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Live like a millionaire
By Tammy Barton


Millionaire next doorI’m sometimes asked to recommend books about budgeting and personal finance. Regrettably, I never find enough time to read these days, but I do have some favourites which I’d like to share with you from time-to-time. I’m going to start with a book which is a good introduction to developing the type of mindset that underpins financial independence.

The Millionaire Next Door by Thomas J. Stanley and William D. Danko

Where do most millionaires live? They live in big houses in fancy neighbourhoods, wear designer clothes and expensive jewellery, drive luxury cars and dine on venison and caviar. Right? In fact, no.

The Millionaire Next Door dispels these myths. Decades of research shows that most millionaires (individuals who have amassed a net worth of $1 million or more) defy the millionaire stereotype which is popularised in the media. It turns out that millionaire-types are usually more interested in financial independence than status symbols—which means you could very well be living next door to one.

Millionaire Next Door is based on research which comes from the United States, but the principles apply equally to us in Australia.

A few interesting statistics from the book:

  • Around half of all millionaires do not live in fancy houses in fancy neighbourhoods. They live in average homes in working class suburbs.
  • Most millionaires drive used cars. A minority drive new cars; even less have luxury cars and fewer still luxury foreign cars.
  • The most popular make of watch worn by a millionaire isn’t Cartier or Rolex. It’s Seiko. Most millionaires have little interest in expensive, showy clothes and accessories.
  • Eighty to 85 per cent of millionaires are self-made. In other words, they did not inherit their wealth or win it in the lotto. They achieved financial independence within their own lifetime.

Research reveals that millionaires come from all sorts of backgrounds, occupations and a range of income levels. What most of them do have in common is a thrifty attitude. The majority have developed wealth through budgeting, saving, investing regularly and living below their means. No surprises here: The majority of them track their household expenditure through careful budgeting. They are keenly aware that little expenses add up. They understand that the key to financial independence is financial control.

Interestingly, the studies in the book show that people who appear to have millionaire lifestyles—those that live in expensive homes and collect consumer status symbols, such as boats, new cars, designer clothes and accessories—very often have higher salaries than real millionaires, but most of their income is committed to servicing debt and consumer spending habits. Very little money—often none—is left over for saving and investing. This is the growing social segment that acts rich, but is actually financially vulnerable. These people are very likely to never achieve financial independence.

Here’s the main point and one of the inspiring lessons from Millionaire Next Door: You don’t have to be a millionaire or high-earner to be a financial high-performer. What you do with your income is a better indicator of financial health than how fat your pay cheque is.

Millionaire Next Door is full of excellent, practical reminders that good money management is a series of behaviours and patterns that each of us can learn to adopt.

Do you have hot tips and handy hints for saving money? Email your ideas to moneytalks@mybudget.com.au.

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Putting lives back together since 1999. Contact MyBudget today on 1300 300 922 or at www.mybudget.com.au.

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