Wealth And Cash Flow Lessons From The Millionaire Next Door
Attitudes and Behaviors of the Affluent How do you Compare
?
Thomas J. Stanley and William D. Danko have met with and conducted research among wealthy Americans since the early 1970s. As the title of their first book The Millionaire Next Door suggests, the profile of a typical millionaire might surprise you.
For example, most millionaires are self-made: 80% are first-generation rich. The minority who do inherit their wealth have very different profiles and behaviors; they didnt earn it, so they dont appreciate it or manage it as effectively.
Two-thirds of millionaires who are still working are business owners. By contrast, only 20% of the U.S. population is self-employed. But the types of businesses owned by the wealthy dont suggest affluence. While some are self-employed professionals such as doctors and accountants, the majority are what the authors refer to as dull-normal. They include welding contractors, auctioneers, rice farmers, owners of mobile-home parks, pest controllers, coin and stamp dealers, and paving contractors.
How about their lifestyles? Im afraid the tabloids and the producers of TVs rich and famous shows will be disappointed. Most live in what would be considered middle income neighborhoods, drive two- or three-year old cars or trucks (usually Fords or Chevys, not BMWs), and much prefer putting their hard-earned money into savings or investments rather than luxury items.
The profile of a typical millionaire household
is not one of an overindulgent family
living in a high-status neighborhood
but instead of a practical, unassuming family
who might even be your own neighbors.
Heres why. Millionaires tend to share a common set of values. Stanley and Danko call them common denominators. Theyve identified seven. Here are a few:
They live well below their means. This is probably the most important one. Thats right, millionaires are frugal. Its how they accumulate their wealth in the first place, and its how they keep it. By contrast, other high income earners who should easily become millionaires instead become hyperconsumers. But when you keep overextending yourself with bigger and bigger purchases (as illustrated in our money pit pieces) its hard to catch up, much less get ahead.
They believe
financial independence is more important than displaying high social status. No McMansions, no luxury automobiles, and no $2,000 timepieces (aka watches). Its meat and potatoes, not caviar and Dom Perignon.
Their parents did not provide economic outpatient care for them. In other words, most millionaires accumulate their wealth independently. Nor, by the way, do they allow their children to become economically dependent on them.
So the picture Stanley and Danko paint is not of an overindulgent household living in an exclusive, high-status neighborhood but instead of a practical, unassuming family who might even be your own neighbors.
The message to you? Its not rocket science and its not beyond your reach. Your household can become wealthy if you stay focused and follow some common-sense millionaire next door principles. But remember, wealth by itself isnt enough; you want wealth that generates
Cash Flow. To get there youll need to follow Cashflownavigator principles.
by: Keith Wheelan
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