Wealth & Lifestyle How to get rich: 6 things the world’s richest self-made people have in common Posted by: Team Tony
When we hear stories about the behavior of the super-rich, it’s usually about shopping sprees, trips to Monaco, or maybe the occasional lifestyle productivity hack. But how did America’s ultra-rich become the top 0.01%? Is there a secret formula to gaining and maintaining wealth? What do all the rich have in common?
For four years, Tony Robbins interviewed the world’s top financial experts to guide the average person on the path to financial freedom. He spoke to money masters like Mary Callahan Erdoes, considered by many to be the most powerful woman in finance, John Bogle, founder of Vanguard and father of the index fund, and Charles Schwab, or “Chuck” as you might know him from discount brokerage.
On the surface, the characteristics of rich people may appear different. John Bogle believes in investing, holding and indexing. Financier Carl Icahn is the opposite: he disrupts the system to maximize profits. It can make a beginner wonder what rich people have in common when the ways they make their fortunes are so different.
What Tony found on his epic journey was a pattern of behavior in this group of ultra-wealthy individuals—principles that guided their decision-making and ultimately their success.
1. You are obsessed with not losing money.
Being rich has nothing to do with luck, but neither is it an unattainable knowledge that only the privileged can attain. Financially successful behavior begins with a clear, unparalleled focus. What are they focusing on? Not lose. While they are not afraid of failure because they know it can teach valuable lessons, they still hate to lose. Above all, they hate losing money.
Remember Warren Buffett’s most famous quote? “Rule #1: Don’t lose money. Rule #2: Never forget rule number one.” The ultra-rich live by this maxim; They also understand the true cost of losing. If you lose 50% of your money, it takes 100% longer to get it back because you have less to invest. You know that no matter how much money you have, you cannot afford to lose it.
2. You know the value of asymmetric risk/reward.
It’s a common misconception that entrepreneurs, financiers, and other successful people have a high risk appetite. But it’s not true. One of the most important characteristics of rich people is that they are risk averse – but they think big. The ultra-rich want to take as little risk as possible for the greatest possible reward.
The average person thinks small. You risk a dollar to make 10 cents. Paul Tudor Jones, one of the top 10 financial traders in history, only risks a 1:5 ratio. In other words, he only risks $1 to make $5 — or a 500% return. Most investors will risk it all hoping to get a return of 8%, 10%, or less. If you use asymmetric risk/reward in this way, you can be wrong 10 or 15 times and only be right once, and still make money.
3. They know they will be wrong.
What rich people have in common is a hatred of losing—yet they’re humble (and experienced) enough to know they’ll be wrong, at least sometimes. You will lose money sometimes. But there’s a difference between losing and failing. There’s a difference between a loss that is a minor setback and a loss that destroys your financial future.
Rich people protect their wealth by structuring their portfolios to make money even when they’re wrong. Whether it’s Ray Dalio’s All Weather strategy or David Swensen’s $20 million Yale Endowment asset allocation, money masters know how to make money in any environment.
4. You understand the power of tax efficiency.
Legendary investor David Swensen, who grew Yale’s endowment fund from $1 billion to $31.2 billion in just over 35 years, once told Tony that there are few things that move the needle: diversification , stocks and tax efficiency. It’s a no-brainer: you don’t get the dollars you deserve; You get the dollars you keep.
What do all the rich have in common when it comes to taxes? They invest in such a way that they keep as much as legally possible. The IRS has sanctioned very specific ways you can keep more of your money, invest it, and earn interest on it. Money can be deferred or tax-free – all legally. Keeping more money helps you reach your financial goals faster.
5. They are all learning machines.
To create a money machine, you must be a learning machine. Therefore, one of the main characteristics of wealthy people is that they are obsessed with growth. Just as the best athletes in the world never stop striving to improve their game, money champions strive for constant, never-ending improvement in their game.
Many successful entrepreneurs and investors have had mentors along the way – Tony had several. They feed their minds with books and podcasts. They learn the language of the rich. You surround yourself with greatness – and you can do the same. The more you learn about what rich people have in common, the more you can emulate them.
6. They are all givers.
Giving back is one of the most understated behaviors of financially successful people. But real money masters understand that true wealth is about more than the number in your bank account. Holding on tight to the wealth they have built means living in a scarcity mentality, cut off from others by fear. Instead, they choose to live openly for those most in need, knowing that wealth abounds.
One day you will achieve your financial goals. You will reach the pinnacle of success. And you may be wondering, “Is that all there is?” You’ve mastered the science of achievement, but not the art of fulfillment. To be truly rich you must find your own way of giving and understand that the secret of life is giving.
Still wondering what rich people have in common? To learn more about the secrets of the ultra-rich, read Tony’s bestseller MONEY: MASTER THE GAME: 7 Simple Steps to Financial Freedom. All proceeds from the book go to Feeding America.
Team Tony cultivates, curates and shares the stories and core principles of Tony Robbins to help others live extraordinary lives.