In the book “The Millionaire Next Door” authors Tom Stanley and William Dank discuss the true characteristics of America’s millionaires. They’ve studied a large number of millionaires and found that the truly rich don’t drive expensive cars and don’t live in mansions. In reality the average millionaire is much more likely to drive an American made car (not a foreign car) and live in the same neighborhood they purchased long ago. These millionaires became wealthy by simply being frugal and saving much more than the average person. Of course we aren’t told this because we often see what celebrities or the entertainment industry show us, but that’s just not the case.
When you live an extravagant lifestyle, such as driving a Bentley or wearing expensive jewelry, this can actually work against you. Since the average millionaire might own a factory or be in real estate (working in a blue collar industry), driving a Bentley can alienate you from those around. If you are driving a Bentley to work, while the people around you are driving Ford Focus’s, then it might appear that you are exploiting them and that you aren’t “one of them”. This can cause division within the company or with the people around you and they might hold resentment towards you. This is why the truly rich drive modest cars and live in modest homes. They don’t alienate the people around them or the people working under them and appear much more relatable then we think.
In the book, The Millionaire Next Door, they go into further detail about the lifestyle of the average millionaire and have found seven common traits that the wealthy share. These traits include:
1. Millionaires live well below their means.
2. They distribute their time and money proficiently, in a much more effective way towards building wealth.
3. Millionaires believe that financial freedom is much more important than living an extravagant lifestyle
4. Their parents did not take care of them financially, usually self-made.
5. Their children are financially independent and self-sufficient.
6. They are gifted at finding market opportunities.
7. They choose the right opportunities within their niche.
As you can see the average millionaire is someone who is actually very frugal, which allows them to accumulate wealth and invest in areas that can expand their net worth. A prime example of the extremely wealthy living a much more simple life than we imagine, is billionaire tycoon Warren Buffet. Warren Buffet, arguably one of the wealthiest people of all times, lives an extremely simple life. It is well known that he has lived in the same house for 50 years and drives a single car to and from the office. That’s interesting considering he could own hundreds of cars if he wanted to and buy his own island. Yet he drives a single car to and from work and doesn’t even allow anyone to drive him around. You can also look at other tycoons such as Bill Gates and Steve Jobs for their frugality. It’s likely that if you didn’t know who they are, you would never know they were Billionaires. They wear the simplest of clothes and Bill Gates is even known for his love of eating regular McDonald burgers.
Knowing this information provides us with valuable insight. The Secret to wealth is to simply live below your means. Stop trying to live likes the Joneses and compare yourself to others; it’s likely that the people you are comparing yourself to does not have real wealth; it is just a picture they have painted. The book also shows is that no matter how much you earn, if you spend more than you bring in, then you can never accumulate wealth. If you want to eventually become a millionaire than you must live below your means. For example if you earn $100k then you should be saving 20%-40% for future investments in a new business or in your financial investments.
The key takeaway from The Millionaire Next Door is that you shouldn’t get caught up in trying to live up to the hype or live up to other people’s idea of wealth. Don’t buy the expensive car at full price, the millionaires in the book they found often buy their cars used and buy cars for a period of 5+ years. Don’t purchase unnecessary things. Look at your purchases as either a liability or an asset; are the things you purchase making you money or are you losing money?
So be weary of the people you see that are driving expensive cars or driving extravagant clothes, they are much more likely to live beyond their means and not really have amassed true wealth. It’s just a show.
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