Billionaires’ mindset: Here are 3 useful lessons that might benefit your own plans

As of July 2023, the world population is more than 8 billion people. Among those billions of people, billionaires only make up a tiny fraction of the population – with, according to Forbes, around 2,700 people holding billionaire status.

The BBC’s Science Focus recently studied the personality traits and moral outlook of the ultra-rich. They found that many billionaires share a similar mindset that may give us an insight into how they gain and manage their sizeable wealth.

Here’s what Science Focus discovered and three useful lessons you might gain from their findings that might benefit your own financial plan.

3 useful lessons you can learn from studying the billionaires’ mindset

1. Billionaires exhibit high levels of emotional control, which might help them avoid emotionally charged investing decisions

Dr Steve Loughman, a social psychologist at the University of Edinburgh, discussed the mindset of billionaires with the BBC’s Science Focus, saying: “These people are good at controlling their emotions, both positive and negative ones, and they tend to be less emotionally reactive to the world around them at high levels.”

It’s an assertion supported by a study from the Socio-Economic Panel (SOEP). Their research looked at data derived from personality tests conducted on more than 20,000 individuals.

Some key findings reported that wealthier individuals exhibited:

• Greater emotional control
• More extroverted behaviours.

The greater an individual’s wealth, the more pronounced these personality traits were – even among non-millionaires who still possessed a sizeable fortune.

Human beings are emotional creatures. Your feelings might have the tendency to elicit reactions in certain situations that aren’t always in your best interests.

One such psychological bias is known as “loss aversion”. It can be particularly prevalent among investors during periods of economic downturn, such as the ongoing cost of living crisis.

When financial pressures are high and markets take a dip, loss aversion might push you into making knee-jerk decisions – such as selling off your investments – in order to prevent further losses.

However, this can turn what was initially a paper loss into a concrete one. It can also remove any possibility for your investment to bounce back in the future once markets rebound, which is typically the case over the long term.

As the prominent billionaire and well-known investor, Warren Buffett, once said: “The stock market is a device for transferring money from the impatient to the patient.”

So, taking a step back from your investments and working on ways to exhibit a greater degree of emotional control or a “billionaire’s mindset” – might help your portfolio navigate any short-term obstacles.

Read more: 3 genuine ways patience can actually benefit your investments over the long term

2. Billionaires are typically extroverted individuals who are prepared to take risks

The University of Aberystwyth recently compiled research on the mentality of the ultra-rich. They found that people on comparatively higher incomes were typically extroverts, who displayed a higher tolerance to risk.

It is an assertion supported by Science Focus’ research which found that risk-taking traits were a common part of the billionaires’ mindset.

It is important to invest in line with your own tolerance for risk and not take on more than your personal circumstances can handle. You don’t want to risk your future in pursuit of greater gains.

However, you also don’t want to fall into the opposite habit of not taking enough risk. It can be especially tempting in times of economic turmoil, such as the ongoing cost of living crisis, to turn to savings and low-risk ventures to protect your funds.

Nevertheless, some risk is likely to be necessary to achieve your goals. So, once you’ve ensured you have safety nets in place, such as an emergency fund for essential bills, you might want to adopt a bit of that billionaire’s mindset and look to invest your money.

3. Billionaires adjust to their wealth over time, whereas their beneficiaries could be negatively affected by “sudden wealth syndrome”

Billionaires often accrue their wealth over time and are prepared to handle the rigours and additional pressure that comes with it. However, their children can suffer when suddenly benefiting from the same amount of wealth but without the benefit of a hardened mindset.

It’s a point made by Clay Cockrell, a therapist to the ultra-rich, when discussing with Science Focus the effect of sudden wealth on the children of billionaires, saying: “Many who didn’t work for their money can lose ambition, and ultimately don’t feel the need to work towards a goal”.

It is sometimes referred to as “sudden wealth syndrome” and can have a real, long-lasting psychological effect.

It might make your loved ones feel guilty about their newfound fortune, or anxious about the possibility of losing it.

You may have reflected on your own estate plans and reviewed ways to reduce the potential Inheritance Tax (IHT) bill your loved ones might face when you’re gone.

But you may not have considered the psychological aspect of leaving behind substantial wealth.

If you’re worried that a sudden, significant inheritance might have a negative effect on your loved ones’ life plans, you could take steps to spread out their inheritance and in doing so, potentially reduce the IHT on your estate.

Here, you can assert greater control over how and when your loved ones receive their “early” inheritance. It could also help spread out the benefit, so it still gives them a boost in life without removing their personal sense of motivation.

There are many ways you could opt to make gifts, each with their own set of allowances and rules.

It’s important you seek out professional advice to discuss the best next steps for your estate plans. Reach out to Aspire to learn more about gifting and other ways to benefit your estate plans.

Working on your mindset could benefit your plans, receiving financial advice could help further

Your financial wellbeing is very important, but that doesn’t mean your emotional wellbeing should be neglected. One of the benefits of working on your personal mindset, especially through receiving regular financial advice, is that it could potentially benefit both.

If you’re interested in finding out more, please reach out to us by email at helpme@aspirellp.co.uk or call 0117 9303510.

Please note

This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.