the small, daily choices we make, which over time have a monumental impact on our finances, to the big money events in our lives that are the most memorable. Perseverance keeps us focused on our goals, and enables us to confront all challenges, big and small.
Balance
The word ‘happiness' would lose its meaning if it were not balanced by sadness. — Carl Gustav Jung
We are constantly bombarded with imbalance in the financial press. Either real estate beats stocks or stocks beat real estate, but rarely do we hear of a healthy balance of both. Balance in all aspects of our lives produces completeness in a way that obsession never will. But balance does not mean a lack of passion. To the contrary, balance in our relationships, work, finances and other areas of our lives enables us to pursue life with passion while remaining firmly rooted. In our finances, balance shows us the importance of living for today and for the tomorrows that come our way.
Self-Awareness
I think self-awareness is probably the most important thing towards being a champion. — Billie Jean King
“I'm trying to find myself,” was a common refrain among teenagers when I was growing up. It was the best excuse we could muster for avoiding the realties of adulthood. But a healthy dose of self-awareness brings into focus the motivations behind the daily decisions we make. Self-awareness allows us to understanding what motivates us to spend money, what investments are best for us given our tolerance for risk, and ultimately what will produce contentment in our lives. Practicing the daily habit of introspection leads to self-awareness.
Learning
I went to the woods because I wished to live deliberately, to front only the essential facts of life, and see if I could not learn what it had to teach, and not, when I came to die, discover that I have not lived. — Henry David Thoreau
It's what we don't know that is most dangerous. The habit of life-long learning enables us to improve our careers, investments, and spending, as well as other areas of our lives. The older I get, the more I realize that learning is a process, not an event. As soon as we think we've got it all figured out, something comes along to remind us just how fragile our understanding can be. Make learning a daily goal, and your finances will thank you for it.
What do these habits teach us? In the words of Aristotle, they teach us that who we are and what we have is a result of what we repeatedly do. Wealth then, is not the result of an act, but the result of our habits.
Author: Rob Berger
Rob Berger is an investor, entrepreneur, blogger, husband, father, and Buckeye fanatic. He founded the personal finance site doughroller.net in 2007, retired from the practice of law at the age of 49, sold doughroller.net and retired again in 2018, and now is a Deputy Editor at Forbes Money Advisor. You can reach him at robberger.com.
“I’m trying to find myself,” was a common refrain among teenagers when I was growing up.
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You’re dating yourself. (grin)
I love this post, especially the part that contains, “If it were easy, everybody would do it.” This is so true.
Enjoyable article. Sets a tone for the financial investor in all of us. Especially good for the newbie to the working world.
I don’t want to live modestly. I don’t want to defer all my enjoyment of life until I’m 65 and too old to enjoy it. I don’t want to spend two weeks a year on vacation and the rest of the time at work. I don’t want to spend my kids’ childhood at the office.
I dislike this philosophy of “work hard all your life so you can retire and live a modest but comfortable life”. That’s an awful way to lead a life.
Gal
@ Gal: How do you want to live your life and by what philosophy do you want to live your life by?
For me personally, I don’t want much more than a family and a home of my own. I’m striving for a job I can do at home anytime because I hate being confined to the ‘9 to 5’ world. I want to spend time with my kids and have some fun while it’s there to be had, not be stuck in an office all day. And I’m not much interested in becoming rich, just in having enough for my future family to live comfortably and without want for anything.
I like the philosophy of working hard and enjoying the fruits of my labor; I just want that small caveat that allows me to do so on my time, not the time of the 9 to 5.
The article does a terrific job of pointing out the common character traits shared by people who have realized their financial success.
Gal…there’s a balance between enjoying what life has to offer and running yourself ragged trying to pay for things that you can’t really afford and don’t bring you true and lasting satisfaction. Joe Dominguez (Your Money of Your Life) wrote a bit about finding that balance through something he called the “contentment curve.” It’s different for everyone.
I think many people underestimate what it will take to retire in the next twenty years and are woefully unprepared for that moment because they overestimate what kind of lifestyle their salaries can actually support over the long haul. And, BTW, 65 is hardly too old to enjoy life. If your username is any indication, I’m sure you’ll be tearing up the road well into your twilight years.
Excellent post!
To me, much of this is easy. Maybe there’s something in certain types of personalities that makes these traits easier to follow? Interesting thought for a follow-up piece.
Very good post.
Naturally, the strongest early reaction was against the idea of “modest living”. “Modest” as used here means “limited in size, amount, or scope” “(Merriam Webster). Hello — anyone here have unlimited means or scope in their lives? Are we just in denial and trying to pretend that we can’t have everything we want when we want it?
My favorite results of embracing a modest lifestyle are:
— knowing we can weather almost any type of financial setback without losing everything.
— being out of the competition to keep up with everyone else’s expectations or definitions of success. This is where self-awareness comes in for us: our goals and sources of joy drive our lives, not yours or theirs.
I am struggling with patience, though! Once I decide to do something, I want to go do it NOW! (I think that’s the control freak coming out.) Something that isn’t quite right still isn’t right just because we don’t want to wait.
