Reading and Wealth

Rich Habits author Tom Corley spent 5 years studying the daily activities of 233 wealthy people and 128 poor people.  He discovered that wealthy people have vastly different daily habits than poor people (not a big surprise). Anyway, he tracked and listed the various activities that the rich do with the idea that if anyone else would do them too, they could become rich.

Whether you agree with this methodology or not, you have to admit that the premise is interesting. You've probably heard it said that you are the sum total of the five people you hang around with the most (or something similar), so why wouldn't "do what the rich do and you'll be rich" work as well?

In fact, that's what the book The Millionaire Next Door did. It tracked the wealthy and ultimately found a handful of characteristics that made people millionaires. I know that this works because I applied those concepts early on in my life and they have served me quite well.
 
In a recent post Tom said that if you want to be wealthy, you need to read. His thoughts:

In my five-year research study on the daily habits of wealthy and poor individuals, I made a profoundly important discovery: 88% of the wealthy individuals in my research read self-help books and articles and industry-related books and articles. In my study it was obvious that the wealthy were fanatics when it came to daily career-related, self-improvement. The reason? Wealthy people told me that by increasing their knowledge base they are able to uncover more opportunities and these opportunities translate into more money. Wealthy people are in constant pursuit of self-help reading material. Engaging in career-related, self-improvement makes individuals more valuable to their employer, customer or clients and helps them to rise up the ladder of financial success.

Comparatively speaking, only 2% of the poor in my study engaged in this self-help reading. One of the interesting things that I found in my study was that the poor who did receive periodicals invariably set them aside with the intent that they would read them later. Unfortunately, very few actually ever got around to this reading.

The wealthy have a different tact. They set aside time every day for their self-help reading. They read every one of their periodicals and more. Why? Successful individuals understand the value of timely information and continuous life-long learning. They are in constant pursuit of opportunities to make more money and advance their careers. Often such opportunities are found inside industry periodicals and self-help books.

Successful individuals, on average, set aside thirty minutes of every day for this self-help reading. They do this day in and day out, like brushing their teeth. They understand that self-help reading increases their knowledge base and helps set themselves apart from their competition. This reading often leads to the discovery of hidden opportunities that they are able to capitalize on. Reading helps make you more valuable to your employer, customers or clients.

I have several comments on these thoughts:

• Whether or not reading leads to wealth (you could argue that one could cause the other or that it's simply coincidence), it's not a stretch to believe that those who regularly read gain knowledge/understanding that help set them apart from everyone else.
• I have always read a lot -- even from an early age. What I have enjoyed reading has changed (from fiction to non-fiction and various subjects within non-fiction), but I've always been a reader.
• "The wealthy were fanatics when it came to daily career-related, self-improvement." We know: 1) Your career is your most important financial asset, 2) Even a 1% change in salary can make a HUGE difference when it comes to lifetime earning potential, and 3) Continuing education (which is what reading is) is one of the few steps that you must take to grow your career. So is it hard to believe that those who practice a vital career-growth activity do better financially?
• My form of reading has changed over the years. Most of it used to center around books and magazines. But these days my reading takes many different forms: books (mostly from the library), magazines (I have a few subscriptions -- some I got for free with airline miles that were set to expire on an airline I no longer fly on), e-books (my new favorite way to read -- you know Amazon has tons of low-priced or free stuff, don't you? Plus the library will lend out electronic copies of books now) e-magazines, and blogs/websites. I read based on content availability and ease of consumption (that's why I read mostly shorter pieces but read many more of them -- versus just one book).
• Much of my "reading" isn't reading at all. I consume a lot of material through audiobooks (checked out from the library) and podcasts (free on iTunes). Lots of great things to "read" and learn about while driving to work, on the way to workout, on a business trip, etc.

As you can tell, I'm a big believer in reading and I do think it gives a person an advantage over others in the marketplace. Whether or not this translates to wealth is debatable, but IMO I think it does.

