The goal of the book is to give an accurate idea of what characteristics make a millionaire. I found four of those characteristics especially important.
4 Essential Habits of Millionaires
1. Millionaires practice frugality.
“They live well below their means.”
Here are some stats on millionaire shopping habits:
- Average paid for a suit = $399
- Average paid for a pair of shoes = $140
- Average paid for a watch = $235
While those numbers might seem a little higher than the average middle class shopper, it is certainly a far cry from the $4,500 pair of shoes we think millionaires would wear.
Did you know that for every 100 millionaires who don’t budget there are 120 who do? Perhaps it is time for you to start a budget. It is time to make sure that you spend less than you earn.
2. Millionaires spend time managing finances.
“They allocate their time, energy, and money efficiently, in ways conductive to wealth building.”
While most of us feel like don’t have time to budget because it is a “waste of time,” millionaires do. It is difficult to reach any kind of a goal until you are first willing to allocate some time to working toward a goal.
3. Millionaires build wealth, not status.
“They believe that financial independence is more important than displaying high social status.”
Ouch. This one hits home. How often do we buy things based on what others will think? People often talk about teen spending and consumerism, but what about adult spending? A person who is upside down and in debt still thinks they can afford a car payment.
Why do those in debt always seem to spend more money and own nicer things than those who are debt-free? I guess we each need to grow thick enough skin so that we do not think about what others think of us. Make a plan and reap the rewards of your financial planning – even if people think you’re weird.
Here’s an example based on the type of cars millionaires drive:
|Latest Model-Year of Vehicle Owned||Percent of Millionaires|
|Last Year’s / One Year Old||22.8|
|Two Years Old||16.1|
|Three Years Old||12.4|
|Four Years Old||6.3|
|Five Years Old||6.6|
|Six Years Old or Older||12.3|
(This chart is from The Millionaire Next Door on page 113.)
Here’s the deal. Millionaires don’t mind driving older cars. The masses who are in debt love owning new vehicles that cost $25,000+. Meanwhile, they can’t make their minimum car payments.
4. Millionaires have a healthy financial background.
“Their parents did not provide economic outpatient care.”
I’m so thankful this was included in the book. Your parents have a tremendous influence on how you turn out financially. I know in my case, I had solid financial education at home.
In so very many ways, I am who I am because of my parents (thanks, mum and dad). The book goes a different direction with this characteristic by highlighting that the parents of millionaires allowed their kids to be independent and learn important life lessons.
Who is going to be a financial mentor for people who didn’t or can’t learn these lessons at home?
When we think about issues of poverty, we need to recognize that what the poor need are examples and mentors – not just money. Education is important.
Which of these four habits do you think are most important to wealth-building? Leave a comment!
I interviewed a millionaire about 10 years ago and took some great advice away from our conversation – I wrap up those thoughts and takeaways in this quick video so take a look if that’s your thing!