Do men and women in the U.S. become wealthy as a result of good habits or good luck?

Earlier this year I wrote a series of columns addressing this question and concluded that it can be either – or both.

However, the data clearly show that the vast majority of affluent Americans got that way by following a particular formula: learning a financially valuable skill, working hard, saving regularly and investing wisely.

My views on this subject were shaped by more than three decades of experience as an investment analyst, money manager and financial writer… but also by the work of Dr. Thomas J. Stanley, a widely acclaimed researcher who spent his professional career studying Americans’ paths to economic and financial success.

You probably know him as the author of the mega-best-seller The Millionaire Next Door: The Surprising Secrets of America’s Wealthy.

Stanley conceded that some folks are wealthy thanks to large inheritances or monetary gifts, but certainly not most. He discovered that more than 80% of millionaires are self-made.

(I should note here that Stanley defines “millionaires” not as individuals who earn a million dollars or more but those who reach a net worth – assets minus liabilities – of a million or more.)

The Millionaire Next Door was published more than two decades ago, however. And Stanley was hit and killed by a drunk driver in Augusta, Georgia, in 2015.

It’s reasonable to ask whether Stanley’s research is still applicable to those trying to become wealthy today.

The answer is an unequivocal yes.

In fact, his daughter, Dr. Sarah Stanley Fallaw, president of DataPoints – a research and technology company that studies wealth accumulation – has continued his work.

She took her father’s findings – and research he had planned to publish – and built on it with her own studies.

The result is an excellent new book: The Next Millionaire Next Door: Enduring Strategies for Building Wealth.

While her father concentrated on things the rich did right, Fallaw devotes equal time to what they didn’t get wrong.

Here are just a few things that millionaires typically don’t do:

  1. Listen to naysayers who tell them they’ll never make it.
  2. Believe those who claim that because of their race, gender, color, creed or sexual orientation “people like them” don’t have opportunities.
  3. Get distracted by conspicuous consumption and a materialistic lifestyle.
  4. Take on a lot of debt, with the exception of mortgages on residences and income-producing properties.
  5. Have a lot of close friends who are spendthrifts.

I’d add to this list that people who want to get rich today need to also reject the newly fashionable narrative of victimization.

That attitude is poison, and I’m sure you’ve heard it before:

  • The economy is rigged.
  • The average guy (or gal) doesn’t have a chance in today’s society.
  • The rich get richer while the poor get poorer.
  • Stocks and bonds are for wealthy people not ordinary folks.

I can’t imagine what anyone gets – other than anger and resentment (and votes) – by spreading these canards. (I’ve countered them all repeatedly in past columns.) And what in the world would anyone gain from believing them?

Before you can be financially successful, you have to believe you can be.

If the economy is rigged, the deck is stacked against you and people like you don’t have opportunities, why get out of bed in the morning?

This kind of thinking is a recipe for financial failure. Guaranteed.

Moreover, Stanley and Fallaw’s work demolishes these myths – as does a minimal acquaintance with the facts.

Still, some critics claim their findings are invalid for a different reason: “survivorship bias.”

This is the claim that economic “winners” and economic “losers” actually share the same habits, but Stanley and Fallaw never realized it because their research focused solely on the affluent.

That claim is demonstrably false – with two exceptions. And I’ll cover them in my next column.

Good investing,


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