Most millionaires aren’t driving Lamborghinis and eating caviar. They’re driving reliable used cars and eating mashed potatoes and meatloaf.
Just like us.
In The Millionaire Next Door, authors Thomas Stanley and William Danko interview multimillionaires to find out the secrets to their success.
Turns out millionaires are just normal people who live frugally, invest wisely and budget frequently. After years of following this simple equation, they become wealthy.
And it’s a formula anyone can follow. Including you! Here are six money habits we can learn from millionaires:
1. They spend wisely. Status isn’t important to most millionaires. They’d rather be financially independent than buy expensive stuff. In fact, only one in four of them have ever spent more than $100 on a pair of shoes! Jimmy Choo, who?
Budget Lesson: Don’t buy stuff because you want to impress people. Buy stuff because you want it, you saved up for it, and you will actually use it.
2. They set goals. Two-thirds of millionaires set goals daily, weekly, monthly, annually and for their lifetime. Maybe that’s why they accomplish so much with their time!
Budget Lesson: Author and motivational speaker Zig Ziglar famously said, “If you aim at nothing, you will hit it every time.” Name goals for all areas of your life and work hard to make them happen.
3. They buy modest cars. Millionaires don’t lease. Most don’t even buy new cars! They purchase modest, reliable vehicles with cash and drive them for years.
Budget Lesson: Forget about car loans and leases. Save up, buy the car you can afford, and drive it as long as possible. Then buy another with cash. Works every time.
4. They budget and track their spending. Everyone needs a budget, even millionaires. They religiously plan and track their expenses each month. And they know where their money is going at all times.
Budget Lesson: Make an easy, online budget with EveryDollar before the month begins. Do this every month, and track your spending as you go. Make adjustments as needed, and always budget to zero.
5. They save and invest. Most millionaires invest around 20% of their income. And while they have accounts with investment firms, they never put their money on autopilot. They make their own decisions and stay in control of their portfolios.
Budget Lesson: Invest at least 15% (or even more after you pay off your house!) of your income in good, growth-stock mutual funds. And stay involved. Make sure your money is doing what you say.
6. They’re happy. The authors concluded that, “Financially independent people are happier than those in their same income/age cohort who are not financially secure.” Why? Because they don’t have to worry about money, like their peers who are spending money as fast as they make it.
Budget Lesson: The greater your net worth (assets minus debt), the less you have to worry about money. You know you can fund your retirement, pay for your kid’s tuition, and buy your home outright. It’s a good feeling.
The Bottom Line
Millionaires aren’t wealthy because they’re lucky. They’re wealthy because they follow simple money habits year after year. See how much you can accomplish by doing the same.
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