Note from Managing Editor Allison Brickell: Today we’re sharing an excerpt from Alexander Green’s book The Gone Fishin’ Portfolio: Get Wise, Get Wealthy… and Get On With Your Life.
The second edition of his book, with a brand-new foreword from Bill O’Reilly, is coming out tomorrow, April 13. The new edition includes two additional chapters and has been completely updated for the current market. To make sure you get a copy right away, pre-order on Amazon.
During my 36-year career as an investment analyst, I’ve sought to discover how ordinary people in this country become wealthy, distill this knowledge to its essence and share it with others.
I’m now convinced that to reach your most important investment goals it’s essential to develop what I call a “prosperity mindset.”
This may be an investor’s most critical asset.
Your mindset is the filter through which you see the world. It determines how you spend your time, what decisions you make and how you invest your money.
What is a prosperity mindset? In my view, it rests on this foundation:
- You understand the habits and choices that allowed tens of millions of ordinary Americans to become wealthy.
- You recognize the major trends – historical, political, cultural, technological and financial – that are making things better for most people in most places in most ways.
- Based on these trends, you maintain a rational optimism about the future, especially when the nation or the world experiences short-term setbacks (like the financial crisis or COVID-19), as we always will from time to time.
- You have a coherent plan that gives you a high probability of achieving your most important financial goals.
- And you are committed to following through to achieve those goals.
Let’s start with understanding how most wealthy Americans got that way.
According to The New York Times, there were 18.6 million millionaires in the U.S. in 2019.
That was a record number for the 11th consecutive year.
Spectrem Group reports that there were also more mass affluent households with a net worth between $100,000 and $1 million, excluding primary residences: 31.8 million, or nearly 1 in 4 households.
Yet a Federal Reserve survey that same year also found that nearly 80% of Americans live paycheck to paycheck. Half say they would have trouble finding $400 to pay for an emergency.
This is a dramatic disparity, and this economic inequality has hardly gone unnoticed.
If you’re a worker who would like to increase your pay, it’s important to know that earned income is generally decided by nine factors:
- Your educational attainment
- Your chosen profession and specialization
- Your years of experience
- Your hours worked
- Your work ethic
- Your social skills
- Your competence and proficiency in your job
- Your ability to cooperate with, inspire and lead your co-workers
- Your ambition to rise in the organization.
If you want to earn more, the choice is clear: Make yourself indispensable to someone.
Beyond income inequality, there is also another form of economic disparity in this country.
Some households have a much higher net worth than others. There is a significant wealth gap.
A prosperity mindset can help close that too.
It starts by understanding that wealth accumulation for most people is based on six primary factors:
- Your ability to maximize your income
- Your propensity to save
- Your appetite for risk
- Your willingness and ability to let your money compound
- The investment costs you absorb
- The taxes you pay.
These factors are under your control.
Investment success is mainly about knowledge and personal accountability.
To turn things around in your financial life, you need only say three words: I am responsible.
This is not a burden, incidentally. It’s a privilege and an honor to take ownership of your actions. It creates freedom and control. It gives meaning to your life.
Self-reliance is the great source of personal power.
We create ourselves, shape our identity and determine the course of our lives by what we are willing to take responsibility for.
Take an important step by adopting a prosperity mindset.
Realize that most high net worth individuals optimized their education and marketable skills, maximized their incomes, lived within their means, saved regularly, invested smartly, and let their money compound over a time, often decades.
This is how ordinary Americans become millionaires. They didn’t inherit it. They weren’t just lucky.
They had a plan. They stuck to it. And they reaped the rewards.
With time and discipline, you can too.