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Do you Have the Most Important Trait Required to Become a Millionaire?

  • October 1, 2018
  • 7.2K views
  • 6 minute read
  • Jeff Wiener
Millionaire man
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$100 now or $200 in one year. Which would you take?

Rebecca Olsen, a Ph.D. researcher from the University of New Zealand, studied this very question. Surprisingly, she found that many people chose to take $100 now rather than wait and receive $200 in one year.

Olsen is studying how to help people be more self-controlled and to focus on the longer-term gain rather than the immediate reward. She found that people might know what’s better for them, i.e. to stay healthy, eat properly, exercise, and save money, but they struggle to follow through on those goals, and choose to take the smaller rewards now rather than wait.  

What she found is that “the act of imagining personal, future events has been shown to help people make more self-controlled decisions. This means vividly imagining an event that will happen when you have achieved the long-term goal you’re working towards.”

The fact that people will choose $100 now rather than wait one year “tells us that we don’t always know how difficult it is to make the self-controlled choice until we’re faced with it.”

There are many choices in the business world that involve self-control and deferred gratification—like the decision to break some bad news to your employees or discontinue a product line you love that’s just not selling, or spend a big chunk of money on something un-glamorous like cybersecurity.

Have you thought about what you’d do in those situations? Make the hard decision, or do what feels good in the moment? $100 now, or $200 later?

I’m sure most of you chose the $200 later, but, as Olsen says, you don’t really know how you’ll react in a situation until you’re actually faced with it.

On a scale of one to ten (with one being low and ten being high), how disciplined do you think you are? This is a critical self-reflective question, so stop for a minute and provide an honest assessment of your level of self-discipline. We’d all love to be a 10, but as with all character traits, discipline comes in varying doses in different people.

If you answered between one and five, it’s not necessarily a problem. In fact, it’s great news—because problems with discipline are completely fixable. Even if you struggle with discipline, you can make certain behavioral changes to your day-to-day behaviors that will build discipline into your daily life. Start doing that, and you’ll start seeing improvements in your schedule, cash flow, employee satisfaction and more.

Are Successful People Born Disciplined?

What do the most successful people in your field have that you don’t? Discipline is probably way up there on the list. Luckily, discipline isn’t an innate quality—it’s a skill that you can develop with practice.

Now, let’s think about the typical entrepreneur.

By their very nature, entrepreneurs are hyper-competitive. The more competitive they are, the more they have a sense of needing to win. Not only in business, but also in their personal lives. In keeping up with the Joneses.

That hyper-competitive quality can help make business owners successful. But it can also hold them back. The reason why is obvious. The typical Type-A businessperson is trying to win the material object game. They want the car, the boat, the shiny new office space that shows what a big deal their company is. But in order to really win big, you need to delay today’s purchase, choose the $200 in one year.  

Your business peers might be more competitive than you or have more stuff. But if you’re more disciplined than them, you win.

I can’t stress how important the concept of financial discipline is, not only in building your business but also in building your wealth. Every unnecessary purchase you can delay— every extra dollar you save—means you have more for:

– investing in your business today.
– investing in interest and compound earning today and in the future.

When it comes to growing your business, knowing which purchases are necessary and which are a wise investment can be tricky. So let’s start with the easy part: The money you spend on your personal lifestyle, like that new leather jacket, truck, boat or dream house. Let’s consider the math of saving $100, and choosing to either delay your purchase or to not purchase that new jacket at all.

On the personal side, if you can reinvest that $100 at 5% interest, with compounding, in 5 years that $100 is worth $128. That means the little things you buy for yourself—or don’t buy—add up.

What if you save that $100 were going to spend on a jacket and invest in your business instead? Because your business is profit-generating (we hope), now the math is slightly different. If your business produces a rate of return of 15% per year, then today’s dollar will be worth approximately $200 in 5 years, and $400 in 10 years.

Alternatively, let’s say you’re looking to sell your business. A business is typically valued as a multiple of your EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). Assuming a 5 to 6 times multiple of EBITDA, for every extra $100 saved, that increases the value of your business by 5 or 6 times.

According to The Millionaire Next Door, overspending on your home could be the most significant inhibitor to achieving financial independence.

What about borrowing to expand your business? The answer is the same: Borrow beyond your means, and you struggle day after day to afford the debt and payments.

Having too much debt, either in your business or your personal life, leaves little room for error.  From a business perspective, it restricts your ability to think clearly about how to expand. And, should business slow down for a period of time, it leaves you with little breathing room because you need to constantly feed your interest and debt payments.

There’s a reason that in almost every business and financial book you read, one of the first things that is discussed is the art of proper budgeting and financial planning, delaying purchases, saving for tomorrow, and discipline. There’s a consistent theme throughout, and the point is, you can’t spend your way to riches on the business side, just as you can’t on the personal side.

If you want to grow your wealth, you’ll need to master the art of saying “no” to the next purchase and reconsider if you need to buy that new car, boat, house, or even that new office space or high-profile ad campaign.

Let me repeat that.

The core of building your business and wealth is having the discipline to say NO.

Until you’ve mastered the art of saying NO, and the art of discipline, you’re going to struggle to get to the next step, both in building your business and in creating your wealth.

________________________

My goal is to help entrepreneurs scale their business, improve profits, and, ultimately, create wealth. I post two blog posts a week.  You can subscribe here.

Want to know more about me and read some of the other interesting small business growth, profit and wealth stories I’ve written.

Here’s an interesting post I wrote:  The Top 2 Mistakes I Made When I Started My Business. That Was a Long Time Ago, and Entrepreneurs Are Still Making the Same Mistakes Today

Here’s one of the first articles I wrote:  My Journey Post Business Sale as I Sail Into a New Harbour.

Are you a younger entrepreneur? Here’s another interesting article I wrote:

My Response to an 18-Year-Old Who Wants to Become a Millionaire by the Time He’s 30.

Download my book and Amazon bestseller (number 1 in business and non-fiction).  You can get your FREE copy here.

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