Archives for December 2018

Poverty isn’t just one thing. It’s complicated.

In my five-year Rich Habits Study, I was able to interview 128 poor people. I learned a lot about poverty. More than most. Understanding poverty, I believe, helps inoculate you from it.

For some, poverty is thrust upon them, through no fault of their own. For others, poverty is their own doing.

While each of the stories of the 128 poor people I interviewed is unique, I did find some commonalities.

According to my research, there are 5 types of poverty.

#1 Functional Poverty

The poor in this category are comprised of people who just don’t make enough money in the work that they do. These individuals are good people. They have strong family values. Their households are run by good parents who love their children. They are hard-working. Frugality is forced upon them, so they learn to squeeze more out of every dollar.

They don’t make a lot of money because the work they do is not highly valued by society. They are able to provide the bare necessities for their children.

Because functionally poor children are raised in a stable, nurturing, loving environment, they are given the tools by their parents to break out of poverty. Many do. Most of their children wind up in the middle-class, but some are able to excel and become rich.

The vast majority of the poor who do become rich, come from this category.

#2 Dysfunctional Poverty

The poor in this category were raised by dysfunctional parents. Addictions are a common variable among those raised in Dysfunctional Poverty. One or both parents may struggle with drugs, alcohol or gambling. Consequently, single-parent households are commonplace in this category.

Hatred is another common variable among the poor in this category. They hate and disrespect the law and society. They are frequent law breakers. Theft and assault are the tools of their trade.

Psychological problems are yet another common variable of those stuck in Dysfunctional Poverty. They are mentally and emotionally unfit. Those with psychological deficiencies somehow slip through the cracks of society; their mental deficiencies ignored or unaddressed.

Incarceration of one or both parents is a common theme in these households. Children are raised by a single parent, or assisted by others – a grandparent, foster parents, charitable organizations, governmental institutions, etc.

The vast majority of the poor, come from Dysfunctional Poverty. This is the number one source of poverty in America.

#3 Exploited Poverty

The poor in this category are individuals who are lulled into dependency through government entitlement programs. They are given the bare necessities of life through these government entitlement programs. Because these programs lack meaningful accountability or an exit strategy for the poor, the individuals caught up in these programs learn to game the system in order to maintain their entitlement benefits.

Many illegal immigrants in America are trapped inside these government entitlement programs, and poverty becomes generational – meaning it spans multiple generations, each one forging the habit of dependency on these programs.

#4 Temporary Poverty

The poor in this category are forced into poverty through misfortune or bad luck. Death of a parent, disability of a parent or family member, disease and health issues, loss of a job, an accident, etc.

Most individuals in this category are eventually able to recover from their misfortune or bad luck and pull themselves out of poverty.

#5 Self-Inflicted Poverty

The poor in this category have no one but themselves to blame for their poverty. These individuals have Poor Habits. They are lazy. They do nothing to improve themselves. They take uncalculated risks with their money. They overspend. They do not save. And they are woefully incompetent in managing their money.

Many of the individuals in this category wind up poor in their old age; dependent on their children, family or friends to sustain themselves.

This is the second greatest source of poverty.

So, can poverty be overcome?

The short answer is yes.

However, Dysfunctional and Exploited Poverty are without a doubt the hardest to overcome. Individuals raised in these households are really placed behind the eight ball in life. Overcoming these two types of poverty is possible, but it requires an almost superhuman effort. But, still, it is possible, if the desire to change is strong enough.

In the movie Trading Places, Lewis Winthorpe III, an old money, wealthy commodities broker, with an Ivy League education played by Dan Aykroyd, is forced to swap places with a destitute, homeless conman, played by Eddie Murphy.

This forced adversity drags Winthorpe down into the abyss of poverty and hopelessness, nearly breaking him. He does not break, however. He resurrects himeself because he does not see himself as a destitute, homeless conman. Instead, he sees himself as a successful, wealthy commodities broker.