How about you? Do you read a lot? Do you think reading has an impact on wealth?

Comments

[Jenny @ Frugal Guru Guide]

I read self-education books but not many that are truly "self-help." I read a lot of fiction, too!

[CashRebel]

I can't emphasize enough how much reading has changed my life. By staying current with industry trends, I was able to totally redesign my role to be more relevant. And then there's reading investing books and pf blogs. Without them id have no idea how to build wealth.

[@pfinMario]

I think more people will be less concerned with the difference between rich and poor as with the difference between rich and middle class (of which 90% of the population seems to believe themselves).

[K D]

Ben Carson, the renowned pediatric neurosurgeon, was flunking school until his (illiterate at the time) mother made him read two books a week(?) and write book reports on them and she also severly limited TV viewing. He was in fifth grade when this started. This turned his life around.

I read a lot, mostly electronically these days - online news, blogs, etc. and I have a Kindle that I read books on (lot of freebies through Amazon and some e-books available through the public library). Our public library also has a contract with Zinio that allows me to read many magazines for free online. I also listen to books on CD while in the car (usually non-fiction, again borrowed from the library).

I think what you read has an influence similar to who you hang out with. In line at the grocery store this morning I noticed how Hollywood focused all the magazines were. That's something I have no interest in but apparently other shoppers do.

[Adam - HireMeHigherEd]

Reading has opened many doors for me, and constantly serves as my source of inspiration. I have always been a very imaginative thinker so it is easy for me to formulate an idea or a plan or envision the future from words. I would not question the validity of this study in the least.

[JNEW]

No question about it- reading is critical to knowledge growth-- and knowledge growth is critical to career options and income.

It does not matter what industry you are in-- reading and learning about your industry will make you more valuable and increase your prospects of either promotion (if you are employed) or business growth ( if you are self employed).

You have all heard the stories of the kid in the mail room who eventually becomes CEO? While rare indeed, this only happens to people who work hard and yes, have a bit of luck. But here is the key--people often make their own luck. If you want to be the CEO you need to know what he knows.

How do you do that?

Well, some people are lucky enough to have a "mentor" in their field-- who shows them the ropes, shares his own reading materials and acts like a coach and a friend.

Others are voracious readers and learners. There are tons of books, magazines, blogs and internet content on every topic you can think of. Classes at community colleges or Ivy schools.

Sometimes-- the best lessons are the ones from the school of hard knocks. Failure is both a terrific motivator and a life lesson.

Here is the point, at last. Its not so important HOW you get your education-- but crucial that you get it.

Reading has made a huge difference in my life and my career. I tried my best to follow my own advice and, as of today, I count the president of the company I work for as my mentor and friend. But before that was true-- I read everything I could get my hands on so that when I had the chance to talk to him (and other senior management types) I would sound knowledgeable, reasonable and current. And I was, because of all the reading i had done.

Those first impressions make a big difference as well.

Good topic FMF.

[Brooklyn Money]

love, love, love reading free e-books from the library on my Kindle!

[Paul]

Very interesting. I bet there is also a correlation between lack of wealth and watching "reality TV" shows.

[thelibrarian]

In her book "The Difference" Jean Chatzky also found the same correlation between reading and wealth.

I work at a library and I would see this all the time when we worked on the Bookmobile. In the poor neighborhoods, the kids would get music CDs and movies. In the middle class neighborhoods, the parents would often prohibit or limit the DVDs and CDs and require their kids to get at least one book.

[thelibrarian]

P.S.

@FMF....I always appreciate your frequent plugs for libraries. They are an underutilized resources. Sadly, the people who can benefit from them the most, use them the least (or they check out movies or play games on the computers, uggh).

[Paul]

As an aside, in the book Freakonomics, they mention ownership of books in the home as a strong indicator of intelligence in children. But, they also said the books need to be permanent fixtures in the home. Use of library books does not seem to help children succeed (not to offend our fine librarians .. I love to use my library!). Not sure why, but found that interesting...

