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“We are what we repeatedly do. Excellence then, is not an act, but a habit.“–Aristotle.
So often we define our lives by the big events. Graduation, marriage, children, a big promotion and retirement are some of the milestones that many of us remember (or will remember) as defining moments in our lives. What often gets neglected, however, are the little things we do each and every day that make the big events possible. As Aristotle said, it’s what we “repeatedly do” that produces excellence. So when it comes to money and wealth, what do you repeatedly do?
Financial security cannot be reduced to a simple formula. But like excellence, it is the result of our daily habits. This can perhaps best be seen in the individual with high income who, due to daily habits, fails to achieve financial security. It also can be seen in the individual who, with relatively low income, has achieved financial freedom. So what are the seven habits of wealth?
1. Hard Work: This habit is first among equals. Achieving financial security is often the result of consistent diligence. We have 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. And hard work has the added benefit of enabling us to appreciate all the more the financial security that it produces.
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.
2. Modest Living: 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 cannot buy.
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
3. Patience: 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.
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
4. Perseverance: If it were easy, everybody would do it. The fact is, obtaining financial security requires working through difficult challenges. These challenges will range from the small, daily choices we make that 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.
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
5. Balance: We are constantly bombarded with imbalance in the financial press. Either real estate beats stocks or stocks beat real estate, but rarely 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.
The word “happiness” would lose its meaning if it were not balanced by sadness.–Carl Gustav Jung
6. Self-Awareness: “I’m trying to find myself,” was a common refrain among teenagers when I was growing up. Then it was typically the best excuse we could muster for avoiding the realties of adulthood. But the fact is 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. And practicing the daily habit of introspection will produce self-awareness.
I think self-awareness is probably the most important thing towards being a champion.–Billie Jean King
7. Learning: It’s what we don’t know that we don’t know that is the 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. And 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. Therefore, make learning a daily goal, and your finances will thank you for it.
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
So what do these habits teach us? In the words of Aristotle, they teach us that 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.
Reprint: This article was originally published on Get Rich Slowly as a guest post.
Published or updated February 14, 2013.