Everyone, at some point in their lives, faces adversity.

Adversity can break you or it can lift you up. It all depends on your vision of yourself.

For the self-made millionaires in my Rich Habits Study, adversity did not break them. They survived because, despite their failings, they held on to the vision of who they desired to be. This vision forced them to acknowledge their failings and propelled them to take massive action.

In short, their vision forced them to change.

This change was not an easy process. It took time. But everything about their lives was forced to change. Their knowledge, skills, their relationships, and their mindset improved as a result of their desire to change.

What drove them to change was the vision of the ideal person they desired to be.

Adversity cracks everyone’s shell. When your yoke is exposed, the only thing that will save you from self-destruction is your vision of your ideal self.

Define who you want to be today. Anchor yourself in that vision. And believe.

When adversity strikes, that vision will be the yoke which will give birth to your new amazing life.

My father had high blood pressure. I remember how bad it was because it very nearly killed him in his mid-fifties, before he got it under control with the help of  prescription drugs.

About four years ago, at age 53, I went in for my annual physical. My Doctor took my blood pressure and it was high – 140 over 98. The prior year, as in all prior years, it had been 120 over 80. He did another reading and then a third reading at my insistence. No change – 140 over 98. Naturally, he was concerned and recommended that I begin a regimen of statin drugs to combat my high blood pressure.

I demurred and said I would fix this naturally. To allay his fears, I scheduled another physical in six months and told my Doctor that if my blood pressure did not come down by that time I would consider his pharmaceutical remedy.

Over the next six months I did the following:

• Daily Running (Aerobics) – My goal was to run a minimum of 20 minutes every day. After three weeks I was able to increase that to 30 minutes or more a day. Over the weekends, I ran about 80 minutes.
• Lifting Weights (Anaerobics) – I lifted three days a week for about 40 minutes per session.
• Healthy Diet – I stopped eating breakfast and ate mostly vegetables for lunch. I asked my wife to include one or more vegetables with our dinner and add some fish. I had a Poor Habit of drinking between one to three beers a night. I cut back on my drinking.

At my six-month physical, my blood pressure had dropped from 140 over 98 to 118 over 78. Also, my Doctor pointed out that my weight had dropped from 190 pounds, six months ago, to 181 pounds.

“How did you do it?” He asked.

I told him I had turned my bad genes off and my good genes on.

I explained to my Doctor that one of the three businesses I ran required me to do habit research and that this habit research involved a need in understanding how habits affect the body and the brain.

Thanks to my habit research, I knew that I could turn off my father’s bad high blood pressure genes and turn on other good genes which would act like sentinels, keeping those bad genes in check.

The trick to turning off bad genes and turning on good genes is forging certain good health habits:

• Intermittent Fasting – 12 hours or more without eating.
• Reducing Junk Food – Bread, Pasta, Alcohol, Processed Foods, etc.
• Eating Healthy Food – Two-thirds of the food you consume every day should be vegetables, low-sugar fruit (apples, avocados, non-ripe bananas, grapefruit, blueberries, raspberries, blackberries), salads, fish, grass-fed beef, olive oil, pasture-raised chicken and turkey, etc.
• Daily Aerobics – For me this was running 20 minutes a day. But you can substitute fast walking, biking, swimming, etc. The key is to get your heart rate up to the 130-140 range.
• Anaerobic Exercise – For me this was lifting weights. But you can substitute resistance exercises, high intensity impact training, core exercises, etc. . daily aerobics and alternating anaerobicsand daily exercise

Epigenetics is a word that describes how your lifestyle can affect gene expression. Your lifestyle can turn genes on (Methylation) or off (Demethylation).

We are all born with bad genes and good genes. Your lifestyle can turn bad genes on or off. Your lifestyle can also turn good genes on or off.

Forging good health habits keeps the bad genies in your bottle and sets the good genies free.

When you are in an emotional state, the prefrontal cortex, your rational, executive command and control center, shuts down. The amygdala, the emotional control center of the brain, then takes over.

