What’s your mental picture of a millionaire? A 39 year-old man dressed in a fancy suit? Accessorized with a Rolex that can probably tell you the time in 4 different time-zones? Stepping into his brand new foreign car that costs more than you make in an entire year? This is what most people think about when they visualize a millionaire. If they see someone with these expensive items, they instantly label them: Millionaire. BUT, this perception of a millionaire could not be more false.
Big Hat, No Cattle
Many of the people that look wealthy today actually have a bank account that’s often hovering closer to zero than it is a million bucks. They finance nearly everything (their house, cars, furniture, appliance, and even their TVs!), which means that they have a bunch of stuff, but absolutely no cash flow. Their solution to gaining more spending power is by applying for another credit card! These people have the appearance of a millionaire, but they have absolutely no assets to back up their apparent wealth. As the Texans like to say, they have a big hat, but no cattle.
Have the Cattle – the Hat is Optional
If you want to be a millionaire so that you can flash your cash and live the high life, then I’m sorry to say, but you will never be a millionaire. With the easy access that all of us have to credit, you could buy a fancy vehicle and high-fashion clothes whenever you want to – you don’t have to be a millionaire to buy nice stuff these days.
According to the book, “The Millionaire Next Door“ (one of my favorites), the top three reasons that millionaires acquired their wealth are:
- 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
What Millionaires Actually Look Like
Instead of fancy cars and a mansion, true millionaires carry a much lower profile. Often times, they live in a simple neighborhood with a simple 3 bedroom, 2 bath house, and are surrounded by people that make far less money than they do. Social status means nothing to them, and by avoiding the Jones’s next door, they are able to hold onto their money, rather than spend it on depreciating assets like a boat.
They often own their own businesses (2/3 of them in fact) and look more like an employee than they do an owner (no flashy suits for them). Half of the wives do not work outside the home. If they do, they are quite often teachers because their occupation schedule aligns with their children’s. Instead of spending all of their money trying to impress their friends (as most of us do), they put their extra cash towards their long-term investments. In fact, their yearly income only accounts for about 7% of their overall net worth, which is a testament to what can happen when you live below your means.
So what life are you hoping to live in the future? Do you just want to wear nice clothes and drive fancy cars, or do you actually want to accumulate wealth for your future self? What are you doing to ensure a wealthy future?
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