One of the key misconceptions I see holding people back is the idea that they don’t have the ‘smarts’ to be rich.
Maybe they never went to Uni. Maybe they didn’t do that great at school. Maybe they can’t tell their iPhone from their iPad.
And so they think, ‘well I’ll never be rich. Smart people earn good money, and I’m not smart people.’
But you need to ditch this idea right now. Nothing could be further from the truth, and it’s holding you back.
And you know, I can understand where the misconception comes from. It might be easier to imagine a rich doctor than it is a rich waiter.
And like a lot of misconceptions it’s based on a kernel of truth. A recent study based on US Census data found that there is a strong correlation between education and income. It found that over an adult’s working life, on average:
- High school graduates should expect to earn $1.2 million;
- Those with a bachelor's degree, $2.1 million;
- Those with a master's degree, $2.5 million;
- Those with doctoral degrees, $3.4 million;
- And those with professional degrees, $4.4 million.
So the more educated you are, the more income you earn.
But there’s two components to this equation. Part of it has to do with intelligence – they vague term used to describe brain efficiency. But a lot of it just has to do with training. If you train in an area that is valuable to a lot of people, then you’re going to make money from it – kind of regardless of how intelligent you are.
And if you’re a freaking genius, but you go off and do a masters and a post-doc in the 12th Century neo-feminist literature of upper Yorkshire, it’s unlikely that you’ll be able to turn that into serious earning power.
So being smart, doesn’t necessarily mean that you’ll earn more.
Secondly, earning more doesn’t necessarily mean you’ll be rich. Income is just one aspect of wealth. It’s what we do with the money we earn, where we invest it, that determines how ‘rich’ we’re going to be.
Personally, I think we get too hung up on technical intelligence. These are the kinds of things that I.Q tests measure. How fast you process information, make computations, calculate and make decisions.
But we now recognise that this is a very narrow way to define brain functioning. And if you think of all the wonderful things the human being is capable of – making art or music or love or other people laugh… then technical intelligence – our ability to understand what 2+2 is – is probably also the least interesting form of intelligence.
In recent years, we’ve expanded the definition of intelligence out to include ‘emotional intelligence’, and that’s a start. We’ve recognised that our ability to negotiate complex social relationships is an almost miraculous feat. And our ability to do it well can often be the difference between success and failure in life.
And so more and more, companies are rating the emotional intelligence of their employees as highly as their IQ.
But I think we can go even further with our definition of intelligence, and I’d like to introduce the term ‘value intelligence’.
By that I mean our ability to successfully relate to the things we value. And most importantly, to differentiate between the things we think we want, and the things we actually want in life.
Take my friend Roz.
Happily married in the suburbs, she bought herself a second-hand Mercedes A-Class as a little run-about. I’m not sure what Mercedes were doing when they built the A-Class. Horrid little fart-box of a thing if you ask me.
Anyway, a couple of weeks ago, the water-pump in Roz’s car goes. Back in the day when I used to roll in a Toyota Celica, if the water pump went, I’d call up George, and two hours and a carton of beer later, problem solved.
But I caught up with Roz the other day. Guess how much it cost her to fix it?
Yep. Five thousand dollars! To fix a water pump! You can buy a whole car for 5 grand, and a decent one at that.
5 grand. And for what? The water pump on a little run-about. Maybe it might drive a little better than other cars in its class, but Roz wouldn’t be one to notice. So what are you paying for? Slightly better quality, or that dinner-sized Mercedes badge on the front?
It’s the kind of dumb decision that millionaires rarely make.
Nope. Some are. But most aren’t.
According to Dr. Thomas J. Stanley, the best-selling author of The Millionaire Next Door and an expert in the habits and attitudes of wealthy people in America, millionaires rarely splash out on bling.
Stanley found that the vast majority of millionaires in the US:
- Live in a house that cost less than $400,000.
- Do not own a second home.
- Have never owned a boat.
- Are more likely to wear a Timex than a Rolex.
- Do not collect wine and generally pay less than $15 for a bottle.
- Are more likely to drive a Toyota than a Beemer.
- Have never paid more than $400 for a suit.
- Spend very little on prestige brands and luxury items.
No, they know that their hard-earned money is too valuable to waste on things that are simply about putting on a front.
That’s not to say they don’t enjoy their money. Of course they do. But when they splurge, they splurge on things they actually enjoy. They buy a Porche because they really love the way it drives, not because they’re trying to live up to some one else’s ideals.
I mean, take your own ambitions for example. What do you truly value? My bet is that quality time with your friends and family, free of financial stress, will rate much higher than wow’ing the neighbours when it really comes down to it.
This is value intelligence. To be able to think and act (and spend and invest) in a way that is aligned with your values.
So if you think you don’t have the smarts to be truly rich, forget it. It doesn’t matter. The question you should ask yourself is, ‘do I know what I truly want?’
If you can figure this out, and hold yourself to it, then you’re half way there.
And I can get you the rest.