When the amygdala is in control of your decision-making, logic is removed from the decision-making process.

A common example of this is overcommitment.

A boss, supervisor, or client requests a meeting with you. At the meeting they ask you to do something for them. Some new project or initiative. Your plate is full. You know this because your prefrontal cortex informs you of this in real time. However, you also want to please them. That desire to please is an emotion.

Your prefrontal cortex recedes into the background, suppressed by the fired up amygdala, which was turned on the moment your desire to please entered the meeting. You walk out of the meeting with more work.

The next morning you wake up. Your amygdala has quieted down and your prefrontal cortex is back in control. Your first thoughts are “why did I say yes?” You have a family and other responsibilities that will now be impacted by our emotional decision.

You didn’t have an opportunity to discuss the impact of this new commitment with your partner or spouse before you made the decision. Now, after the fact, you must. This new commitment will require your partner or spouse to take on additional responsibilities. Their plate, however, is also full. You fight. You’re both unhappy.

Overcommitment is a Poor Habit. It is always an emotion-based decision. To remove the emotions from your decision-making, you must give your amygdala time to calm down and allow your prefrontal cortex to control the decision-making.

The best time to make a decision is upon waking up in the morning. This is when the amygdala is dormant. Deferred decisions remove the amygdala from the decision-making process and put your prefrontal cortex in control. The decision you make will very likely be the right decision.

“Let me sleep on it.”

There’s a lot of old, sound wisdom in those five words.

Definition of Heuristics: The process of experimentation through trial and error.

Those who achieve the greatest success in life, and thus, accumulate the most wealth, are individuals who have combined three things:

1. Monetization
2. Passion and
3. Innate Talent

Making money (Monetization) doing something you love (Passion), which is easier for you to master than it is for others (Innate Talent), will make you rich and successful in life.

Each person possesses certain innate talents; activities they are naturally better at doing than others. These innate talents are imprinted on you at birth by virtue of your unique combination of the 20,000 genes you inherited from your mother and your father.

When an innate talent is exposed, those talent genes awaken and send a powerful signal to the emotional center of your brain, altering you, through passion, that you’ve struck gold.

Passion is life’s way of notifying you that you’ve stumbled upon an innate talent – the thing you were born to do – your main purpose in life. When you put your innate talents to use to make money – success, wealth and fulfillment result.

The sad truth for most people, however, is that their talent genes remain dormant, never seeing the light of day.

Why?

Lack of experimentation.

Only by experimenting with numerous, diverse activities will you be able to strike gold – finding that which you were born to do.

In short, you need to learn how to dabble.

Experiment with different activities. Explore one new activity a month. Devote whatever time you have available to that activity every day.

One process, which I recently touched on (YouTube Challenge), involves making a list of different new activities you’d like to experiment with. Then, one by one, learn everything you can about each activity and engage in that activity for one month.

After a month, you will discover if it is an innate talent:

• It will be easy for you to do and it will also make your heart sing (you’ll want to keep doing it) or
• It will be very hard for you to do and will make your heart cry (you’ll want to stop doing it).

We all have one short life to live. The only way for us to find our true calling is through heuristics – experimentation.

Start your experiment today!

The rich get richer.

You’ve no doubt heard that soundbite many times.

Is it true?

The short answer is no.

According to the Williams Group, a wealth consultancy group, 70% of wealthy families lose their wealth by the second generation, and a stunning 90% by the third.

Still, those raised in wealthy households have a huge advantage over those raised in poverty.

