Are people with a big house or fancy car wealthy? Many would say yes, but the best-selling book, The Millionaire Next Door, written by Thomas J. Stanley and William D. Danko twenty years ago proves these beliefs wrong. Unfortunately, one of the authors, Thomas J. Stanley, recently passed away in a car accident. I thought it was an appropriate time to remind readers of the key messages of the book.
From a personal perspective, the book is an all-time favorite for me. Besides my parents, it has had the biggest impact on my view of money and how to build wealth. The book was a graduation gift to me from my sister-in-law, and I couldn’t think of a better book to give your kids or recent college graduates.
One of my favorite lines and the primary thesis of the book is, “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.”
Before writing the book, the authors completed personal and focus group interviews with more than five hundred millionaires and surveyed more than eleven thousand high net-worth and/or high-income respondents.
To summarize the book, Stanley and Danko found seven common characteristics of the wealthy which are listed below:
7 Common Characteristics of the Wealthy
1. They live below their means.
- Very simple, spend less than you earn.
2. They allocate their time, energy, and money efficiently, in ways conducive to building wealth.
- Millionaires work hard to be successful by spending their time building businesses or planning/monitoring their investments.
3. They believe that financial independence is more important than displaying high social status.
- They don’t waste time trying to keep up with the joneses.
4. Their parents did not provide economic outpatient care.
- Their parents did not support them forever.
5. Their adult children are economically self-sufficient.
- Similarly to #4, they don’t take financial care of their adult children.
6. They are proficient in targeting market opportunities.
- Finding specific niches and exploiting them is often the key to generating an above-average income.
7. They choose the right occupation.
- They enjoy their profession and work hard at it.
I’m reminded of the recent news regarding a Vermont gas station attendant and janitor, who after his death at age 92 people found out he was a multi-millionaire with charitable gifts of over $8 million. It is a misconception that you need high income to become wealthy.
The 5 Things That Made Them Millionaires
Dr. Stanley followed up with a second book titled The Millionaire Mind. The conclusions are similar to his first book, but he includes the top five factors most mentioned by millionaires as being important to their financial success.
1. Integrity – being honest with people
2. Discipline – applying self control
3. Social skills – getting along with people
4. A supportive spouse
5. Hard work – more than most people
The Bottom Line
Building wealth takes discipline, sacrifice and hard work. Are you and your family willing to reorient your lifestyle to achieve financial independence? Many will likely conclude they are not.
So next time you see someone with a big house or expensive car, don’t automatically assume they are wealthy as the research shows they are likely not. In life, I’ve found experiences and relationships are more important than things. It sounds like the wealthy have realized this as well.
Please contact Financial Symmetry if you’d like to become financially independent to see how we can help.
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