Effortless Wealth

Effortless wealth may not be easy to achieve, but it doesn’t have to be hard, either. It starts with a look at your money habits.

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On The BIGG Success Show, we talk with Tom Corley about his wonderful new book, Effortless Wealth: Smart Money Habits at Every Stage of Your Life (Getting Rich Does Not Have To Be Hard)*. Here’s a summary of that discussion.

You may have seen him on the CBS Evening News, CNN, CNBC, Dave Ramsey, USA Today, Kiplinger’s Personal Finance, Success Magazine, Inc. Magazine, Reader’s Digest, Business Insider, and a whole bunch more.

He’s a Certified Public Accountant (CPA), Certified Financial Planner (CFP), and best-selling author, Tom Corley. He joins us to talk about his latest book, Effortless Wealth.

How easy is it to get rich?

The full title of Tom’s book is Effortless Wealth: Smart Money Habits at Every Stage of Your Life (Getting Rich Does Not Have To Be Hard). So we couldn’t resist – we had to ask: How easy is it to get rich?

Tom says it’s not easy. (NOTE: His title doesn’t say it’s easy. It says it does “not have to be hard”. There’s a BIGG difference between the two.)

He spent five years studying the daily activities of 233 rich people, and 128 people living in poverty. This research revealed four paths to wealth:

The “Saver / Investor” path” takes about 32 years to accumulate an average of $3.3 million.
The “Big Company Climber” (we would add a second “g” to “big” but we’ll let Tom make his point) takes about 21 years to accumulate close to $3.4 million.
The “Virtuoso” path- people with “mad skills” – takes about 20 years to accumulate approximately $3.9 million.
The “Dreamer / Entrepreneur” path is the shortest path which also builds the biggest nest egg – it takes 12 years to accumulate an average of $7.4 million.

So there’s not one way to become wealthy. There are multiple ways.

He adds that knowing what to do gets you halfway down the field. But knowing what not to do gets you in the end zone.

From multi-millionaire to broke in one day

Tom had experience learning what to do and what not to do. Because when he was nine-years old, his family went from multi-millionaire status to broke in one day. He says, when you’re young, emotional events like that sticks your memory forever.

His father owned a tool distributorship. He sold the business for $4.5 million (in 1972 dollars). The buyer was supposed to make three payments. But they only made the first $1.67 million payment.

So 18 months later, his father took the business back. The people who bought the company had run it into the ground. They didn’t do the things that his father taught them to do. So he took the business back and they were pissed.

30 days after his dad took back the business, the warehouse was a victim of arson. Of all the warehouses in the industrial development, his was the only one to burn down.

He lost about $3 million worth of inventory. So his dad called vendors to get the tools to replenish his stock. They told him his business still owed them money. His dad always paid cash. But the buyers had opened credit accounts – which they didn’t pay. To the tune of $3 million.

His dad had a choice. He could file for bankruptcy or he could pay his vendors. His father’s tool business was #1 business of its kind in the Northeast. He knew if he went bankrupt, 15 small tool manufacturers would likely go broke too. So his dad took the money he had remaining and used it to pay off the $3.2 million he owed his vendors.

With his remaining money, he fought his insurance company for the damage caused by the fire. After about 18 months, he surrendered. He had no money left.

He didn’t even have enough money to get home. As he was walking over the Brooklyn Bridge, he had a George Bailey moment. He thought, “Why don’t I just jump off this bridge? My life is over with. I failed my family. I failed my kids.” He really was thinking about committing suicide. But he didn’t. He said that, every time he looked over the edge, he saw the whitecaps in the water. And he said in every one of those whitecaps was a picture of one of his kids. He turned around and walked off the bridge.

How do people who get rich differ from those who don’t?

When he started doing this research, Tom said he had no idea that the conclusion would be that habits are the #1 reason why you’re rich or poor.

Self-made millionaires have growth habits through daily self-improvement, reading, and studying everything there is to know about their career or industry. They become virtuosos – experts in everything there is to know about their career or their industry, and develop unique skill sets through deliberate practice.

Because they do these things daily, they grow daily. So they’re constantly evolving and improving and getting better. And by the time success visits them, they are completely different people. Their knowledge base, or their skill base, renders them to be superior to most everybody else.

So these growth habits are probably the most important types of habits that you can engage in that separates the rich from the poor.

We conclude: You have to grow personally before you can grow your portfolio.

Tom adds: Money is a byproduct of success. And success is a byproduct of growth. It’s a domino effect.

Everybody wants to be a millionaire. But how many of them would spend 12 years learning, growing, facing adversity, overcoming obstacles and pitfalls, making mistakes that cost them an enormous amount of money, worrying about whether or not they’re going to make payroll – like the dreamers / entrepreneurs in my study. How many people have the broad shoulders to survive that adversity? Not many, he says.

It’s consistent with Tom’s research. Adversity visits everybody. Self-made millionaires find a way to overcome it. But they don’t surrender and never quit. They have a BIGG capital “G” stamped on them. It stands for “grit”. (That’s one of the reasons for the second “G” in BIGG!)

How to persevere through a pandemic like the coronavirus?

Speaking of adversity, we thought it only fitting to ask Tom about coronavirus. People’s portfolios have been decimated. Business owners are struggling to remain viable. What can you do?

He says: These black swan events happen. Remember 2008 and 2009? Guess what Warren Buffett was doing? He was buying. A lot of self-made millionaires in my study did the same thing.

For individuals sitting on portfolios, do nothing. The only time you have to do anything is if you need money to survive. If you have to withdraw money in order to feed your family, then you have no choice.