Advantages

• Better Education – Those raised in wealthy households generally live in wealthier neighborhoods. These neighborhoods typically have better school systems with better teachers and more educational resources.
• More Resources – The rich obviously have more resources. They can afford to hire tutors for their children. They can afford to fund ancillary costs associated with the clubs or organizations their children are able to participate in. They can afford to enroll their children in SAT preparation courses. They can afford to fund college education for their children.
• More Time – Many of the children raised in poor households are, at some point, called upon to help pull the cart – they must find work to help support the family. This limits how much time they have to do anything else. Those raised in wealthier households do not have this need. Thus, wealthy kids have more time to study, more time to participate in school clubs and more time to spend building long-lasting relationships with their wealthy friends. These long-lasting relationships pay dividends down the road. Finding a job is easier – just reach out to one of your childhood friends, and ask them to open a door for you.
• Formal Education – Wealthy kids often attend expensive private schools. These schools are more focused on preparing their students for college. As a result, almost 100% of graduates from private high schools attend college. Conversely, only about 16 percent of low-income students graduate college.
• Success Peer Pressure – Children raised in wealthy households are expected to go to college and sometimes graduate school. In the minds of their wealthy parents, this tees their kids up to find better, higher-paying jobs, upon graduation. In these wealthy enclaves, this becomes a shared expectation wherein everyone within these rich neighborhoods is on a similar path – the pursuit of a college and/or a graduate school education. This “Herd Doctrine” has a very powerful gravitational pull that directs the behavior of those inside the “rich neighborhood herd”.

But, growing up rich also comes at a cost. There are certain disadvantages to growing up rich that inhibit the pursuit and accumulation of wealth.

Disadvantages

• Less Willing to Take Risks – Those raised in wealthy households have a lot to lose. Thus, they are more risk averse than those raised in poverty, who have nothing to lose.
• Inferior Work Ethic – Comfort can lead to complacency. Those raised in a wealthy household do not have to work for their meals, their school supplies, their video games, their iPhones, etc. When you have no choice but to work in order to get the things others are given, you are forced to develop a hard work ethic. Because success requires a strong work ethic,  if you lack it, success will be impossible.
• Fear of Failure – One of the downsides of failure, is that failing at something can put you in the poor house. When you grow up poor, you don’t fear poverty as much, because it is something you are familiar with and something you survived. Therefore, failure does not frighten you as much. Those raised in wealthy households, however, become accustomed to having the good things in life. Thus, fear of failure means losing what you have. That fear will hold you back from the pursuit of your dreams, because such pursuits could fail.
• Uncomfortable With Failure – Those raised in wealthy households have many safety nets that come to the rescue when they fail at something. Consoling parents, tutors, private coaches, etc. When these children begin work in the real world, however, the real world will not coddle them, like their parents. They will eventually be exposed to failure, and when they are, they will be ill-equipped to overcome it on their own.
• Unaccustomed to Sacrifice – Those raised in wealthy households are given things they did not have to work or sacrifice for. The pursuit of wealth always requires sacrifice. Sometimes for many years. If you’re unaccustomed to sacrifice, it will be more painful and less tolerable for you. Grinding it out is typically not in the DNA of those raised in wealthy households.

Success requires change and one of the seven steps to change is growth. You grow by learning. This learning can be knowledge-based, skill-based or both.

One of the advantages our generation has over all other generations is easy access to information. Information that can accelerate change, leading to success and producing wealth.

If you were to peruse YouTube, you’d find a lot of videos. Many of those videos do nothing but feed time-wasting habits. But many of those videos also educate.

When I decided I wanted to build a horse shoe pit in my back yard, I visited YouTube. There, I found an abundance of videos explaining and showing exactly how to do that. I watched a few videos, took notes, and after about an hour, went outside and began building my horse shoe pit, based on my notes.

Although I had never built a horse shoe pit before, the education I acquired from those YouTube videos helped me to build the perfect horse shoe pit.

What new knowledge or skills would you like to acquire?

See if you can make a list of twelve. This will become your Growth List.

Next, find a binder and put your Growth List into that binder. This will become your Growth Binder.

Then, each month, focus on one of the twelve items on your list. Visit YouTube and watch at least three videos about the item on your list. Take copious notes. Review your notes. Try to summarize your copious notes into a one-page summary. Then put all of your notes and summary page into a Growth Binder, with a slipsheet or topic separator, in order to separate it from the other items on your Growth List.

