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Building wealth requires resilience and perseverance.
- To build wealth, you need two qualities, according to a researcher who studied more than 600 millionaires: Resilience and perseverance.
- These qualities are characteristic of those who can afford to retire early and entrepreneurs who become self-made millionaires.
- It takes conscious effort to develop resiliency and perseverance.
What does it take to get rich?
It may seem like building wealth is impossible, but the answer lies in two qualities that anyone can develop: Resilience and perseverance.
That's according to Sarah Stanley Fallaw, co-author of "The Next Millionaire Next Door: Enduring Strategies for Building Wealth" and the director of research for the Affluent Market Institute.
A follow-up to the 1998 bestseller "The Millionaire Next Door," written by her father Thomas J. Stanley and William D. Danko, the book provides updates and new studies on Stanley's original research on millionaires. Stanley Fallaw's findings are based on a survey of more than 600 millionaires in America conducted between 2015 and 2016.
"To build wealth, to build one's own business, to ignore critics and media and neighbors, you must have the resolve to keep pursuing your goals past rejection and pain," wrote Stanley Fallaw.
She added: "Millionaires and other economically successful Americans who pursue self-employment, decide to climb the corporate ladder, or strive to create a financial independence lifestyle early do so by perpetually pushing on."
She cites an example of multimillionaire Alan DeMarcus, who started at his uncle's HVAC business at age 14. After two-and-a-half years in college, he quit school once he landed a sales role at his uncle's business.
The company eventually went bankrupt, but Alan had enough resilience and perseverance to build a successful refrigerant recovery business in the middle of the 2008 recession. He eventually sold the business, and today he's worth between $8 million and $10 million.
Read more: The author of 'The Millionaire Next Door' explains 3 ways anyone can build more wealth
These qualities are also exemplified by those who build enough wealth to retire early.
"We see this resiliency illustrated in those who pursue the early retirement/financial independence path [FIRE]," Stanley Fallaw wrote. "Those who pursue this path to economic freedom meet daily hurdles to becoming so in thanks in part to their neighbors, community (both in-person and virtual), and companies pursuing them for their financial and cognitive resources."
Consider JP Livingston, who retired early at age 28 with a $2 million-plus nest egg. She lived frugally, tucking away 70% of her take-home pay - 40% in investments, 60% in savings. Even as her income rose each year, she didn't succumb to lifestyle inflation; instead, she only saved more money.
She had enough perseverance to stick to her goals and avoid "lifestyle creep" - the tendency to spend more whenever one earns more. Often, this urge comes from a subconscious desire to "keep up with Joneses"; it's a prime example of the daily hurdles Stanley Fallaw referenced that can prevent a person from reaching financial independence.
Resiliency is also a key way entrepreneurs become self-made millionaires - surviving the ups and downs of building a startup into a successful business requires a lot of resilience and perseverance, according to Thomas Corley, a researcher who separately studied self-made millionaires.
But these qualities aren't "for the faint of heart," according to Stanley Fallaw.- The key to becoming resilient is analyzing every tough experience by considering how the setback can turn out to be a good thing and what you can do to make that happen, reported Business Insider's Shana Lebowitz, citing a Harvard Business Review article by Srikumar Rao.
- Do that and you'll be on your way to building wealth in no time.