Tuesday, January 27, 2015

How To Live Like A Millionaire

The book The Millionaire Next Door (amen.To/YE8Cxe) is a thoroughly researched book about the lives of actual multi-millionaires. The insights in the book are astounding. By and large. Millionaires live more like the rest of us and less like the billionaires we look into Forbes.

Becoming billionaire takes extraordinary risk combined with extraordinary luck—and some would add talent to that equation. Becoming a millionaire requires principally patience and discipline.

The following are some observations from The Millionaire Next Door:

1.  Millionaires are frugal. Of course there are exceptions, but most millionaires are frugal. They accumulated their wealth by not going through here the money they earned rather than by earning vastly more than other people.

2.  Millionaires drive frugally. Most millionaires drive cars for a long time. A very long time in some cases. Though they don’t necessarily scrimp on the cars they drive, they don’t typically have a new car every year or two. More commonly, they drive their cars for ten years or more.


3.  Millionaires live frugally. Typical millionaires are placed in homes that represent less than ten percent of their net worth. Most do do not live in homes that would be described as luxury homes. By being placed in modest homes, they put themselves in a position to compare their spending to people who generally have much less money and thus feel less social pressure to spend extravagantly on their clothes, cars and vacations.

4.  Millionaires save. Millionaires appear to have been a discipline to save scarce amounts of their earned income, sometimes as much as 40 percent. Most Americans save less than 4 percent of their earned income.


5.  Millionaires aren’t lawyers. Surely there are lawyers who are millionaires, but not many millionaires are lawyers or other professionals who are employed in shiny, tall buildings in major city centers. Such people, the book found, often feel a lot pressure to consume their lavish incomes that they are in a position to accumulate significant wealth. Simply not functioning with or around high consuming people helps people to salvage and invest rather than consume.

6.  Millionaires are entrepreneurs. Most millionaires are under the age of a business. They may not derive huge incomes from their businesses, but the business itself is a valuable asset over time. When millionaires retire, they not only have the benefit of savings invested like most of the rest of us, but also have to value businesses that can be bought to help finance their retirements.


So, if you already live frugally, you already live like a millionaire. If you are young and you are consistently saving and investing your earned income, you can accumulate $1 million or more by the time you retire. Don’t fool yourself, however; you can’t easily turn a measly $1,000 savings account into $1 million even over forty years. Accumulating wealth, as the wealthy have been demonstrated, requires discipline, living frugally and saving consistently.



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