Don’t let the E! Channel fool you, most millionaires aren’t made by flaunting their bare butts and Botox-injected lips on social media. The good news for those of us less well-endowed, and without the last names Zuckerberg, Tusk, Ma, or Branson, is that most millionaires are actually made the old-fashioned way – by avoiding debt, being thrifty, and investing wisely. In his wildly popular book, The Millionaire Next Door: The Surprising Secrets of America’s Wealthy, the late Dr. Thomas J. Stanley brought us into the homes and pocketbooks of the average American (and Canadian, for all intensive purposes), and showed us that the common person could become millionaire.
These timeless principles, taken directly from his book, prove that any one of us, regardless of our income, can find ourselves on the road to wealth.
Avoid debt like the plague
Constantly being in the red guarantees you one thing – you’ll never gain any real measure of wealth and financial freedom. When it comes to debt, you have to have a take no prisoners, pedal to the metal mindset; nothing but full-fledged dedication to living according to, and under your means. That means no credit cards, no student loans, no car loans, no wedding debt, no nothing! This is the mindset my husband and I have taken on in our family and business finances, committing ourselves to bootstrapping any trips, events, projects, or purchases we want to make. It’s simple; being free of any and all debt sets you up to actually build something – a foundation, a life, a legacy.
Budget and Plan Ahead
It might seem like a cliché recited by your parents, but the truth of this principle still stands: those who fail to plan, plan to fail. Can you think of any business or company that doesn’t look ahead and plan their quarterly and annual budgets? In the same way, you have to operate your personal finances with a forward, and upward perspective, anticipating what’s to come and planning for it.
Planning is typically found to be a strong habit among people who have a demonstrated propensity to accumulate wealth. – Tom Stanley, The Millionaire Next Door
Don’t get overwhelmed here. Take things in bite sized pieces if you have to. Make long-term savings projections for large purchases like a house or car. For example, you want to buy a house in the next 5 years? Research what the average market rate is in the area you’re hoping to buy, then set your annual and monthly ‘House Savings’ budget accordingly for the next 5 years (taking a rough estimate of land transfer taxes, agent fees, and other closing costs into account). Work backwards and be sure to have a strong down payment upon purchase (we’re aiming for 30%). As for “smaller purchases” like cars and vacations, pay for those fully in cash. According to Dr. Stanley, majority of millionaires own their car, and pay for it upfront in cash.
They become millionaires by budgeting and controlling their expenses, and they maintain their affluent status the same way. – Tom Stanley, The Millionaire Next Door
Mr. & Mrs. Frugal
In her wildly popular book, Lean In, Sheryl Sandberg said, “The most important career choice you’ll make is who you marry”. As one of the world’s most influential and wealthy female executives, she’s right on the money with this one.
Most people will never become wealthy in one generation if they are married to people who are wasteful. A couple cannot accumulate wealth if one of its members is a hyper-consumer – Tom Stanley, The Millionaire Next Door
You agreed to richer or poorer, but let’s face it, when we sign up “till death do us part”, we’re all hoping most of that will be for the richer, or at least steadily move upwards. Or, was that just me?
Gentlemen, is your lady’s handbag worth more than your car? Ladies, you love those brand new wheels he’s picking you up in? Well, those heated seats are gonna burn you once you see that monthly car payment. Marry someone who shares your values and vision about money. Otherwise, no matter how much money you make, if you aren’t on the same page and working as a team, your efforts will be in vain.
We live in an “insta-world”, where everything from ordering our dinner, to our paying our bills, or buying a pair of pants can be done instantly with a device in the palm of your hand. However, building true, lasting wealth doesn’t quite work that way; it takes time, consistency, and patience. Get serious paying off that student debt you’ve been dragging along for the last 10 years. Save aggressively for that house you want. Research the best deals for that vacation and pay for the whole thing in cash. Start your path to building wealth and becoming a millionaire today!
Here’s to stacking that paper…actually, though.