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June 3 - June 26, 2024
Yet they are uncommon in the sense that they are financially independent.
“About one-half of the millionaires in America don’t live in upscale neighborhoods.”
What I write is designed to enlighten those who are confused and misinformed about what it means to be rich.
Most Americans have no idea about the true inner workings of a wealthy household.
Wealth is not the same as income. If you make a good income each year and spend it all, you are not getting wealthier. You are just living high. Wealth is what you accumulate, not what you spend.
Wealth is more often the result of a lifestyle of hard work, perseverance, planning, and, most of all, self-discipline.
They live well below their means. They allocate their time, energy, and money efficiently, in ways conducive to building wealth. They believe that financial independence is more important than displaying high social status. Their parents did not provide economic outpatient care. Their adult children are economically self-sufficient. They are proficient in targeting market opportunities. They chose the right occupation.
Mainly, that building wealth takes discipline, sacrifice, and hard work.
They paid me $100, $200, or $250. Oh, they made me another offer—to donate in my name the money I earned for my interview to my favorite charity. But I told them, “I am my favorite charity.”
Conversely, those people whom we define as being wealthy get much more pleasure from owning substantial amounts of appreciable assets than from displaying a high-consumption lifestyle.
In this book we define the threshold level of being wealthy as having a net worth of $1 million or more.
Those who are significantly above this level can be considered wealthy in relation to others in their income/age cohort.
Multiply your age times your realized pretax annual household income from all sources except inheritances. Divide by ten. This, less any inherited wealth, is what your net worth should be.
Because we are a consumption-based society. In general, the longer the average member of an ancestry group has been in America, the more likely he or she will become fully socialized to our high-consumption lifestyle.
I drink scotch and two kinds of beer—free and BUDWEISER!
Webster’s defines frugal as “behavior characterized by or reflecting economy in the use of resources.”
The affluent tend to answer “yes” to three questions we include in our surveys: Were your parents very frugal? Are you frugal? Is your spouse more frugal than you are?
The foundation stone of wealth accumulation is defense, and this defense should be anchored by budgeting and planning.
They became millionaires by budgeting and controlling expenses, and they maintain their affluent status the same way.
Each time she tabulates, she tells herself she is reducing her fear of never being able to retire in comfort.
Financially independent people are happier than those in their same income/age cohort who are not financially secure.
possessed by possessions.
One earns to spend. When you need to spend more, you need to earn more.
all elements of consumption are reduced by a minimum of 15 percent for the next year or two.
To build wealth, minimize your realized (taxable) income and maximize your unrealized income (wealth/capital appreciation without a cash flow).
What is “the relationship between realized income and wealth”?
people accumulate significant wealth by minimizing their realized/taxable income and maximizing their unrealized/nontaxable income.
What if your goal is to become financially independent? Your plan should be to sacrifice high consumption today for financial independence tomorrow.
It’s easier to accumulate wealth if you don’t live in a high-status neighborhood.
You will never become financially independent without purchasing investments that appreciate without income realization.
If you’re not yet wealthy but want to be someday, never purchase a home that requires a mortgage that is more than twice your household’s total annual realized income.
Of course, his mortgage broker told him he was qualified for a $250,000 mortgage. But that’s like asking a fox to estimate the number of chickens in your coop.
Simply: People who become wealthy allocate their time, energy, and money in ways consistent with enhancing their net worth.
PAWs allocate nearly twice the number of hours per month to planning their financial investments as UAWs do.
Begin earning and investing early in your adult life.
Planning and controlling consumption are key factors underlying wealth accumulation.
Your spouse’s orientation toward thrift, consumption, and investing is a significant factor in understanding your household’s position on the wealth scale.
Our research indicates that even these top earners cannot have their cake and eat it, too.
The “pride of new car ownership” is not worth $20,000.
Planning and wealth accumulation are significant correlates even among investors with modest incomes.
If your goal is to become financially secure, you’ll likely attain it…. But if your motive is to make money to spend money on the good life,… you’re never gonna make it.
PAWs love working, while a large proportion of UAWs work because they need to support their conspicuous consumption habit.
First is dealer loyalty.
The second factor underlying buyer types is vehicle choice—new or used.
Type 1: New Vehicle–Prone Dealer Loyalists (28.6 percent) ♦ Type 2: New Vehicle–Prone Dealer Shoppers (34.8 percent) ♦ Type 3: Used Vehicle–Prone Dealer Loyalists (17.1 percent) ♦ Type 4: Used Vehicle–Prone Shoppers (19.5 percent).
buying new instead of used is much simpler; it requires less time and effort.
Car-buying behavior does indeed help explain why some people are wealthy while most are not and never will be.
Used vehicle–prone shoppers are the most aggressive and most price-sensitive when it comes to acquiring motor vehicles.
Conversely, most of the other high-income-producing occupations contain disproportionately smaller portions of high–net worth types.
They inoculate themselves from heavy spending by constantly reminding themselves that many people who have high-status artifacts, such as expensive clothing, jewelry, cars, and pools, have little wealth.
