I often write answers on Quora, where I am the most viewed writer for investing, wealth and personal finance, with over 236 million views in the last few years.
On the answers below, taken from my online Quora answers, I focus on a range of topics including:
- What do millionaires do that most people don’t? Is it actions, words, persistence or something else entirely?
- Would a person who already lives a comfortable live be any happier getting an inheritance big enough to retire?
- What are the pros and cons associated with thinking big?
- At what amount of wealth does it make sense to consider yourself wealthy? My definition might be quite different to the typical one!
- With so many wrong predictions, why do people still listen to Jim Cramer?
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What do millionaires do that most people don’t?
The biggest commonalities are:
- Invest money rather than save it or spend 100% of it.
- Taking calculated risks rather than just playing it safe all the time
- Relative frugality. Studies show most wealthy people don’t spend as much as the public assumes.
- Take personal responsibility rather than blame others, or look for handouts. I was listening to Jordan Peterson make an excellent point a few days ago. He said he started to change his beliefs after going on political marches and meeting successful business people. When he went onto the marches he was confronted by loads of people complaining who had never really made it. The attitude was “I am only one person. I can’t change my own life in this big world of political and corporate interests”. In comparison, people who succeed tend to take personal responsibility and think they can change their own circumstances.
- Avoid multiple divorces and other potential “ruin risks”. So, taking calculated risks makes a lot more sense than taking no risks at all, probably you are careful about ruin risks.
- Spend less time with toxic people, and don’t allow criticisms from toxic people to hold them back.
- Scale ambitions after the original success has been achieved.
- Avoid extreme bad luck and take advantage of any luck afforded to you. Unfortunately, luck does play a role, yet most people don’t take advantage of good fortune either. Most just spend an inheritance as an example.
- Using leverage. This could mean leveraging time through compounded returns (as per the chart below from Acorn), leveraging money (debt) in a safe way or leveraging technology and other people for business owners.
The biggest commonalities I have seen are in mentality. Our thoughts influence our actions.
I know several people who graduated at the worst moment – after the 2008–2009 financial crisis and 11-12 years before Covid.
The ones who have succeeded tended to be positive people – positive about themselves, capitalism, making money, giving back to others.
This has especially been the case if they have been persistent and didn’t give up.
The ones who have done the worst often spent their time going on political marches and ranting on social media, rather than taking concrete actions to positively influence their own lives.
In comparison, the sensible young people were using social media to make money or improve their lives in some productive way!
Remember most of the world’s millionaires are self-made, and the majority of inherited wealthy and indeed celebrities lose the money.
68% of former professional basketball players are broke within just five years of retirement, with 78% of NFL players facing the same fate.
Yet these people were very lucky in life. The point is, our own actions plays a huge part in the end results.
You see the same difference after every crisis. After Covid, I personally know people who saw it as an opportunity – more people would be online, consumer trends would change etc etc.
Then there are those people who are negative and in defence mode, who often demand government action.
You can guess which people on average succeed.
Would a person who lives a comfortable middle class life be any happier if they received an inheritance substantial enough that they wouldn’t ever have to work again?
There is contradictory research about this.
Almost all research shows going from poor to comfortable increases your happiness.
Above say 90k a year, some studies show that happiness goes up much more slowly.
Other research actually shows happiness declines above 150k, maybe because such people work longer, spend less time with friends and family etc.
I suspect it depends on if you like your job and if you find something else to do in retirement.
There is a lot of debate about why people in Japan live longer than most countries.
Diet has often been cited, but few people look at “Ikigai” – meaning to live life with purpose.
It is quite normal to see 70 and 80 year olds in Japan working, even if it is voluntarily.
In the West too, people who work longer tend to live longer, especially if they like their job.
Therefore, I suspect that if somebody gets an inheritance and finds value in other forms of non-paid work, like volunteering, they would be happier.
That doesn’t mean volunteering for eight hours a day, but doing enough to have purpose.
Together with using the extra time to spend time with friends and family, and you could have a winning strategy.
That is because spending more time having strong relationships with people you love increases happiness.
In comparison, if somebody retires and doesn’t know what to do with all the time, depression could be the result.
The bottom line is that money is important, but so is health and relationships.
So, if somebody already has enough money and especially wealth, it is logical to also focus on those other things.
A final point I would make is the need not to compare yourself to others.
Some incredible statistics have shown that there is a huge increase in depression amongst people who live in the same street as new lottery winners!
What are the pros and cons of dreaming big?
Dreaming, by definition, is usually thinking about something which will make you happy and satisfied.
There is the normal advice that goals should be realistic and not too high.
