Will hanging out with rich people make you rich?

April 23, 2012 — Leave a comment

Me and Warren Buffett

Can hanging out with rich people make you rich? As with many personal finance questions, the answer is usually “it depends” because there are two types of rich people.

The first type of rich people got there with many years of consistent saving and investing (slow and steady). The second group of rich people did it with a great salary or business idea (fast and furious). There are of course a combination of both, but we’ll keep them separate for discussion purposes.

One example of the rarer rich person who has the qualities of a great business mind and slow and steady is my friend Warren Buffett… and it’s so obvious that we’re friends because we bowl together (above).

I want to learn from the slow and steady group because they’ve created a strong financial base and stuck with it. However, I’d also like to learn from the fast and furious because they usually have a great business mindset.

The most dangerous part is picking up spending habits of the fast and furious and the slow and steady business acumen of the slow and steady!

Who are you hanging out with today?

Think about the group of ten people that you hang out with most. It could be your family members, friends, club members, or work associates. A common saying is that we tend to have a salary that is the average of this close group.

Does that mean if you start hanging out with rich people, you might get rich? As stated previously, if you hang out and learn the right things from rich people, it might happen.

The ten closest friends income predictor can also be viewed as the chicken or the egg problem. Do people become rich because they hang out with millionaires, or do they hang out with millionaires because they are rich? The latter might be true, but I think the former can be as well.

You hang out with friends that have similar interests as you. If all of your friends own their own businesses and are fast and furious type people, there is a good chance the group will talk a lot about their companies. This will get you in the entrepreneurial mindset, and you will keep your eyes open for opportunities. They will also have great connections that will enable you to start your own business.

If you hang out with the slow and steady group, you’ll also learn to take control of your money and invest wisely.

Do you need new friends?

This is often a taboo subject because we aren’t supposed to pick friends for our own benefit. However, if you have a friend who is constantly pushing you to do drugs and commit crimes, not many people would blame you for ditching that friend.

What if you had a friend that was a nice person but was constantly negative and was always played the victim? This isn’t very empowering and over time it will start to drag you down. They may not even want to see you succeed because they’re afraid you’ll leave them behind. As Charles Kindleberger said, “There is nothing so disturbing to one’s well-being and judgment as to see a friend get rich.”

I took an inventory of my ten closest friends and made some assumptions on their incomes, but as it turns out, their average income is still higher than mine. This means I still have room to grow! As alluded to earlier, just make sure you don’t try to match the spending habits of those who make a lot more than you and you should be fine.

Is this rule relevant for you? Is your income the average of your ten closest friends?

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