Accumulating wealth has little to do with an individual’s level of income.
Most of the truly wealthy in America don’t live in Beverly Hills or on New York City’s Park Avenue, instead, they live next door to you and the typical American.
In the bestselling book, The Millionaire Next Door, the authors, Dr. Thomas Stanley and Dr. William Danko, identified seven common characteristics that show up repeatedly among those who have accumulated wealth over the long-term.
If you want to build wealth and achieve financial freedom, it’s essential to study and embrace these seven common characteristics of the wealthy:
Characteristic #1: They live well below their means.
Frugality is the foundation of wealth building. Habits of frugality that are void of luxury-car purchases may not impress the neighbors, but they’re important traits to embrace to build wealth. The goal is financial independence and financial freedom, not the appearance of wealth.
Characteristic #2: They allocate their time, energy, and money efficiently, in ways conducive to building wealth.
The wealthy know how to budget their money, and they know how to budget their time. They anticipate and plan their incomes and expenses. They spend significant time researching their investments. They spend time examining ways to increase their unrealized income; i.e., tax-advantaged investment accounts.
Characteristic #3: They believe that financial independence is more important than displaying high social status.
It’s easier to appear wealthy than it is to be wealthy.
The wealthy understand that conspicuous consumption and high levels of “domestic overhead” carry a highly negative correlation with one’s true net worth. The wealthy aren’t interested in status vehicles or other showy products. After all, it is much easier to appear wealthy than it is to be wealthy.
Characteristic #4: Their parents did not provide economic outpatient care.
Statistics demonstrate that the more financial assistance an adult child of affluent parents receives, the less likely it is that that adult child will become wealthy.
Generally speaking, the more dollars adult children receive, the fewer they will accumulate.
These gifts — whether for down payments or for a grandchild’s private-school education − will, more often than not, simply generate higher levels of consumption. After all, it’s much easier to spend someone else’s money than your own.
Characteristic #5: Their adult children are economically self-sufficient.
Cash gifts from parents to their adult children result in dual outcomes: They increase the children’s dependence upon the parents for continuing financial support, and they deplete the parents’ financial position.
The authors of Millionaire Next Door found that cash gifts from affluent parents to their adult children serve dual negative outcomes:
- They increase the children’s dependence upon the parents for continuing financial support, and
- They continuously deplete the parents’ financial position.
Characteristic #6: They are proficient in targeting market opportunities.
Finding specific niches and exploiting them is often the key to generating an above-average income. In a nation geared toward turbocharged levels of consumption, market opportunities are created constantly for those willing to supply new products or ideas.
Characteristic #7: They chose the right occupation.
The successful man or woman is a person who likes their work and who can’t wait to get up in the morning to get down to the workplace.
Wealth is generated through talent, desire, and discipline. There are four times as many millionaire entrepreneurs as there are millionaire employees.
There are too many people [employees] today working at jobs that they don’t like.
The successful man or woman is a person who works at a job, who likes their work and who can’t wait to get up in the morning to get down to the workplace. They can’t wait to rise up from bed and get down to their workplace and get the job underway.
Each “characteristic” played an integral part in the means by which these people achieved their enviable financial positions and became The Millionaire Next Door”.
References:
- https://themillionairenextdoor.com/publications/the-millionaire-next-door/
- https://themillionairenextdoor.com/2011/08/factor-7-a-key-characteristic-of-the-millionaire-next-door/
- https://www.mdmproofing.com/iym/7factors.php