Takeaway #1 - Millionaires Are Frugal
Frugal probably isn’t the first word that pops into our minds when we think of a Millionaire.
But that is the word that Dr. Thomas Stanley uses to describe a typical millionaire he found in his study.
Media loves to sensationalize big spenders and lavish lifestyles. There’s a reason why shows like Gossip Girls, Billions and movies like Crazy Rich Asians are so popular.
I mean who would want to watch a show about people who practice habits of frugality.
Spending their money wisely. Buying things based on value. Saving for future purchases. It wouldn’t even get past the network’s brainstorming session.
In order to become a millionaire, you must learn the habit of being frugal – being wise with the use of your money.
Being frugal is the cornerstone of wealth-building.
Not buying the brand new sports car because everyone on your street has one. Not taking your family on a lavish vacation to a remote island, because you want to show off to your coworkers.
One of the ways millionaires in Dr. Stanley’s book practice frugality is, by creating an artificial economic environment of scarcity. Even though they could afford a $100 dinner out, they set a limit of only $50. Even though they could buy a $1 Million Dollar home in an expensive neighborhood, they limit themselves to a half million dollar home in a modest neighborhood.
By living frugally, they are able to keep their spending to the minimum and invest the remaining money towards growing their net worth.
Takeaway #2 - Millionaires Are Planners
Planning is a strong habit among people who have accumulated wealth.
Dr. Stanley found time and time again in his interviews that millionaires invest quite a bit of time in planning their financial future. They prioritize managing their financial assets over other activities.
And they don’t just leave it when they feel like it. Most of them have a regimented schedule – each week, each month, each year. They review their investments and make adjustments to maximize the returns they are getting on all their assets.
Not many people know this, but Arnold Schwarzenegger, the 7 time winner of Mr. Olympia, a movie star and the former governor of California actually became a millionaire through real estate before his 30s. He had invested his earnings from bodybuilding into purchasing real estate in Los Angeles in the 70s.
However, a key habit that enabled all this to happen, was that he wrote his goals down on 3×5 index cards and planned out his future.
Brian Tracy, Author of No Excuses says in his book that only 3 percent of adults have written goals and plans. And this 3 percent earn more than all of the other 97 percent put together.
If you want to become a millionaire, build a habit of writing down your goals and creating intentional time for planning.
And this should be for both life planning as well as financial planning.
Takeaway #3 - Millionaires Value Financial Independence Over High Social Status
Many people struggle with this. I certainly do.
In a world of social media and insatiable consumption – it’s so hard to fight off the desire to look successful. To look rich. We all want to fit in and perception plays a big part in that.
However, the millionaires in Dr. Stanley’s book prioritized actually being financially independent rather than looking rich.
With a credit card, any one of us can look rich – we can buy the nicest clothes on credit. Lease the latest sports car and get a huge mortgage on a mansion we can’t afford.
But, we won’t enjoy the peace that would come with financial independence. Because deep down, we know that we are just one step away from financial catastrophe.
To the millionaires in Dr. Stanley’s book, freedom is the ultimate purchase. By living below their means and meticulously planning their financial future, many are able to enjoy the freedom that comes with financial independence.
Even if their income dropped or their business had a bad year, it would be ok because they are not living the hyper consumption lifestyle that so many people struggle with.
For the Sandwich Generation like us, this is huge.
We value time with our family over many things, so by managing our finances well and overcoming the social status game, we can also enjoy the financial freedom with family that many of these millionaires were able to enjoy.
Takeaway #4 - Their Parents Did Not Provide Economic Outpatient Care (EOC)
Dr. Stanley uses the term Economic Outpatient Care to refer to adult children who are still receiving financial support, even well into their adulthood.
Many of the millionaires in the book never received cash gifts from their parents. Majority were self made millionaires.
The study showed that when adult children received more dollars, the fewer they would accumulate, while those who were given fewer dollars accumulated more. This is quite ironic. Basic math would tell us that if you received more money, you would have more, right?
However, we humans aren’t logical beings.
Productivity is a skill that needs to be developed and people who continue to receive economic outpatient care have a hard time developing that skill. Sadly, they become dependent on their parents to provide them with the next dose of cash to maintain their lavish lifestyle.
Reading this chapter made me think hard about my own kids. How could I raise them so they become self reliant and productive members of society, instead of becoming dependent on economic outpatient care.
Dr. Stanley gives a few tips via what he heard from the millionaires.
Just as we practice frugality, we must teach them to our kids. Kids observe everything that we do – so if we are living a lavish lifestyle, then our kids will follow suit as they get older.
We should also create an environment that honors independent thought, individual achievement and self responsibility.
Lastly, many of the millionaires had a great appreciation for the value of high-quality education. For me, this would be reading with my kids on a regular basis and passing on the value of learning from an early age.
Of course this is much easier said than done. I’ll keep you guys posted on my own journey with my kids – how well I manage not to fumble this.
Takeaway #5 - They Chose The Right Occupation
The most affluent in America are business owners, including self-employed professionals.
And this makes sense given that there is a lot of upside potential that comes with owning your own business and control that comes with being a business owner.
In addition, unlike having just one source of income as an employee, business owners have multiple sources of income – each client they service or sell products to is a source of income in itself. So they could have hundreds or even thousands of sources of income.
But don’t think that just because you have a business, you will become a millionaire. Yes, it is true you are more likely to become affluent if you are self employed, however most business owners are not millionaires and will never come close to becoming wealthy.
It’s a competitive environment and only the ones with resilience and the best business models will survive. However, Dr. Stanley does give some pointers based on his research on how one can find success as a business owner.
Dull Company – Interestingly, many millionaires talked about finding success in dull businesses. Often dull-normal industries (think trash collection or junkyard) don’t attract a great deal of competition and economic impact isn’t as detrimental as other industries (tech or real estate).
Some Knowledge – Most successful business owners had some knowledge or experience with their specific industry before they ever started their business. If you don’t know anything about baking, maybe you should think twice about opening up that cupcake shop?
Frugality in Business – Just like how we want to practice frugality in our own personal lives, you want to practice frugality in your business. Treating company money like our own personal money and considering all spending from the perspective of an investment – If I purchase this equipment or this course, what will I get in return? Faster production? Additional knowledge to better market?
Becoming a millionaire is something that many of us can achieve if we are willing to practice the takeaways found in this book.
I hope you found this post helpful. Check out the book because it’s filled with many more details about the lifestyle of the millionaire.