I’ve heard a lot of great stories over the years from our clients about how they attained their wealth. I’ll share with you a few valuable lessons from their stories. These lessons are intended to help you if you are trying to accumulate wealth or if you are trying to teach someone how to accumulate wealth. I will also tell you about a new product from CornerCap that may help you apply these lessons and make accumulating wealth a little easier.

Lesson #1 – Create the Right Mindset about the Role of Money

One client described a friend of his as a “one marshmallow person.” I didn’t exactly understand what he meant, but he explained that the term was a reference to the studies involving human self-control that took place years ago at Stanford University.

The studies included an exercise where a child is left in a room by him or herself along with one marshmallow on a table. The child is told by the proctor that if they can wait 15 minutes before eating the marshmallow, then they will receive a second marshmallow. A “one marshmallow person” lacks the patience to make it to the second marshmallow. This lack of discipline in the area of deferred gratification suggests that such a person will consistently spend every dollar in his or her possession.

Two of our clients accumulated multiple marshmallows through many years of deferred gratification while growing their own business. They created an investment strategy that outpaced inflation by a significant amount. It became clear to them that the primary role of money was investment, not spending. They reinvested as much of the profit as they possibly could. They spent very little money on themselves and they worked most of the time. They ended up selling their business for a lot of money.

You may not have an opportunity to invest in a small business, but you do have the opportunity to invest in the public market of stocks and bonds which, over long periods of time, have provided a rate of return that outpaces inflation. The key is to have the mindset that the primary role of money is investment. Your investment strategy should have a target annual rate of return that exceeds inflation between two and four percent over the long run.

Wealth Accumulation LessonsLesson #2 – Ask for Help

Another thing that comes up when clients tell their stories is that someone helped them along the way. For one of our client families, each generation is helping the next in a very deliberate and clear way through a precatory statement. The purpose of a precatory statement is to express a wish or make a request in writing. The current generation has written down what they learned from their parents and what they expect from their grandchildren and the generations to come as it relates to money. The statement is presented to each descendant at age eleven. Here is one passage from the statement.
“We want our family to have conservative values when it comes to spending and saving money. Both of our parents were very much this way and we are the beneficiaries of their thoughtfulness. No idea has ever become successful without a careful and thoughtful plan. It has been said that 80% of investing well is spending well.”

I like to think of their precatory statement as a view from the top. A successful plan well executed. This brings us to our next lesson.

Lesson #3 – Have a Plan

Yes, the stories all mention a plan. One client said she liked the phrase, “a goal without a plan is just a wish.”

Another client told me her daughter had asked her how she had attained her wealth. She said she had a very deliberate process. She consistently saved 15% of her income. She had a plan.

During a discussion about the difficulty of carrying out a plan, one client cited a quote by world heavyweight champion Mike Tyson. Tyson was asked by a reporter about his upcoming opponent’s plan to defeat Tyson. Tyson simply responded, “everybody’s got a plan until they get punched in the face.” Tyson was confident that whenever reality shows up in the form of a punch in the face, the plan is quickly abandoned.

There will be some strong doses of reality thrown at your plan along the way. Today’s marketing and consumer credit machines are designed to have you spend more than you earn. Today’s financial news networks are designed to constantly make you doubt your investment strategy. Don’t get distracted. Pay attention to your plan.

How can CornerCap Help?

We have developed a new product to help people who are in the early stages of wealth accumulation. The product is called MAP. The acronym MAP stands for My Accumulation Plan. MAP is designed to make wealth accumulation a simple process. Here’s how it works.

MAP provides easy online access from your smartphone, tablet, or computer. The process starts by asking questions about your investment timeline, your investment experience, and your risk tolerance. MAP recommends an asset allocation for your account based on your answers.

MAP then guides you through the process of opening an account and connecting it to your bank account so you can move money from your savings account to your investment account. The minimum initial investment amount required to open a MAP account is $5,000.

MAP helps you create an automatic monthly transfer from your bank account to your investment account.

MAP includes a range of investment portfolios designed to help you reach your target rate of return. Each portfolio consists of multiple exchange-traded funds (ETFs) and is developed using CornerCap’s proprietary investment process called Fundametrics. The portfolios range from more conservative to more aggressive. MAP recommends a portfolio appropriate for your plan based on your specific information.

MAP will provide educational content to help you create and maintain your plan. MAP will also help you interpret the relevant news events and media distractions by providing commentary on the latest investment issues.

I encourage you to look around the site to get a better understanding of MAP.

And if you know someone who might benefit from this information, feel free to pass it along to them. Maybe we can convince someone to put down the marshmallow and hit the “Get Started” button.