Yet almost any successful person does say that one of their regrets is not thinking big enough, soon enough.
It is something I, myself, would have done differently if I was 18 again.
Usually people only dare to dream big when they have already tasted some success.
So, I was thinking bigger at 30 than when I was 18, even though most people assume younger people are more idealistic.
I think the reasons are simple enough to understand. Parents, friends and society do try to rein in big ambitions, and do it for the right reasons, but can indirectly stifle growth.
The thing is, once you have achieved some success, you don’t need to work as hard.
One way of motivating yourself is to scale your ambitions. This book makes a pretty good argument about that:
Let’s put this another way. Imagine you are 32 years old. You have made your first million in terms of wealth.
You have a family and a good life, and know your income is likely to be reasonable for the next few decades unless something happens to your health.
Therefore, provided you avoid depression, divorce, ill health or vices, your wealth will always scale.
In that case, what will make you work harder? Dreaming about scaling, helping others in the world with a foundation, making your parents proud, being known globally etc?
Or just doing the same old things, getting a bit better? The answer is obvious.
The negative is when people are only dreamers. Ideas, and dreams, are pointless unless:
- People are very persistent and never give up. It can takes years and decades to get to where you want to be.
- The amount of hard, and these days smart, work is huge.
- Some big calculated risks are taken. That could be going “all in” on a business idea, emigrating or other risks that could yield better results.
- Often the goals need to be linked to an emotion. For example, you want to become insanely successful before your parents die, and don’t want to be the 70-year-old who is thinking “I wish my parents could see me in this moment”.
- People actually know what they want to achieve. People’s dreams are different.
- We ignore those voices, internally and externally, who try to criticise. That stops many people.
These days there are plenty of dreamers who think everything is easy due to social media.
When do you consider yourself wealthy? And what is wealth?
I was listening to a financial journalist who was invited to speak in the Middle East.
This person only became respected as a journalist after he became a millionaire on an average salary. He had a normal job before.
On the podcast he mentioned how he was invited by a CEO who lives in the region.
Over lunch, the CEO told him that he wanted him to speak so “his staff can avoid the mistakes I made”.
He was consistently making $2m-$8.5m a year, including bonus’ and stock options, for over a decade.
This was tax-free money. Yet when the journalist asked him how many months he would last if he lost his job, he replied two or three months!
So, if he gets sick, or loses his job, he is screwed. Even if he gets another job which is much worse paid, he is in trouble.
He has gotten used to a lifestyle which involves first class flights, skipping on glaciers etc.
For me, that person isn’t rich. He isn’t wealthy. He is living pay cheque to pay cheque.
He is poor in many ways despite his ultra high-income. He is a prisoner in some ways, as he always needs huge amounts of inflows to deal with the outflows.
In comparison, there are people earning in a year what he earns in a week who are wealthier.
I know plenty of millionaires who have never earned more than 50k a year.
For me, somebody is wealthy when they can stop working tomorrow and have an income (from the portfolio regardless of whether that is property or ETFs) which is two or three times higher than the average per capita income of the area they live in.
So $100,000-$150,000 a year from the portfolio if you live in an area with a $50,000 per capita income, or $40,000-$60,000 if you are living in a city with $20,000 per capita income.
Everybody’s definition is different, but the general view of what a wealthy person looks like is quite distorted.
Almost everybody probably thinks the aforementioned CEO is both wealthy and high-income unless he tells them the reality.
I have personally met a few people like him, and know from the statistics that it is normal.
The following answer appeared on the Adamfayed.com Quora space
How can Jim Cramer be wrong so many times and still have a financial show?
- People have short memories. One of Steve Forbes best quotes is “You make more money selling advice than following it. It’s one of the things we count on in the magazine business – along with the short memory of our readers”.
- People like entertainment and stories better than somebody who says they don’t know where markets will be tomorrow or next year.
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Adam is an internationally recognised author on financial matters, with over 235 million answers views on Quora.com and a widely sold book on Amazon
In the answers below I spoke about:
- What should a 18-year-old do to accumulate wealth? I list the two main aspects of wealth accumulation – how to make money and manage it.
- Is growing up without money sometimes better than having inherited wealth? I consider some of the reasons why inheritance isn’t always a good thing for those who receive it.
- Where do most wealthy people live globally? Is it Tokyo, London, New York or another city, and how about per capita?
- Is it rational for most people to worry about losing wealth?
- Will the banks pay people to take mortgages due to negative interest rates.
- Could there possibly be any rational reason to panic sell in the stock market? I speak about the difference between stock pickers and those who buy the whole market.
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