How to Live Like a Millionaire

How to Live like a Millionaire

How do millionaires live? What kind of spending choices do
they make? How do they handle their money? These were the
questions that Drs. Thomas Stanley and William Danko,
authors of “The Millionaire Next Door,” tried to answer
through their 20 years of studying and researching people
with a net worth of over a million dollars.

What they found through their research was surprising. Most
garden-variety millionaires (not celebrities or sports
stars, but just average wealthy people) do not drive
expensive cars, wear expensive clothes or jewelry, or have
homes the size of the White House. Most of the people Drs.
Stanley and Danko interviewed look and act very much like
the rest of us. The only difference is that these people are
millionaires while the rest of us only dream about it.

The fact that most millionaires in America are so much like
the guy next door surprises many. Most of us think of
millionaires as being people who are easily identifiable
because of the cars they drive, the luxuries they enjoy, and
the neighborhoods they live in. But as the authors point
out, “Most people have it all wrong about wealth in America.
Wealth is not the same as income. If you make a good income
each year and spend it all, you are not getting wealthier.
You are just living high. Wealth is what you accumulate, not
what you spend.”

Below are a few of the points about millionaires found in
“The Millionaire Next Door.” Let’s see what lessons those of
us who aren’t worth millions of dollars can learn from those
Americans who are.

1. Most average millionaires live well below their means.
They could afford to spend more and enjoy more luxuries in
life but they choose not to. They know that they would have
probably never become millionaires while supporting an
extravagant lifestyle.

Lesson to the rest of us: It’s hard to accumulate wealth if
you spend all you make. Living below your means allows you
to save, invest and accumulate more. Ben Franklin once
wrote, “Beware of little expenses. A small leak will sink a
great ship.”

2. Most average millionaires live frugally.
These people are not typically big spenders. They watch all
of these expenses, both big and small because they believe
being frugal is the key to achieving financial independence.
As authors Stanley and Danko write, “Being frugal provides
them with a dollar base to invest.”

Lesson to the rest of us: Frugality is a tool that can help
get you where you want to be financially.

3. Most average millionaires are more concerned with
financial independence than social status.
They believe in the statement, “You aren’t what you drive.”
They understand that many people who appear wealthy actually
have little wealth because they spend it all in order to
support a lavish lifestyle.

Lesson to the rest of us: Benjamin Franklin also said,
“Rather to go to bed supperless than rise in debt.”
Unfortunately this concept is totally foreign to a big
portion of the population. Too many Americans are stuck in
the cycle of spending tomorrow’s cash today in an effort to
attain and maintain social status.

4. Most average millionaires believe in the value of hard
work and being self-sufficient.
A majority of these people did not receive significant
financial support from their parents, nor do they provide
financial support to their own children.

Lesson to the rest of us: The authors state that the odds of
becoming wealthy by inheriting a fortune, winning a lottery,
or becoming a celebrity are about 1 in 4000. However, the
odds of having a net worth over $1 million is about 3.5 in
100, and more than 80% of the people in this category are
just ordinary people who accumulated their wealth slowly and
steadily. In other words, don’t bank on becoming financially
secure by chance. Hard work is a much more reliable ticket
to financial security.

5. Most average millionaires use their time, money and
energy wisely.
“These people understand that efficiency is one of the most
important components of wealth accumulation,” write Stanley
and Danko. Thus, they allocate these resources in such a way
that helps them increase their net worth.

Lesson to the rest of us: Wealth rarely “just happens.” It
is almost always the result of hard work, planning, and
controlling consumption. If these things aren’t part of your
financial planning, you probably don’t have what it takes to
accumulate wealth.