Principles for Life: Common Denominators Among Those Who Successfully Build Wealth

One of the most fascinating things about my job as a financial advisor is that I am blessed to be able to learn from the successful people I meet and interview. Over the last decade, I have had the privilege to work with many high net worth individuals and families. I hear stories about their journeys as well as their short term and long-term goals. While everyone is unique in their own way, I have found three distinct principles that are used and implemented by high net-worth families.

They keep a household monthly profit and loss statement.

 Have you ever seen a successful CEO or CFO on Bloomberg, CNBC, or FOX being interviewed who does not know what his revenues or expenses are? He or she wouldlook foolish if they didn’t have a game plan on future cash flow and forecasted expenses. It is safe to say that nobody would invest in a company where leadership positions fail to budget. Every successful company has an idea of the amount of money going in every month and how much money is going out. Whether it’s the CEO or CFO, they know their numbers and they constantly monitor and refine where their money is best suited to be invested. Good companies make money over long periods of time and stay in business while bad companies that spend more than they make eventually go out of business. Having someone who tracks and monitors the financial income statement is always found in wealthy families. They treat their family income statement like a business to make sure it is coming out ahead each and every month.

They possess a “get rich slow” mentality.

We live in a society where we are bombarded with get rich quick schemes. There are various trading programs, newsletters, and advisors who promise huge returns in very short periods of time by flipping stocks or real estate. Advisors or services who over promise and under-deliver won’t be around for too long and do not have a built to last mentality. The truth is that high, net-worth people are rarely attracted to get rich quick investments. Dave Ramsey, who has a money show on Fox Business Network, recently revealed that zip codes with higher than average home values, have the lowest quantities of lottery tickets purchased in most state-run lotteries. Why is this? They would rather have high predictability. They own a diversified combination of real estate, bonds, stocks, index funds, and deeds of trust in their portfolios and shoot for high single-digit returns annually. Using the good old-fashioned baseball analogy; their goal is to hit singles and have a high batting average rather than sport a low average and hit a periodic grand slam. I call it the “get rich slow” mentality.

They give it away in slices and it comes back in loaves.

There are all sorts of ways to give money to charity. I have found that most high net worth families make it a priority to give to their favorite charities in a way that they are comfortable with. Some have philanthropic intentions with smaller amounts of money each month. Many people give to a church or synagogue based on a percentage of annual earnings. They may build donations into their monthly fixed expenses. Some want to leave a portion of their estate by forming a charitable remainder trust where they will leave behind investments to their favorite charities after they pass. No matter what the form of giving may be, the principle of giving is always a priority. There are many other principles that we could explore and dig deeper into. Dr. Thomas Stanley author of The Millionaire Next Door and The Millionaire Mind, does just this. He specializes on case studies and heavily researched information; including saving patterns, salaries, occupations, and risk tolerance. These books are recommended reading if you love statistics and want to learn more about these key characteristics for success .

Ben Stewart is the President of Stewart Wealth Management Inc., a Marin County based Registered Investment Advisory firm that specializes in financial solutions and money management for small business owners and high, net-worth families. He can be reached at ben@stewartwealthmgt.com;

415 464-4920, or visit his Web site stewartwealthmgt.com.