[Apex]

@Paul,

That is correct but did you know that it doesn't matter if the child actually reads the books? Wait, what was that? That's right, a pile of books sitting on a shelf full of dust makes all the difference. Cracking them open makes no difference. It turns out it is not about the books, the books are more an indicator than a driver of anything.

Here is an article by the Freakonomics authors citing a study of more than 20,000 US students that shows the rather unambiguous data.

http://usatoday30.usatoday.com/news/opinion/editorials/2005-05-03-parents-edit_x.htm

The kinds of parents who provide books produce intelligent children. That's probably why the library doesn't count. It's not about the books, its about the characteristics of the types of families who provide books in the home.

It turns out watching TV causes zero harm and visiting museums and cultural exhibits provides zero benefit as far as intelligence.

What matters is parents who are educated, make good money and are involved in the child's life/education.

Now this is just about intelligence and not about success so it would be nice to see how it translates beyond raw intelligence. There are plenty of really smart bums and wash outs as well as people with average or even below average intelligence who are wildly successful. Intelligence alone is not nearly enough and is easily wasted by those without discipline and drive.

I suspect that beyond just their IQ, reading is still quite beneficial, especially in those last two categories I just mentioned and that is why my kids are reading every night.

[K D]

I ordered the book. I'm thinking it might be a good graduation present.

[Nick @ AYoungPro.com]

I'm a huge reader and I have always found it extremely beneficial. I am not surprised at all to learn the results of this study and I wholeheartedly believe it to be accurate.

[SteveD]

I read FMF almost every day :-) I go through phases of reading other self-help material (and taking local online classes in topics like real estate), and it's made a HUGE difference in my thinking and my success. I used to read a lot as a kid, but don't read much fiction anymore.

[Mike Hunt]

The key is about learning and growth, and reading is a symptom of this. Learning and growth, properly focused and harnessed with the discipline of a good work ethic, is one of the key elements to making career gains happen.

-Mike

[Alex]

I read nightly -- typically a few chapters a night depending upon the time I have available. With each new job I've taken, the first thing I did was go to the bookstore and clean out the "experts" shelf to understand the gold standard in how to do that job. It's been invaluable.

My husband and I started reading to my son every night as part of his bedtime routine at 4 months. We're hoping that it pays off not just in wealth, but lifetime enjoyment and self-improvement for him.

[jim]

Yeah, does reading FMF count?

[freebird]

My guess is that reading and wealth are neither cause nor effect vs each other, but that they are related by being consequences of a common factor-- namely cognitive ability. Jobs that require extensive reading usually pay better than those that require no reading at all, and income is one of the strongest factors that determine wealth. A better way to see the direct correlation between reading and wealth would be to compare reading habits vs incomes of people within a single job category. I suspect the sensitivity of income to hours per week of reading would be much less when compared in this manner.

BTW the effect of a 1% change in salary depends on your time horizon, I think. Old guys like me prefer bonuses over raises. I used to read a lot in order to learn the opinions of others. Now I read less (eyes losing focus) and mostly to nitpick the statements of bloggers. Writing these comments helps develop my critical thinking ability, something that is vitally important when reading finance related articles. Remember everything that is written has an agenda, and it usually involves your money, so you need to figure out what it is in order to be able to distill the useful information from the nudge.

[Old Limey]

@freebird
I agree with you. An ability to accumulate wealth does not have a high correlation with the amount of reading that you do.

As an example, from 1956 to 1992, 36 years (the working portion of my life, excluding the value of our home, I retired with $320K in investments the bulk of which came from my 401K which had few investment choices.

Between 1993 and today, 20 years (the retired portion of my life, excluding the value of our home and another piece of real estate, our investments have grown to $7.26M.

Conclusion - it wasn't reading that contributed to the large increase in our wealth, it was that I was actively managing our investments rather than the passive management that was my only option when I was working.