When you think of wealth, what do you think of? Lamborghinis? Rolex? Giant mansions on the beach? Private yachts? Of course that’s what most people think of as wealth. They think of the glamorous people who spend millions of dollars traveling the world and wearing all the ice. Bling? What are the cool kids calling it now? Shiny expensive things!
But what many don’t understand is that real wealth can mean so much more. What about free time with your family/friends? Not having to set an alarm clock every day to wake up for a job you despise? Being able to feel like you are enough? That’s what real wealth means to me and many of the people featured in the book “ The Millionaire Next Door” by Thomas J. Stanley.
If you haven’t read it yet, in “The Millionaire Next Door” T. Stanley basically went around the country meeting and studying millionaires (people who have a net worth of over a million dollars). What he found is that most millionaires are living lives, just like normal people, but with a lot more freedom. They spend their working years focusing on saving, investing, and building businesses instead of “keeping up with the Joneses.” Instead of buying the 4,000 square foot McMansions so popular with the upper-middle class, they would only buy as much home as they needed, in a neighborhood that made sense for their lifestyle, with a mortgage loan of no more than 20% of their salary. Then they can use the extra money to invest in their future.
A simple choice like what size house you live in can impact your ability to choose your future in a huge way. If your house is no bigger than you need, you don’t have to spend extra hours cleaning it that you could spend relaxing. If your yard is not as big as a football field, you can spend your weekends enjoying it or going to the beach, instead of mowing and pruning, or having to spend your hard earned money having a landscaper do it just so you can have some time off. (But if you enjoy yard work and gardening, go for it!)
Millionaires are Frugal
In his book, T. Stanley describes your average millionaire as frugal. Some in the sense of clipping coupons and wearing the same pair of patched up jeans for too many years to save every last penny but most are just conscious of where their money is going. They don’t make “Target runs” a regular event. (AKA spending $300+ on all sorts of cute things you did not plan on purchasing.) They often have a written or just ideal budget that they stick to each month. A budget often gets a bad rap because it can feel restrictive. But really a budget can mean freedom. If you plan to save a certain amount first, then budget to spend whatever is left on what you need and want, you can spend that money without feeling any guilt or dread. If you really like throw-pillows, put the money for it in the budget and go for it, just make sure that your savings and essentials have been paid first.
Millionaires Live Within Their Means
When you see those rich people cruising around in Lamborghini’s or wearing high end jewelry what is the first thing you think? “Wow, they must be really successful?” Or “Wow, I wish I could do that.” The truth is most people who buy high end cars, wear expensive suits, and drink the “best” wines are usually not wealthy at all, they just want other people to think they are. Their egos push them to buy things that really don’t even matter.
In his 2009 follow-up book “Stop Acting Rich,” Thomas Stanley describes the ultra-rich (like actually have 100s of millions or even billions of dollars in value) as “Glittering Rich.” These people can legitimately buy mega yachts and private islands in Hawaii and not even spend 1% of their wealth. We’re not talking about those people because they are less than 1% of the millionaire+ club. Most of the people who buy these high end items are “wanna be rich.” They might have decent jobs or job titles, but instead of living within their means, they live how they think people expect them to live.
A low level lawyer might buy a $5,000 suit because he thinks that’s how a successful lawyer should dress, but in reality that’s almost 10% of his annual salary! He’s just putting himself in a position where he either needs to take on debt to afford his fancy suits or is locking himself into many more years of long hours because he’s not able to keep up with his lifestyle. Many families live paycheck to paycheck on a $200,000+ salary just because they build a life of spending more than they should. This is not how to build wealth!
Real Millionaires Look for Deals
If a millionaire needs a nice suit, he often goes to Sears or some other regular department store with good quality suits on sale. If she needs a car, she finds a reliable car that is comfortable, efficient, and makes sense for her line of work then pays cash for it, unless maybe it’s a business expense that would make more sense to lease due to tax purposes.
Real millionaires don’t spend money just to spend money. They look for quality and good pricing. They spend their money on what is really important to them like a nice vacation with their spouse, college tuition for their children, or growing their business. They look for what really matters and spend accordingly.
Millionaires Invest
Most millionaires don’t become millionaires overnight. They put in some years of work to build their wealth. Putting away a portion of their paycheck every month into their retirement funds. Building and growing a successful business. Investing in low cost index funds or blue chip stocks (think big companies like Coke) and letting them grow.
In order to grow their money, millionaires can’t afford to just spend it all or stick it under a mattress and hope the house never catches fire. In order to become millionaires, they make smart choices about how they spend their money as well as how they can get it to grow for them, keeping up with inflation as well as building a beautiful nest egg that allows them to choose what they want in retirement, however early or late THEY CHOOSE it to be.
What do you think of these Millionaires Next Door? Do you want to be one? What steps are you taking to join the ranks of Millionaire?
Monthly contributions to my TSP over the years are enjoyable to watch grow🤑
Compound interest is fun to watch!