In the book The Difference: How Anyone Can Prosper in Even The Toughest Times, author Jean Chatzky details a 2007 study done by Ohio State scientist Jay Zagorsky that looked at the relationship between intelligence and wealth. Now most people would think that the smarter a person is, the more likely he is to be wealthy (have a higher net worth than less smart people.) However, this is not the case. The findings:
Zagorsky found that although there was a link between intelligence and income (the top 2 percent of society based on IQ alone is earning, on average, $6,000 to $18,500 more a year than someone with a normal or average IQ), there was no link between intelligence and wealth.
Why is this? Why do higher incomes not translate into higher net worths? Zagorsky thinks that overconfidence is the reason -- that intelligent people that make more think they can always earn more tomorrow, so they spend today on things like bigger homes, more cars, and the like. These purchases, in turn, limit their ability to grow their net worths. Chatzky thinks the answer might be that they went to pricier colleges and are struggling with college debt. But that's just speculation -- she doesn't offer any evidence to support this conclusion.
A few thoughts from me on this issue:
1. I'll tell you why people that make more don't accumulate more wealth -- because they spend more! We've seen over and over again that people who make a bundle can spend a bundle (plus some), driving their net worths down, down, down. If you want some examples of this, see my Spend Less than You Earn category and scroll down for a variety of posts on this subject.
2. The steps it takes to become rich are not difficult. You don't need to be an Einstein to understand them. All you have to do is have basic intelligence to grasp some simple concepts, then the discipline to DO them. I'll admit that they're not easy steps -- but they are simple.
3. Wealth doesn't require a high income. Sure, if everything else is the same, a higher income is better. But a person with an average income who spends less than he earns will far outpace someone with many times the income that spends it all plus some when it comes to accumulating a good net worth. Sure, the high earner has the potential of a much higher net worth, but if he never acts on that potential, it's wasted.
Long-time readers will recall that we covered this topic sometime ago. If you're interested in more on this topic, check out Intelligence is Linked to Income, but Not to Wealth.