If an item on your list is skill-based, make sure you practice what you’ve learned, after reviewing the notes. This will help reinforce what you’ve learned and help you develop a brand new skill.

Do this for each item on your Growth List. After twelve months you will have advanced your knowledge and your skills enormously.

Ideally, if your Growth List is tied to your dreams and goals, it will help move you forward towards the realization of your dreams and goals.

Good luck!

Those who struggle with poverty, while growing up, see the world as a very different place than those raised in the middle-class or in wealthy households.

In my Rich Habits Study, 41% of the 177 self-made millionaires were raised in poor households. Yet, somehow they managed to break out of their poverty as adults.

Ironically, according to my research, being poor actually endows you with certain advantages over the middle-class and the wealthy.

More Willing to Take Risks

One of the common denominators among all of the self-made millionaires in my study, was the need to become comfortable with taking risk. Growing up poor forces you to take risks in the pursuit of wealth. Overcoming the fear of taking risks, therefore, becomes a habit.

With respect to my Rich Habits self-made millionaires, the fear of taking risk resurfaced only after they accumulated their wealth. At that point, the fear of losing their hard-earned wealth motivated them to hire wealth advisors, insurance agents, CPAs, Estate Planners and other financial advisors to help them preserve their wealth. So, becoming rich actually lowered their tolerance for taking risks, risks which could potentially decrease their wealth.

Desire to Change is Great

Poverty can either beat you down or make you stronger. For the self-made millionaires in my study, it made them stronger. That’s why they were in my study – poverty motivated them to achieve.

Their desire to become successful and rich drove them to transform themselves. This desire to change motivated them to learn what they needed to know in order to succeed. It also forced them to develop and perfect superior skills in order to earn more than their competition.

Superior Work Ethic

A hard work ethic is a prerequisite to success. Those who are raised in poverty, have no choice but to work hard. Thus, the poor develop a hard work ethic. When you are able to combine that hard work ethic with your dreams and goals, what a powerful combination!

If you grow up in an environment of comfort, you might be less willing to do the hard work success requires.

Failure Doesn’t Scare You As Much

One of the downsides of failure, is that failing at something can put you in the poor house. When you grow up poor, you don’t fear poverty as much, because it is something you are familiar with and something you survived. Therefore, failure does not frighten you as much and, in fact, emboldens you to take risks.

Poverty Removes Rose-Colored Lenses

When you grow up poor you see things through a much different lens. You know life can be very hard when you are poor. Things can and do go wrong. You know that because you experienced that growing up in poverty. The experience of poverty allows you to see things as they really are and not allow yourself to be blinded by unrealistic rose-colored optimism.

Being anchored in reality, allows you to see potential pitfalls ahead of time, which enables you to navigate and pivot around those pitfalls. Those who are not raised in poverty, might see things as they wish them to be and be blind to reality, until it hits. And when it hits, it’s always a surprise, leaving you ill-prepared to deal with that reality.

Comfortable With Failure and Setbacks

Those who struggle with poverty become familiar with failure and setbacks. Consequently, when things go wrong, as they often do in the pursuit of wealth, those raised in poverty don’t raise the white flag and surrender. Rather, they see failure and setbacks as normal and something that can be overcome.

Accustomed to Sacrifice

Growing up poor means you are unable to possess the things non-poor people take for granted. Poverty forces you to become accustomed to doing without. This actually is a great advantage. The pursuit of wealth always requires sacrifice. Sometimes for many years. If you’re accustomed to sacrifice, it’s less painful and more tolerable.

Frugality is a Habit

The poor have no choice but to be frugal with their spending. They forge the frugality habit at a very young age. And, as you know, habits are hard to break. This frugality habit, therefore, follows the poor into their wealthy adult lives.

