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the typical millionaire had more than 30 percent of his wealth invested in publicly traded stocks. More often it is in the low-to-mid-20-percent range.
90 percent of millionaires who live in homes valued at under $300,000 are extremely satisfied with life.
most multimillionaires in America don’t live in expensive homes.
the large majority of the rich live well below their means.
Countless millionaires have told me that the journey to wealth is much more satisfying than the destination.
we discovered something odd. Many people who live in expensive homes and drive luxury cars do not actually have much wealth. Then, we discovered something even odder: Many people who have a great deal of wealth do not even live in upscale neighborhoods.
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.
Eighty percent of America’s millionaires are first-generation rich.
seven common denominators among those who successfully build wealth.
building wealth takes discipline, sacrifice, and hard work.
On average, we invest nearly 20 percent of our household realized income each year. Most of us invest at least 15 percent.
One way we determine whether someone is wealthy or not is based on net worth
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.
it is easier to purchase products that denote superiority than to be actually superior in economic achievement. Allocating time and money in the pursuit of looking superior often has a predictable outcome: inferior economic achievement.
All too often young people are indoctrinated with the belief that “those who have money spend lavishly” and “if you don’t show it, you don’t have it.”
PRICES PAID BY MILLIONAIRES FOR CLOTHING AND ACCESSORIES
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.
Mr. Friend is possessed by possessions. He works for things. His motivation and his thoughts are focused on the symbols of economic success. He constantly needs to convince others of this success. Unhappily, he has never convinced himself. In essence, he works, he earns, and he sacrifices to impress others.
One earns to spend. When you need to spend more, you need to earn more.
They viewed such purchases as small expenses. But small expenses become big expenses over time. Small amounts invested periodically also become large investments over time.
The typical millionaire in our surveys has a total annual realized income of less than 7 percent of his wealth. This means that less than 7 percent of his wealth is subject to some form of income tax.
To build wealth, minimize your realized (taxable) income and maximize your unrealized income (wealth/capital appreciation without a cash flow).
her realized, or taxable, income is too high. Last year she paid $69,440 in federal tax on her $220,000 income.
you can’t be wealthy. Your income is too high.”
The average American millionaire realizes significantly less than 10 percent of his net worth in annual income.
The fact is that the super-affluent got to that position by being masters at minimizing their realized income.
Most millionaires measure their success by their net worth, not by their realized income. For the purposes of wealth building, income doesn’t matter that much.
It’s easier to accumulate wealth if you don’t live in a high-status neighborhood.
What you probably don’t know is that your neighbor in the $300,000 house next to yours bought his house only after he became wealthy. You bought yours in anticipation of becoming wealthy. That day may never come.
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.
Begin earning and investing early in your adult life.
In reality, many people who live in luxury have little money left over after funding their high-consumption lifestyles.
Consider this fact: Most millionaires we have interviewed never in their lifetimes spent near $65,000 for an automobile. In fact, as we will report in Chapter 4, more than half the millionaires we interviewed never paid more than $30,000 for a motor vehicle.
“That’s why they’re millionaires!”
Investing when one has little or no intellectual basis for one’s decisions often translates into major losses.
PAWs tend to produce children who become PAWs.
Most of us want to be wealthy, but most of us do not spend the time, energy, and money required to enhance our chances of realizing this goal.
Nearly all (95 percent) of the millionaires we surveyed own stocks; most have 20 percent or more of their wealth in publicly traded stocks.
we have encountered more nonmillionaire active traders than millionaires who actively trade.
I’d be rich if I would just keep… [my stocks, but I] can’t help but make trades in my own portfolio. I’m looking at the screen every day.
He has two favorite investment categories, agricultural land and stocks from the medical industry:
That’s what Warren Buffett does… invests in companies that he knows and understands. But you must have seed money [savings to invest] in areas you have knowledge. I have over $2 million in my profit-sharing plan.
He is his own financial advisor. He rarely sells stocks.
when stocks in a pension plan are traded, they are not subject to capital gains taxes.
Building a net worth of $5 million or more in one generation is quite an accomplishment.
Then I tell him, “So you’re really good. Well, I’ll tell you what. Send me a copy of your personal income tax returns from the last few years and a list of what you have had in your own portfolio for the past three years. If you made more money than I did from investments, I’ll invest with you. Here’s my address.” When they say, “We can’t show that to you,” I tell them, “You are likely to be full of baloney.” This is my strategy for checking people out. It works. I check them all out this way. I mean it very honestly.
Not one of the dozens of cold callers submitted his income and wealth appreciation data to Mr. Martin.
Mr. Martin also asked for referrals from those of the accountant’s clients whose investments always seemed to do well.
Choose a financial advisor who is endorsed by an enlightened accountant and/or his clients with investment portfolios that in the long run outpace the market.
