Barbara O’Neill, Extension Specialist in Financial Resource Management
Rutgers Cooperative Extension
Factors That Promote Financial Success
During the last year, I had the opportunity to hear several well-known personal finance speakers talk about the characteristics and practices of financially successful people. Audiences are usually very interested in this topic because it provides a motivational roadmap and specific tips to follow.
At the 2017 Financial Planning Association (FPA) conference, the final general session speaker was financial author and television personality, Jean Chatzky. Her topic was “What the World’s Wealthiest, Most Successful People Do Differently.” Below is a description of six key success factors that were described in her presentation:
Optimism/Happiness- People who score “8” on 1 to 10 scale have greater problem-solving ability, longer lifespans, and increased success. Chatzky advised “prioritize doing things instead of acquiring things.”
Resilience– People are not born with resilience. Chatzky advised attendees to “Control the things that you can control” and “take action when you feel stuck.”
Connectedness- Chatzky advised attendees to build their “social capital” by sharing information, resources, and contacts. In addition, strong relationships with others need to be built in person and not just online.
Passion-People with passion view work as a calling, “want things more,” and work hard to achieve them. When people work hard, they often earn a higher income and have more money to achieve their goals.
Good Financial Habits- An example is habitual savings. Automatic savings deposits make it easier to delay gratification and save for your “future self”; i.e. the person that you will be 20 to 50 years from now. Our future selves are strangers to us today.
Gratitude-Grateful people five back to individuals, organizations, and communities. They are also less likely to be affected by depression. The antidote to materialism is charity inspired by gratitude.
At the 2017 annual conference of the American Association of Family and Consumer Sciences (AAFCS), Sarah Newcomb, a behavioral economist at Morningstar, noted that people who are future-minded and think ahead have more savings than those who do not. In addition, two simple areas of inquiry can accurately gauge the status of a person’s financial health:
- How far in advance do you make plans?
How much control do you feel that you have over events that happen in your life?
People who focus on the future and feel that they create their own financial destiny tend to save more than others for retirement and other financial goals. When people focus on the future, they tend to be less impulsive (e.g., spending habits), regardless of their level of financial literacy. Newcomb found that the strongest predictor of good financial decisions is not financial literacy but, rather, a focus on the future. High levels of impulsiveness and materialism, on the other hand, were associated with poor financial decision-making.
In addition, Newcomb’s research found that “power is happiness.” Empowered people are financially happier than others. Conversely, people who don’t feel in control of their personal finances have been found to exhibit negative emotions about their financial status even up to those earning a six-figure income.
Newcomb’s research, which is summarized in her book, Loaded, has found that, the farther away something is in the future, the less people care about it. The secret to fostering future-mindedness is to trick your brain to think that “the far away is close.” When this happens, people care more about the future because the “Here and Now” is clear and intense while the “There and Later” is vague, abstract, and unemotional.
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