Growing up poor is not necessarily a disadvantage. Poverty forces you to develop certain traits that can actually be leveraged to your advantage, helping you in the pursuit of your dreams and goals.

Do bad things happen to you?

How often?

Seldom, occasionally, more than occasionally, all the time?

If bad things are a part of life for you, it’s time for some serious introspection.

We are creatures of habit. That means we do things without consciously being aware that we’re doing them.

When life goes wrong too often, that’s a red flag that your repetitive behavior, thinking and choices, also known as habits, are to blame.

Relationship Problems

Relationships are the currency of the wealthy. Wealthy people build strong, powerful and lasting relationships with upbeat, optimistic, enthusiastic, can-do people.

If you’re having relationship problems, there are two main causes:

#1 Your Relationships Are Toxic

You have surrounded yourself with toxic people. Toxic people have Toxic Traits that throw wrenches into our lives and those Toxic Traits eventually become intolerable:

• They constantly complain
• The constantly criticize
• They are negative
• They are pessimistic
• They are on an endless search for problems
• They struggle financially
• Their lives are filled with drama
• They have addictions

#2 You Are Toxic

You possess Toxic Traits and those Toxic Traits eventually become intolerable to others, destroying or impairing your relationships.

Job Problems

Wealthy people make themselves Un-Fireable. They do this in three ways:

#1 They Become Virtuosos

Every day they invest in themselves by growing their knowledge and perfecting their skills via daily practice. This transforms them into Virtuosos, experts in some particular niche. And because they are Virtuosos, they are indispensable to their employer or customers.

Those who struggle keeping a job have not invested the time in improving their knowledge or developing superior skills. As a result, they are expendable, and among the first to be fired.

#2 They Are Likeable

Successful, wealthy people are likeable. People want to work with them and do business with them. As a result, they have strong relationships with the people who matter the most – superiors and customers.

Those who struggle keeping a job may be victims of their own lake of likeability.

#3 They Build Relationships With Decision-Makers

Wealthy people work hard in building strong, powerful relationships with decision-makers. They talk to them regularly, they make an effort to learn more about their lives and their interests and they do whatever they can to help make their job easier. They acknowledge birthdays and life events.

Money Problems

There are essentially three ways to create wealth:

1. Save/Invest – These millionaires reduce their standard of living in order to live off 80% or less of their income. Then they prudently invest that 20% prudently, every year, for many years.
2. Become a Virtuoso – These millionaires either have a unique knowledge-based expertise or developed some expert skills that set them apart from their competition. As a result, they are able to charge a premium for their products or services or are able to rise up the corporate ladder and become beneficiaries of wealth-building stock-based compensation.
3. Entrepreneurship – These millionaires pursue a dream and keep pursuing that dream until they succeed.

If you’re struggling financially, it is most likely because you are living beyond your means. You could be living beyond your means because you don’t earn enough to meet your living expenses or you make a good living but spend too much money.

Health Problems

The wealthy in my Rich Habits Study habitualized good health. They did this a number of ways:

• Eating Healthy
• Daily Aerobic Exercise – Aerobic exercise has five important benefits:
  1. Improves Mental Functioning
  2. Improves Health
  3. Boosts the Immune System Which Helps Prevents Disease
  4. Reduces the Effects of Chronic Stress
  5. Makes Us Feel Happier
• Sleeping 8 Hours a Night – There are many benefits to a good night’s sleep:
  1. Sleep Repairs Cell Damage
  2. Sleep Creates Memories
  3. Sleep Clears Out Waste Material Within Each Cell
  4. Sleep Helps Grow & Repair Muscles
  5. Sleep Erases Bad or Unimportant Memories
  6. Sleep Grows & Distributes New Brain Cells
  7. Sleep Restores Willpower
  8. Sleep Reduces Inflammation and Helps You Think Clearer
  9. Sleep Cleans Brain Cells

If you want to get off the problem treadmill, you have to make yourself aware of the habits that are causing those problems. Self-awareness is always the starting point of change.