Ok so I know many people think once someone reaches millionaire status that they can begin to purchase a brand new Mercedes every two years just to live the good life. But that is not the case as most average millionaires actually care more about staying low key and remarkably maintaining the wealth they worked so hard to build.
Now I bet your asking why are they being so frugal if they are actually millionaires. Why don’t they just spend all day like the average tourist on vacation. Well if I were to give you an off the cuff answer, it would be because by that point in life, the average millionaire is already older and a bit wiser with how money management works. They also prefer to value every dollar and the opportunity it can bring in future revenue.
This usually equates to the average millionaire believing in the live modestly lifestyle, and is way past the, drive a Ferrari on the weekends because that makes me look cool syndrome.
This translates to them being fundamentally frugal. Because even though they have reached the almighty millionaire status, they are not necessarily making a million dollars in income per year. People have a misconceived notion that all millionaires are raking in the dough but for the most part the average millionaire next door makes under 250K in annual income. They reached the status in part by being smart with finances, investing, and saving diligently.
If I were to pull a few facts from the millionaire next door book it would be that the average millionaire actually has over a million dollar net worth but not necessarily a million dollars in readily available cash.
Some of the net worth might be tied up in 1 or 2 houses, and have a mix of tax deferred and brokerage accounts. Some of those accounts might be taxed heavily if the principle is withdrawn, so they have no interest in withdrawing funds as that will trigger a big tax bill. Millionaires hate taxes if you didn’t know that already.
They also prefer to drive a paid for car with cash that is about two years old. This is very opposite to what most people think of when it comes to the average rich person’s mode of transportation.
Another important financial tactic that frugal millionaires practice is that they spend on average a very low percentage compared to income. This is how they successfully transformed into a millionaire. By minding the gap those average frugal millionaires took the surplus between income and expenses to invest every year into assets that produce consistent cash back.
Once you can successfully navigate this money tactic you will have an increase in cash flow year after year. By increasing the cash flow and maintaining expenses at a low level you can now see how the fast track towards wealth really is possible.
Facts about The Frugal Millionaires:
* Only 19 percent receive any income or wealth of any kind from a trust fund or an estate.
* Fewer than 20 percent inherited 10 percent or more of their wealth.
* More than half never received as much as $1 in inheritance.
* Fewer than 25 percent ever received “an act of kindness” of $10,000 or more from their parents, grandparents, or other relatives.
* Ninety-one percent never received, as a gift, as much as $1 of the ownership of a family business.
* Nearly half never received any college tuition from their parents or other relatives.
* Fewer than 10 percent believe they will ever receive an inheritance in the future
This sums up the reality that the majority of frugal millionaires build their money by handling income correctly, investing every year, and not placing a high value on consumerism.
This article was based on findings in the great book “The Millionaire Next Door“ written by Thomas J. Stanley, unfortunately the author recently passed away see the article Here for more info on his tragic car accident.
Now if you take into account all of these facts do you think you might become one of these millionaires. Follow the path today and begin to live modestly with finances, and you will reach the frugal millionaire status in no time at all.
Comment if you see yourself as the Frugal millionaire or the Flashy millionaire?
Rich Uncle EL
Pic provided by Thomas J. Stanley.com
I've always been frugal so I doubt I would become flashy if I achieved millionaire status. I think being frugal makes achieving long term wealth easier and people who are flashy (in my experiences) tend to have less but want to show off more
That is actually the way to really live life, but many cant see the basic act of looking rich in comparison with forging that and becoming rich. Thanks for stopping by, talk to you soon.
I'd probably be a frugal millionaire since I'm frugal now, but I could see myself being more generous with money toward the people and causes I care about. Certainly not "flashy" by any means, but more open-handed.
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