Want to become a millionaire? You won’t need a street named after you to become one! Perhaps the answer is to study the behaviors and values of people who have done it.
Value 1: Income Does Not Equal Wealth
The size of a paycheck explains only approximately 30% of the variation of wealth among households. What really differentiates the millionaire is how much of their income is invested. On average, millionaires invest nearly 20% of their income.The majority of millionaires have a budget. Of those who don’t, they have a value of “pay yourself first.” In other words, they invest a good chunk of their income before they can spend any of it.
Millionaires also plan out their expenses for the coming year. While it may take time to sit and plan expenses out, millionaires are more likely to track their spending. They also have a clearly defined set of daily, weekly, monthly, annual, and lifetime goals.
All this budgeting and goal setting takes time, but millionaires are willing to spend it. Prodigious accumulators of wealth spend nearly twice as many hours per month planning their investments as under-accumulators of wealth. Millionaires agree to these following behaviors:
• I spend a lot of time planning my financial future.
• Usually, I have sufficient time to handle my investments properly.
• When it comes to the allocation of my time, I place the management of my assets before my other activities.
Planning, budgeting, saving, and setting aside time to allocate finances are all ways that millionaires ensure their income is used in practical ways and invest their income intelligently.
Value 2: Love the Home You Are With
Your choice of home and how often you choose a new one will determine your ability to accumulate wealth. According to The Millionaire Next Door, “Half of millionaires have lived in the same house for more than 20 years”. This means that millionaires love the house and neighborhood they have chosen and stay there for many years.
In Stop Acting Rich, Thomas Stanley writes:
Nothing has a greater impact on your wealth and your consumption than your choices of house and neighborhood. If you live in a high-price home in an exclusive community, you will spend more than you should and your ability to save and build wealth will be compromised… People who live in million-dollar homes are not millionaires. They may be high-income producers but, by trying to emulate glittering rich millionaires, they are living a treadmill existence.
Millionaires make sure to choose a practical home for their budget and stay in that home for many years, so they can allocate more of their earnings towards savings and investing.
Value 3: Love the Spouse You Are With
The majority of wealthy people are married and stay married to the same person. Of course, marriage shouldn’t be just about money. Several studies have shown that people who are married accumulate more wealth than those who are single or divorced.
However, it’s important to note that marrying someone with the right financial habits is more optimal. Millionaires try to marry someone who is more frugal and not so much a hyper-consumer.
Value 4: Don’t Drive Away Your Wealth
The majorities of millionaires own their cars, rather than lease. Approximately a quarter have a current-year model, but another quarter drive a car that is four years old or older. More than a third tend to buy used vehicles. What is the most popular car maker among millionaires, according to Stop Acting Rich? Toyota.
So who’s driving all those BMWs and Mercedes? Not millionaires. Eighty-six percent of “prestige/luxury” cars are bought by non-millionaires. Much like the previous value about homes, millionaires do not trade their cars in often. They keep a practical, well maintained vehicle for many years before deciding to trade their car in.
Value 5: Be Happy With What You Have
At this point, you might be wondering whether all this living below your means is worth it. Sure, millionaires having bigger portfolios — but are they happier? Danko and Stanley’s research indicates that they are. According to their research, “Financially independent people are happier than those in their same income/age cohort who are not financially secure.”
There’s a peace of mind that comes from living below your means and having money in the bank. Millionaires don’t expect “status” purchases to improve their happiness, because evidence shows it doesn’t happen. There are actually two benefits of learning to live on much less than your paycheck.
• The first, of course, is that you can save more.
• But second, it also means that you ultimately need to save less.
After determining the Values of a Millionaire, one may be wondering how they can possibly do this given their income. DuRant, Schraibman, and Lindsay, LLC would be happy to help develop a financial plan for you and your household. This would assist in your saving or investing more of your income inching you closer to your desired goal (whatever that goal may be). We would like to leave you with one more thought to ponder – a question actually. How does one eat an elephant? The answer is quite simple…one bite at a time. Much like eating an elephant, if you start saving and investing you will see you investments grow.
For more information contact us or call (803)790-0020