I’ve been cruising through another read of The Millionaire Next Door and I’ve got a few points I want to share with readers.
For those of you who aren’t familiar with the book, let me introduce. The authors did a bunch of research on millionaires to find out why they were wealthy. What characteristics they shared, what background, what occupation, etc.
The results are pretty phenomenal if you’re a believer in frugality. The common denominator with all these millionaires was their frugality. They know how to save money and they choose to save a large portion of their income over many, many years.
Beyond that, most millionaires care very little about status. Most of them drive very modest cars, live in very affordable homes, and wear very few expensive articles of clothing. They aren’t worried about outward appearance or societal standing.
- 50% of millionaires never spend more than $399 on a suit or piece of clothing.
- 50% of millionaires never pay more than $140 for a pair of shoes.
- 50% of millionaires never pay more than $235 for a watch.
Or maybe more applicable to the Cash Cow lifestyle:
- 10% of millionaires (and us) have never paid more than $195 for a suit or article of clothing.
- 10% of millionaires (maybe us? Close call…) have never paid more than $73 for a pair of shoes
- 10% of millionaires (and us) have never paid more than $47 for a watch
This is sharply contrasted with much of the other research on the spending habits of those with at least a six figure income. The great majority spend everything that they earn. They aren’t wealthy at all, they just earn a ton of money each year.
- For every millionaire who owns a $1000 suit, there are 6 non-millionaire owners who earn between $50,000-$200,000 per year.
Why is it that so few people in America are wealthy? How can people earn huge six and seven figure incomes, yet still be worth less than a million dollars at age 65?
In a word, priorities.
They believe in spending tomorrow’s cash today. They are often in debt and they subscribe to an earn-and-consume lifestyle. It’s a black hole and they never escape.
Can you imagine trading 45 years of your life for a bunch of material possessions that are worth nothing? Literally, they are worth nothing by the time they are paid off. Factor in interest payments and it becomes easy to see how people are always complaining about being broke.
But that’s the trend. Consume, consume, consume, until they wake up and realize that they own nothing of value. All their time was spent in exchange for a paycheck. That paycheck was exchanged for a bunch of depreciating assets. And the cycle goes on.
It doesn’t have to be that way. With a little discipline, it is easy to save and get ahead in this country. Individuals and families have been doing it for centuries, and as this excellent book shows, anyone can become a millionaire.