What I learned Reading: The Millionaire Next Door
Majority of the wealthy are not seen on television
Even now, a large part of the population believes the only way to become wealthy is by either hitting the lottery or some form of overnight success, and it pains me to this day that this was all I knew growing up.
As I began to embark on my endeavor to build my financial empire and my wealth of knowledge, my foundation was shaken as my perception of who the wealthy were had quickly dissipated. As a youth, my thought of the rich and wealthy were the people I saw on tv. Little did I know, this would drastically affect how I saw the attainment of the illustrious one percent.
Everyone can’t be Michael Jordan. Everyone can’t be Tom Cruise. We’re all not born to an affluent family or gifted with an abundance of money through inheritance. So who do we inspire to become?
– Did you ever hear of the millionaire plumber?
– What about the real estate investor that takes the world while securing financial freedom through amassing only a few residential properties?
These are all people who’ve built the life many dreamed of and were never once in front of a camera. Most of these people you would never know to be in the top five percent of income generators in America because they’ve amassed their wealth contrary to what many believe is possible.
Who are these mysterious wealthy individuals? Not all the wealthy individual drive the most expensive vehicles or live in mansions. Coincidentally, this could partly be how they’ve gotten to where they are now. For now, I’ll leave you with this thought, and in the great words of Mya Angelo, when you know better, you do better.
Living paycheck to paycheck doesn’t have a tax bracket.
Over the course of this book, a few thoughts became the overarching points that are essential in giving you the idea of how long term wealth starts. While many of the chapters in the book go into detail on how the wealthy live, how they invest their money, and what jobs they have, I feel the most critical part of the book resides in Chapter 2. This chapter focuses entirely on building your mental foundation of wealth. Controlling your mindset is the first step to becoming an accumulator of wealth. As I’ve come to learn, true wealth doesn’t start with your bank account; it begins with what’s between your ears. While there are pages of useful information riddled through this chapter, there are four key questions we should ask ourselves to ensure we’re doing our part to take the first steps in the right direction.
1. Does your household operate on an annual/ monthly budget?
2. Do you know how much your family spends each year/month for food, clothing, and shelter
3. Do you have a clearly defined set of daily, monthly, annual, and lifetime goals?
4. Do you spend much time planning your financial future?
Perception is Not Reality
So, who are these millionaires? Where can you find them? Grab your phone or while you are driving, look for the nicest neighborhood in your city. That’s where the millionaires are. Right? Wrong. Millionaire’s hide in plain sight and are amongst all the “normal” folk. How can you tell? Well, most times you can’t. Are they driving the most beautiful cars? Lamborghinis. Porsche. Nope and nope. According to Millionaire Mind and from my experience, millionaires look no different than you and I. They drive some of the same cars we drive, and they wear some of the same clothes we wear. Who are these people we think are wealthy? Some are cash rich and living the lifestyle, but who’s net worth is far from what you would expect. The name of the game is building wealth. Accumulating wealth by increasing your asset column and minimizing your liabilities and expenses. In short, your money should be making you more money, and this should be the goal.
What do the wealthy know that we don’t? Well, to start, they realize that being part of the millionaire club doesn’t mean that you have to look the part on the outside. Playing the role involves a lot more than looking the part, and besides, most didn’t become millionaires increasing the expense column with luxury vehicles that have a tremendous hidden cost that stem from annual upkeep from repair and maintenance cost. Nor did they get to where they’ve gotten spending and budgeting insane wardrobe cost to look the part. So why are most of us spending much of our time trying to look the part and less of the time trying to be the part?
Avid Learner tip: Income generation does not equate to wealth accumulation. It’s not about what you make but more so what you keep.
Investing what you earn wisely can pay dividends. While the doctors and attorneys of the world are bringing in a significant income, much of those earnings are going toward looking the part. Therefore, little wealth generation is happening due to living a lavish lifestyle.
Wealth is calculated by the amount of time you could live off your current level of financial income without working.
Another factor that eats into your wealth can come from your surroundings. Few people realize just how much their environment affects their lives. What happens when you get the raise you’ve been waiting for, and now you want to move to a better neighborhood. Psychologically, what happens when you upgrade your surroundings. Let’s say you move from an area where the average household brings in about $70,000 (dual workers) to a neighborhood whose average household that brings in over $100,000. In theory, you’re great. You’re now in, what you would consider being, an affluent neighborhood and you’re where you want to be. However, this may have its pitfalls too. Many people get caught up in status and perception. Now that you’re in a more upscale neighborhood and your neighbors have nicer and newer cars. Maybe they have other material amenities too. This is how the perception trap happens.
Unsuspectingly, we fall victim to our environment. As the old phrase says, we’re trying to keep up with the Joneses. Before you know it, you’re making more money but your expenses have found their way upward too, and now you’re in the same situation you were before. The answer to your problem is that you need to work harder and get another raise, right? Wrong.
Avid Learner Tip: The reason why the wealthy can spend money on lavish gifts and amenities is that they don’t work for them. Their assets do. While the middle class works for every cent they earn, the wealthy put their money to work to buy the things they want.
Would you be surprised to find out that the average middle-class individual spends more money on motor vehicles and wardrobe items than the average American millionaire? Don’t spend like a millionaire with anticipation to become one. Wait until that day comes, and who knows, you may not want to spend that money then.