A surprising truth about most millionaires

In their famous book, The Millionaire Next Door, Thomas J. Stanley and William D. Danko did extensive profiling of people whose net worth defined them as self made millionaires.

They found out that the pop culture concept of a millionaire is quite false and that most actual millionaires live a very simple lifestyle.

The authors found out that many people who earn high incomes are not rich, because of their spending habits (they spend everything they earn). In fact, most high income earners are just a couple of paychecks from being broke, because their net-worth is close to zero.

An interesting statistic they talk about in the book is the percentage of millionaires who own an expensive wristwatch.

Fully one-half of the millionaires surveyed never in their lives spent more than $235 for a wristwatch.

About one in ten never paid more than $47, while about one in four spent $100 or less.

Certainly, some millionaires purchase expensive watches. But they are in the minority.

Even among millionaires, only 25 percent of those surveyed paid $1,125 or more.

About one in ten paid $3,800 or more.

About one in one hundred paid $15,000 or more.

As for me... I have never owned a wristwatch and I don't intend to in the future :)

How to join the millionaire's club?

The authors have discovered seven common denominators among those who successfully build wealth. Those characteristics are:

1. They live below their means. In general, millionaires are frugal. They don’t live lavish lifestyles. They’re willing to pay for quality, but not for image.

2. They allocate their time, energy, and money efficiently, in ways conducive to building wealth. millionaires begin investing early in life (if you want to learn how to do it the right way, register for my free webclass here).

3. They believe that financial independence is more important than displaying high social status. The authors spend far too much time beating home this point: usually millionaires don’t have fancy cars.

4. Most millionaires were not financially supported by their parents. The authors’ research indicates that “the more dollars adult children receive [from their parents], the fewer they accumulate, while those who are given fewer dollars accumulate more”.

5. Their adult children are economically self-sufficient. This chapter is fascinating. The authors clearly believe (and I share this belief) that giving money to adult children damages their ability to succeed.

6. They are proficient in targeting market opportunities. “Very often those who supply the affluent become wealthy themselves.” The authors discuss how one of the best ways to make money is to sell products or services to those who already have money (a great business advice).

7. They are business owners. “Self-employed people are four times more likely to be millionaires than those who work for others.”

Ok, there you have it.

Now's the time to sell your wristwatch and buy some stocks :)