You have to do whatever you have to do. And we’re all in this together. You have family. You have friends. Some of them have money. They can help you survive. It’s their responsibility to help family and friends during a crisis like this. That’s what human beings do – we step up to the plate and we help. If you’re in desperate need of money, reach out to family and friends until the stimulus package, the Care Act – kicks in.

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Where and when do I start accumulating wealth? Is it when I graduate and get my first real job?

Without hesitation, Tom says to identify your habits. You can’t change habits you’re completely oblivious to right. So get a grip on the habits that you have right now.

Take three consecutive days making a list of habits. What do you do in a day? Look for activities you repeat again and again. These are your habits.

Next, label each habit. Is it good (+) or bad (-)?

Now, start tackling the bad habits. Pick one. Introduce a good habit that conflicts with that bad habit.

For example – if you sit on the couch every day, watch TV, eat potato chips, and drink beer, that’s a bad habit. Introduce a new habit – say aerobic exercise. Take a baby step. You always baby step new habits.
So you do 5 – 10 minutes of aerobic activity every day.

Keep doing the counter-balancing activity again and again, until you pave a highway in your brain. It may take a month. Then amp it up to fifteen minutes of daily aerobic activity for a month. Then you could go to 20 minutes the next month, and 30 minutes the month after. By the next month, you’re up to 40 minutes a day of aerobic exercise.

Exercise is a keystone habit, meaning it has a domino effect. I will eliminate contradictory habits automatically. You will stop doing conflicting habits that get in its way – like sitting on a couch, eating potato chips, and drinking beer.

And the great thing about Keystone habits, like aerobic exercise, is that they create complimentary habits. These are things like eating healthy, stopping smoking, intermittent fasting, and losing weight.

What money habits should we follow at each age?

Effortless Wealth is really written for Savers / Investors. They’re happy being an employee. They don’t want the responsibility of owning a business (Dreamers / Entrepreneurs), becoming a senior executive (Big Company Climbers), or developing mad skills that often require a lot of time and money (Virtuosos).

If you’re a Saver / Investor, you just want to do what you do and become a millionaire. The only way that’s possible is to create a standard of living that only costs 80% of the income that you earn.

So, you save and prudently and consistently invest 20% of your income. Over time, your investments will grow. You’ll maintain your standard of living, so you keep saving 20% (or more). If you earn $50,000 a year – in about 32 years – you’ll be financially independent, maybe even wealthy.

So saving is one of the rich habits.

Living below your means would be another one.

Being frugal would be another one.

Associating with other like-minded frugal savers would be another rich habit. Forge relationships – rich relationships – with people that have the same or similar habits (such as saving and investing) as you.

Why is it so difficult to form rich habits?

Tom says it’s because we live in a consumer-based society. Everybody is trying to keep up with everybody else, especially now and in light of social media.

So you see pictures of the Kardashians going on vacation somewhere on a yacht. You think I’m going to have that. So you book a vacation with your friends on a cruise that you can’t afford. And you spend a year paying it off.

It’s really the influence of the people around you that takes you off track. It’s so important to really be aware that these things that are going on around you are influencing your decision making. Peer pressure can have a real strong influence on how you spend your money. You just have to consciously that you’re not going to be part of the consumerist herd.

What if I’m 50 years old and haven’t saved anything?

Tom says you have to start doing something. You have to start cutting back somewhere. And it’s difficult.

When you’re 45 years old, and you have two kids in college, you’re stuck in between a rock and a hard place. There’s almost nothing you can do about that. You want to try and get your kids through college. As parents, we have that goal.

If you’re out of that stage – maybe you’re in your early 50s and you just don’t have enough saved up – because you spent $280,000 a kid over the last 20 years. Now, those kids are out of the house. You don’t need that big house. It’s time to downsize.

Housing is the number one cost of living. So if you can reduce your housing costs from say 35% down to 25%, now you have 10% that you can start using to invest. And the interesting thing is that momentum gets built up when you start forging the safe saving habit even in your early 50s. It grows and it grows.

You may not have quite enough to retire on when you turn 70. When you start saving and investing late, it means you have to continue to work into your late 60s and early 70s. There’s just there’s no way around. Social security’s not going to be enough.

The other thing you could do in conjunction with this is pursue something on the side. Build a separate stream of income. It usually takes about five years for one individual stream of income to start bearing fruit. Maybe it will create cash flow that you can invest for your retirement years or you can sell the business.

The two of us conclude: If you’re getting up in years, there’s still time. There’s still hope. You just need to act with a sense of urgency.

Or as Tom says, “The only time to raise the white flag and surrender to life is when you’re dead.”

Then he shared a great story about Elon Musk. In August 2008, he was on his fourth experimental flight of the Falcon rocket. The first three had failed. If this flight failed, he was out of money.

Years later, an interviewer asked Musk about that fateful time:

“You had $170 million at one point. You’d gone through almost all of it – much of that because of SpaceX. And at this point in time, failure meant you’re literally out of money. When the rockets were failing, why didn’t you just say, ‘You know what? I’m going to fold up my tent. I’ve got $50 million left. I’m just going to live off of that. I tried. I gave my best effort.’ Why didn’t you just quit at that point?”

Musk responded:

“It never crossed my mind. In fact, I will tell you this. I would never quit. The only time that I would quit on anything is either when I am physically disabled, or I’m dead.”

What a great example of the Dreamer / Entrepreneur Tom talks about in his book. We’ve barely scratched the surface of what is in Effortless Wealth*. We highly recommend this book to you!

Until next time, here’s to your BIGG success!

George “The Professor” & Mary-Lynn
Co-Founders, BIGG Success

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