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Learn From Millionaires

April 18, 2010

More than 130 pyramids have been found in Egypt.  These massive structures were an engineering feat at the time.  I imagine the most difficult one to build was the very first one.  After they had a plan that they knew would work, it would have been easy to replicate it and just change the proportions for the desired size.

How does this relate to personal finance?  Many people dream of becoming a millionaire.  The great thing about this dream is we have a plan on how to get there.  In 1996, Thomas Stanley and William Danko studied millionaires to learn what they did to amass a net worth of a million dollars.  They presented their findings in the book The Millionaire Next Door.  The results were surprising.

When we think of millionaires, we think of people who live in really big houses, drive nice cars, and wear expensive clothes.  Their research showed this was not the case.  While many people who look like they are quite wealthy have big salaries, a number of them were actually using debt to keep up with appearances.

Most millionaires, they found, live a pretty humble lifestyle from the outside view.  So, if their cars and houses and clothes do not set them apart, what does?  It is, in fact, their methods of attaining wealth, and Stanley and Danko learned some of them.

No. 1:  They live below their means.  The millionaires studied were very conscious about how they spent their income.  Every dollar was budgeted out and a solid plan was in place on what was going to happen to every paycheck.  The millionaires were not eating out at fancy restaurants or splurging on the latest must-have object; they were cutting coupons and avoiding brand name everyday products.

No. 2:  They allocate their time, energy and money efficiently, in ways conducive to building wealth.  The millionaires, on average, spent twice as much time every month than the average person planning on what they were going to do with their income.  They spent time creating a budget and tracking expenses to make sure they were keeping to the budget.  They weren’t looking for the next “get rich quick” plan, but slowly making wise decisions every day to build wealth.  When they purchased investments, they would make wise mutual fund purchases and then sit back and let it grow.  They did not try to time the market or actively trade, but rather trusted the investments they made for the long term.

No. 3:  They believe financial independence is more important than displaying high social status.  One of the biggest traps we can fall into is measuring our success based on our possessions.  This seems to be pretty common in our society as we always want a newer car or a bigger house or fancier clothes.  Most true millionaires do not care about this, but realize it is important to save now to benefit in the future.  Most millionaires were driving older model used cars and living in their modest suburbian homes. 

There are more lessons to learn from these millionaires, which I will address next week.  For now, please consider my advice to be a roadmap; the beginning of your journey toward financial greatness.  We are lucky in the fact we don’t need to find a mystic secret to become millionaires, but can just follow the lifestyles of normal Americans who have, through conscious decisions every day, become great.

Become a great wonder!  Master your finances today.

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2 Comments leave one →
  1. Ben permalink
    April 22, 2010 5:14 pm

    Why would I want to become a millionaire if I can not have a huge house and brand new car?!?

    I am just kidding Andy, another great read.

    • April 25, 2010 2:13 am

      You need to live like no one else now, so later you can live like no one else.

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