Researchers have found that certain characteristics are common to those who are able to successfully build wealth over time. Let’s take a look at them and what they could mean for your personal finances.
As a pastor, you may have chuckled a little bit when you read this title (thanks for not stopping there, though). You may think, Wealth? As a pastor? My only wealth is in heaven! It doesn’t have to be that way, though.
Contrary to popular belief, the ability to accumulate wealth has much more to do with behavior than it does with income. Don’t believe me? Famous singer Toni Braxton has filed bankruptcy twice, Rapper 50 Cent had to file bankruptcy despite having $10 million in assets (he owed about $50 million), and MC Hammer made more than $30 million when U Can’t Touch This topped the charts, but 6 years later he filed bankruptcy with $13 million in debt. Even Willie Nelson found himself owing the IRS $16.7 million at one point.
Being able to earn ridiculous amounts of money doesn’t mean a person has the ability hang on to that money and build real wealth. And earning a modest salary doesn’t mean a person can’t slowly build wealth, either. Read this post to meet a real, live Pastor’s Wallet reader who is a millionaire after 30+ years in the ministry. It can be done.
Research has found that certain key financial behaviors and traits are more indicative of a person’s ability to translate income into wealth than the amount of their income. These behaviors come more naturally to some people than others, but they all can be developed through intentionality. They are:
Conscientiousness
Conscientiousness is the personality trait of being careful, or vigilant. Conscientious people tend to be diligent and organized, they show self-discipline and are thorough, deliberate, and dependable. Conscientious people are more successful with money because they pay attention to how they are spending, shop around before making purchases, develop a budget, and stick with it. If you are conscientious, people like having you on their team because you focus on the task at hand, produce high-quality work, and don’t miss the details.
Some people are naturally more conscientious than others. If it is not natural for you, you can work at it and improve. Start small so you don’t get overwhelmed. A lot of people that aren’t naturally conscientious don’t budget because tracking all of their spending just seems overwhelming to them. Choose one thing, like how much money you spend eating out, and focus on it. Watch your behavior patterns and work on making any adjustments you think you need. Once you make it a habit in one area, you can move on to the next.
Financial Literacy
To be successful with money, you need some basic financial acumen and numeracy skills. You don’t need to be able to calculate the time value of money in your head, but you should understand how compounding interest works and be able to calculate percentages. The simple fact that you’re reading this blog puts you way ahead of most Americans.
If you’re curious to see how you match up with your peers, take this quiz. If you passed that with flying colors, you’re doing great. Move on to the next point. If not, take some time to work on your financial literacy by reading books, blogs like this one, or even taking a course like Dave Ramsey’s Financial Peace University.
Focus
Have you ever sat down at your computer to look over your finances and ended up on YouTube or reading the news instead? You’re not the only one, but that will hurt you financially.
The ability to focus on things like planning and budgeting, or even paying bills, without being distracted is vital to financial success. Focus not only applies to tasks but also goals as well. If you’re going to be a successful investor, you have to ignore the short-term noise (like the Dow dropping 1,175 points in a day) and keep your eyes on your long-term goals (it’s gone up 10,209 points over the last 5 years).
To improve your focus, choose one task or goal and force yourself to focus on it a little bit more than you’ve been able to in the past. If you work in small increments, it will build up over time. If you can’t spend more than 5 minutes on a budget, next week do 6. Then the next week, do 7. By the end of a year, you’ll be spending an hour on it! (Though you may not need that much time!)
Planning
Setting goals, creating a budget and following it, these are classic steps towards financial success. For a good look at how effective goal setting can be in building wealth, read this post about how one Pastor’s Wallet reader became a millionaire after 30+ years in the ministry.
Responsibility
In psychology, the degree to which people believe they have control over the outcome of events in their lives is called locus of control. An internal locus of control means you believe you have control to shape your own life. An external locus of control means you think outside factors determine your fate and you don’t have much say in the matter.
Those with an external locus of control don’t believe they are responsible for the outcome of their financial lives. Therefore, they don’t take positive steps that will help them build wealth. Those with an internal locus of control are much more successful financially. However, they tend to be anxious as well because they feel that everything rests on their shoulders.
As Christians, we know God has ultimate control over everything. However, we also know that he rewards diligence and wise stewardship (Matt. 25:14-30). So, we need to take responsibility for our financial lives and trust him when things are out of our control.
Confidence
Overconfidence can be dangerous, especially in investing. However, you need to be confident in your decision-making to be successful with money. In Jesus’ parable of the talents, the servant who lacked confidence hid his money and was chastised for it. You need to feel competent and confident to make wise financial decisions, which again ties into your level of financial literacy.
If you lack confidence, increase your knowledge in financial matters. You will feel capable and empowered and be able to make good decisions, instead of just hiding your money in your mattress.
Composure
When the markets tank, do you freak out? A good way to measure your composure is this: How much have you worried about the stock market over the past week? It’s been a bumpy ride, which we aren’t used to after last year.
Those that can maintain their composure during wildly volatile and fluctuating markets are those who find success in the long run. Your ability to focus on your goals and your understanding of the markets also play into your capacity to stay composed. Without composure, you will end up making unwise investing decisions that will cost you a lot of money.
Social Indifference
With the advent of social media, it’s never been so easy to keep up with the Joneses. Or at least try to. One great indicator of wealth building potential, as laid out in the book The Millionaire Next Door, is the ability to not let those around you influence your spending habits. If you have a strong desire to wear, drive, eat, and spend whatever you see everyone else wearing, driving, eating, and spending, then you will have no money leftover to build for the future.
Research has found a positive relationship between social indifference and net worth independent of age and income. The less you care about what everyone else is doing, the more you will be able to build wealth. So, get off of social media and live your life, don’t try to live someone else’s.
I hope you take some time to reflect on where you stand in each of these areas and where you need to improve. But, pastors, this isn’t just for you. I’m sure your counseling experiences confirm everything I’ve said in this article. If you want a financially healthy congregation, work on building these traits into your people, and not just into yourself.
