How the rich get rich — and you can, too
Most people would like to live like millionaires, but few understand what that really means. Marketers of luxury products foster the impression that millionaires drive fancy cars, live in mansions and surround themselves with luxury goods.
The reality is that most millionaires live surprisingly modest lives, far from the fast lane. And, most people who act rich are not rich. That’s what Thomas J. Stanley, PhD, America’s foremost authority on the affluent, has discovered during his extensive research for his new book Stop Acting Rich… And Start Living Like a Real Millionaire.
Bottom Line/Personal interviewed Dr. Stanley on how to live like a real millionaire* and become a millionaire in the process…
What’s wrong with living in a big, fancy house? Though many Americans believe luxury real estate is a great long-term investment — recent years aside — a big home is far more likely to prevent you from becoming a millionaire than to help you become one. While it’s true that real estate tends to increase in value, big homes also have big costs — including big mortgage payments, property taxes, heating and cooling bills, and insurance and maintenance bills.
Also, expensive homes tend to be surrounded by other expensive homes that are owned by people who buy expensive things. That creates social pressure to spend to fit in. It’s better to buy a modest home that you can easily afford in a neighborhood where you are more successful than most of your neighbors, minimizing the pressure to overspend.
Invest the money that you save in the stock market. Stocks, not real estate, are the true investment path to wealth — despite big pullbacks in stock prices from time to time.
Fully 86% of people who drive luxury brands (BMW, Mercedes, Lexus, Jaguar and the like) are not millionaires. These brands tend to attract high earners who also are status-conscious overspenders, which prevents them from ever accumulating significant assets.
Even more millionaires (70%) have never owned a boat. Of those millionaires who actually purchased a boat sometime during their lifetime, most sold it and never bought another one.
When millionaires shop for clothes, they are more likely to head to Kohl’s, JCPenney and Target than to Saks and Brooks Brothers. (If a millionaire does wear a Brooks Brothers garment, he/she probably bought it on sale.)
When millionaires buy a watch, their choice is Seiko, not Rolex. Paying thousands is just showing off, something true millionaires rarely do. (Of those who wear a Rolex, 46% received it as a gift.)
When millionaires uncork wine for guests, the median price they paid for the bottle is just $13. Only 7% of millionaires own a bottle that costs more than $100.
Exception: Many male millionaires are willing to pay $100 to $300 for a pair of shoes. They aren’t anteing up to get a flashy brand name, however. The most popular millionaire shoe brands include Allen Edmonds, Cole Haan and Johnston & Murphy — shoemakers known for providing comfort, quality construction and timeless styling. When these shoes wear out, millionaires (70%) have them resoled rather than replaced.
Engineers tend to be analytical thinkers who value quality and substance. They ignore marketing hype and focus on things that matter. Example: An engineer is more likely to pay extra for a garment with a high thread count — an objective measure of quality — than one with a prestige label.
The culture at most educational institutions values saving for retirement over spending on elite consumer goods. Few educators earn flashy salaries, yet teachers and professors often manage to amass seven-figure savings.
Managers of supermarkets and discount department stores look at consumer products not as symbols of economic success but merely as a way to make a living.
If you already have married someone who likes to spend, try to hang out as a couple with your more frugal friends. This should dampen your partner’s impulse to spend to fit in.
*Dr. Stanley defines a millionaire as someone with investments of $1 million or more, not including equity in one’s home, motor vehicles, furniture, etc.