(Trying to to better self-editing BEFORE submitting an entry. ;) )
A great article. It’s always nice to see things broken down into steps or habits. Too often we forget that there is a lot of inner work involved with getting rich, and focus only on the money part of it.
I find Balance to be the key. If you balance your hard work and perseverance with a modest living you are bound to succeed.
Also never forget to take action … thoughts only get you so far (and that’s not very far).
Gal,
I empathize. Part of it, for me, is choosing my battles. I got the education I needed so that I can do work I find interesting. I found a job where I can work a bit less then 8 hours a day and get 4 weeks vacation a year. I’m putting up with a fair amount of muscle soreness right now because I’ve increased my activity level.
OTOH, the last time I job-searched, I turned down jobs that paid better and required 50-60 hours a week. If money was most important to me, I’d have taken it. The tradeoffs involved in working that hard don’t appeal to me. I also can live well within my means, so I have no practical need for the extra money right now.
Oh, and: I have a fear of falling. There’s no way I’m going to balance on a board placed between a ladder and the stairs to wash the second-story windows in my entryway. I could work hard to overcome this fear … but I have many, many things higher on the priority list right now :)
Peter,
Balance is key, but Self-Awareness is key to getting the right balance… ;)
I really enjoy your blog. I’ve been trying to improve my financial situation after destroying it with bad habits and irresponsiblity in college. The last few years have been a struggle to actually implement all that I’ve been learning about healthy personal finance. This month, after reading a past blog about the debt snowball payment plan I set some goals and am sticking with them. I finally feel like I’m making some actual headway in my thought and spending patterns. Keep up the inspiring writing! You have truly helped me help myself.
I loved reading this article. Thank you!
Very good article!!
That said all this discussion of living modestly is “crap”
Think big, do big things that are different, contribute to the world and make a great deal of money -then live large.
That does not mean in debt or beyond your means as is so prevalent today.
My father worked very very hard. He amassed a nice fortune and really started to enjoy the wealth he amassed when be was about 60 years of age. He died suddenly at 63 and left a lot of chips on the table.
PS If your wondering did he leave me the money the answer is no. His will called for the establishment of a charitable trust. What I did get was a priceless education that has allowed me to be successful on my own.
I dislike this philosophy of “work hard all your life so you can retire and live a modest but comfortable life”. That’s an awful way to lead a life.
Sure beats working hard all your life and never being able to retire!
@ Gal: How do you want to live your life and by what philosophy do you want to live your life by?
“You/who live on the road/must have a code/that you can live by”
I have enjoyed reading these comments about my article. Two things stand out to me. First, the importance of balance. I agree we shouldn’t sacrifice everything today for a richer tomorrow, but we also shouldn’t spend everything today without regard for tomorrow. I tried to capture that idea as follows: “In our finances, balance shows us the importance of living for today and for the tomorrows that come our way.”
Second, I found the response to “modest living” very interesting. I spent a lot of time deciding on the word “modest” for this article. I still stand by it, although I recognize that what’s modest living for one might be frivolous living for another. I still believe that modest living produces the most contentment in life, although I can’t claim to have always practiced this idea.
Andrew,
My philosophy for life is to make smart decisions so you can enjoy the present while still thinking about the future. I refuse to just settle for “comfortable”. I want “fun” and “enjoyable” and “memorable”.
Redhead68
Of course. I do understand that balance. I don’t spend unnecessarily on fancy cars and large houses. However, I also don’t intend to work every day until I’m 65 just so I can retire. Retirement seems to be the wrong goal. Living life to the fullest seems to be a better one. And yes, I am also planning for the future, I’m just enjoying the present at the same time. My posting title by the way refers to my fitness blog’s name, not age :)
JenK
Sure, that’s exactly what I mean! I made good choices about my education and career. So now, I can afford to pick and choose my job. I can find one based on what I like, not based on pay. I can take months off of work and know that I’ll still be fine. Instead of counting down the days, weeks, months and years to retirement, I can save for the future while still having a great time in the present.
Sorry folks, I didn’t mean to get anyone all riled up. Your life is yours to live and you all should do whatever makes you happy. I just get annoyed sometimes with this mantra of “work hard for 45 years so you can have a comfortable retirement.” I couldn’t life with that as my only future prospect. But hey, that’s just me.
Gal
This is the best non-J.D. post I’ve ever read here at GRS … you’ve really captured some essential truths here. Thank you.
Dave, I really appreciate the compliment, and I’m glad you enjoyed the post.
Excellent material J.D. Made me a subscriber. Seldom is wealth considered in terms of personal character. You’ve done a good job here. I’ll add one thought from Goethe: “What you get by achieving your goals is not as important as what you become by achieving your goals.”
Did Goethe say anything about those who don’t achieve their goals?
@ Gal: I can understand the philosophy you live by and actually I quite like it. Good luck to you in achieving your goals!
Just to be clear though; I’m not settling for “comfortable”, that’s exactly I want. I’ve no doubt that always being able to live comfortably is as important to me as having a life full of fun, enjoyable memories is to you.
Everyone’s after their own contentment, that’s just mine.
Brillant article.