Can You Spot A Millionaire?

What does a millionaire look like to you? 

Is it someone with exotic cars, big houses, and fancy clothes?  Is it that person who is always traveling and enjoying fine dining around the globe?

What about your average blue collar worker who lives next door?  How about a co-worker at your job?

The truth is, you may already know a millionaire and not realize it.  Therefore, in order to become a millionaire you have to understand who and what a millionaire is.

This week we will be talking about the book “The Millionaire Next Door” by Thomas Stanley and William Danko.  The Millionaire Next Door challenges our idea of who and what a millionaire truly is. 

Typically, we would think of Hollywood types as what a millionaire is.  Big houses, eccentric lifestyles, and all the stuff in the world. 

Stanley and Danko are here to tell us just how wrong we are in their academic research study turned 272 page guide to financial independence book.

So, what does a millionaire look like?

At first glance, if you didn’t know who Steve Jobs or Mark Zuckerberg were, would you have assumed they were two extremely wealthy individuals? The answer is probably not. 

Steve Jobs and Mark Zuckerberg - Become a millionaire

Aside from the fact that you do know the individuals above (and they’re billionaires!), Stanley and Danko, the authors of The Millionaire Next Door, tell us in their book how unsuspecting every one of the millionaires they interviewed were. 

The majority of them wore exactly what Steve Jobs and Mark Zuckerberg wear — nothing special

Only a handful of the millionaires interviewed drove a new car, lived in a mansion, wore fancy clothes or expensive shoes and watches.

Conversely, all the high income earners with only a small amount in the bank were the ones who lived in the mansions, drove the newest Porsche’s, and wore Rolex watches. 

If these people ever retired, it would be impossible for them to keep up their lifestyle for more than a couple of years.  Additionally, putting yourself in a position that your job means your lifestyle can easily create a high stress situation. 

Safety In Numbers

Jobs are not guaranteed, they are not a definite situation.  With that, income is not guaranteed either. 

Imagine if you were fired from your job today.  What would this mean for you financially? Do you have enough money to support your current expenses for more than a year?  Six months? One week?

For many Americans, it is not uncommon to live paycheck to paycheck — irregardless of income.  I know, first hand, ‘rich’ individuals that ask me for money on occasion.  If this person lost their job today they wouldn’t be able to pay their bills for the next month.

“Put yourself in the situation where your job needs you, not the other way around.”

Financial independence and the desire to become a millionaire are about more than just a dollar sign. 

It’s about the freedom, the independence.   It is about creating peace of mind. 

Someone who is financially independent doesn’t need to worry if they lose their job.  In fact, just knowing this fact gives them leverage at their workplace.

The Difference Between Wealth And Income

A person can have a lot of income but no wealth.  Conversely, a person can also have a lot of wealth, but not a lot of income. 

Think of income as money earned every year and wealth as money saved or invested over a lifetime.  You can have a lot of income, but if you spend it all you create no wealth.  All too often when we picture someone wealthy, what we really mean is someone with a lot of income. 

Let me explain…

When you see a person driving a Porsche, with a Prada bag, Gucci shoes, maybe a pair of Cartier sunglasses, we immediately think, “This person must have a lot of money!” 

How else could they pay for these things?  Well, you aren’t wrong, they probably do have a lot of money.  Likely, though, what they don’t have is wealth.

So much of their income is spent purchasing frivolous things that they forget to keep any of the leftover, if there even is any.  This is the reason why so many famous millionaires and multi-millionaires have gone broke.  A few examples are rapper ’50 Cent’ and actor Nicholas Cage.  Read about them and more here.

How do high earners go broke?

To the average person it seems ridiculous that someone making hundreds of thousands of dollars a year could go broke.  The majority of people in our country likely make a cumulative one million dollars over the course of 10 to 20 years. 

So how could someone who makes several million over a short amount of time go broke?

The answer, as you may expect by now, is over-consumption.

Let’s take the example of Nicholas Cage from earlier.  Here is a list of some of the things Cage spent his money on:

  • Several super-cars, including a rare Ferrari and the Shah of Iran’s Lamborghini
  • Rare jewelry
  • A shark
  • A crocodile
  • Two king cobras
  • At least one dinosaur skull
  • A collection of pygmy shrunken heads
  • A private jet
  • A pyramid tombstone in a New Orleans cemetery

In addition to this, Cage also purchases several pieces of real estate.  They included the single most expensive piece of real estate in Rhode Island, castles, yes, castles, in England and Germany, his own private island in the Bahamas, and a huge mansion in southern California.

After awhile he stopped paying his real estate taxes, foreclosed on his homes, and the rest was history. 

What does it take to become a millionaire?

The easiest way to start your journey to become a millionaire is to win the lottery.  However, for the rest of us, Stanley and Danko gave us a list of a few common denominators that they found all or most of their millionaire subjects had.  Millionaires…

  1. Live below their means.
  2. Allocate their time, energy, and money efficiently, in ways conducive to building wealth.
  3. Believe that financial independence is more important than displaying high social status.

All of these three concepts are directly related.  Living below your means is a wealth building tool.  It goes hand in hand with believing that financial independence is more important that portraying a high social status.  And both of those are efficient and conducive ways to building wealth. 

Most importantly though, in order to become a millionaire you must have the millionaire mindset.

The Saving Brain

One factoid that I recall from reading The Millionaire Next Door was that wealthier people spend about twice as much time planning their finances than non-wealthy. 

You may be familiar with these excuses people had for not planning their financial futures.  The rhetoric was always, “I don’t have time for that,” or “I don’t understand that stuff,” and the worst of all, “I’m too young to start saving.”

Well, ladies and gentlemen, that is the entire purpose of this blog.  To break down, learn, and understand what it takes to become a millionaire.

If you have not yet read my first two posts, Financial Independence for Millennial’s, and Here’s Why You Will Be Working Forever, please do so.

In the next major blog post I will begin exploring what to do with our money now that we are saving it.  I am also planning on writing a smaller personal finance update each month or so so you can track my progress with me.

I hope you will become a millionaire with me!

-Chris

Related Post

Be the first to comment

Leave a Reply

Your email address will not be published.


*