You don’t need a lot of brains to be rich. In fact, there’s not much of a correlation between intelligence and wealth.
I found a few pretty provocative studies and discussions on the subject of being smart. Rob Pitingolo, who runs a blog called Extraordinary Observations, has come up with a chart showing “where the smart people live”.
He’s developed several charts which are all based on some in-depth studies he’s conducted on his own. You can read about how he’s come up with these figures in his article here. It follows that metropolitan areas would have a larger population of people who have attained higher levels of education, but there’s a lot more to this than meets the eye, and a lot more data here that Rob has dissected.
You Can Become Financially Successful Without Being Extra Smart
It also makes sense to me that there are certain factors that attract educated people to certain places — wouldn’t these places be helped by the fact that Ivy League schools are located there? Or perhaps more white-collar jobs? And what about wealth? Is there some tie-in here between being smart and being wealthy?
So let’s check out Rob Pitingolo’s chart on “where the smart people live”. Here’s what it looks like:
If you’re interested in the details, you can read about his analysis on his blog.
Anyway, this leads me to another intriguing study I came across. It’s one that points out that being smart does not necessarily lead to financial success and wealth, even as education and intelligence have been pegged to have a certain correlation with the ability to generate and make money. Apparently there’s a predictable relationship between having brains and earning income:
Each point increase in IQ test scores is associated with $202 to $616 more income per year,” the study contends. “This means the average income difference between a person with an IQ score in the normal range (100) and someone in the top 2 percent of society (130) is currently between $6,000 and $18,500 per year.
But making money or generating income is not the same as keeping that money (enough to build wealth). The study states that being intelligent or more educated can probably help you make money, but it won’t necessarily help you become wealthy (because growing your net worth assumes you’re actually holding on to the money you make). Instead, you can look to your personality as more of an influence on your finances. There are certain personality traits that help with building wealth, such as impulse and self control, fiscal discipline and such — and even less intelligent people can possess those attributes.
Here are other noteworthy aspects of the study (and here’s yet another article on this):
According to the study author, “Being more intelligent does not confer any advantage along two of the three key dimensions of financial success (income, net worth and financial distress),” with intelligence test scores having a weak relationship with income.
People with higher IQ scores have been shown to have problematic financial behaviors and debt problems more often than those with lower scores. So what could cause such fumbles? Are “smarter” people less inclined to spend time on monotonous financial tasks? Or could arrogance (thinking they’re so smart) be their financial downfall?
Whatever the case, the point here is this: being intelligent doesn’t equate to being rich. I believe it’s all about the choices you make.
Created June 23, 2010. Updated September 30, 2012. Copyright © 2012 The Digerati Life. All Rights Reserved.