Paradigm Shift in Personal Finance Attitudes: Millionaire Lifestyles

December 10, 2010

National Financial Education Center at Debt Reduction Services Inc-Personal Finance Evolution from Debt to WealthI generally have the pleasure of facilitating three to seven personal finance classes each week, usually around the Treasure Valley of southwest Idaho. Many of those classes are for high school students in an economics or a personal finance course.

Inevitably, whether I’m discussing budgeting, credit, avoiding debt, or effective consumer spending behaviors, questions or comments come up about wanting to be rich.

In a previous post (“What It Means to Be Rich“), I discussed what I believe is a good definition of wealth, as well as some important tips for reaching the level of being wealthy. Today, though, I’d like to share thoughts about the “millionaire lifestyle” that so many of our youth (and many in our adult population) so desperately want to live. Thanks to the extravagance of many in the entertainment, professional athletics, and other high-profile industries trumpeted in magazines and publications proclaiming themselves to be the luminaries of and guides to the lifestyles to which we, as patriotic American consumers, ought to aspire, many young people have a warped sense of who the wealthy are and how the overwhelming majority of them live.

To many of the students in the classes I visit, wealth is all about spending. There is little concept of how the wealth was created or of the finite characteristic of wealth. Too often, wealth is only for fulfilling today’s appetites for thrills, frills, and glitz designed to attract attention.

Such a view of wealth discredits the hundreds of thousands of millionaires who, typical of most in their group, have spent decades dedicating themselves to their business, their employment, their investments, and the management of their own money in order to reach such an achievement. And when they wake up one morning, look over their finances, and discover that, not including their primary residence, they have a net worth of over a million dollars, they do not then go out and begin buying fancy cars and designer clothing. It is not their habit.

One of my favorite series of books that help to enlighten us on the “secret” lifestyles of the rich is the “Millionaire Next Door” books by Thomas Stanley and William Danko. They may not be the most compelling of readings, but the substance of their surveys should shake long-held, though misguided, attitudes and beliefs too many of us and our children cling to.

Some of the most interesting findings:

  1. Most millionaires never purchase new cars. They buy and drive used cars.
  2. Most millionaires have never spent more than $55,000 (in 2010 dollars) on a new car.
  3. Most millionaires live in homes worth less than $300,000 (in 2010 dollars)
  4. The most common make and model of a millionaire’s primary mode of transportation back in 1996 was a used Ford Taurus, not a Mercedes or a Lexus or a BMW.

High school students in my personal finance workshops get a kick out of that last one, especially when I ask who, in the class, drives a Ford Taurus. It seems there’s always at least one or two, so I congratulate them as likely being on their way to becoming a millionaire.

My hope is that eventually, we can collectively teach our young people to value life as an experience and not as a race to collect and show off as much superfluous STUFF as our incomes will permit.

Todd Christensen
Director of Education
www.NationalFinancialEducationCenter.org
Education@NationalFinancialEducationCenter.org
Facebook: MoneyDay2Day
Twitter: Day2DayMoney

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Published in: on December 10, 2010 at 12:10 pm  Leave a Comment  
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What It Means to Be Rich

August 23, 2010

Today, I read a good blog post about the 3 Ps of True Wealth (http://bit.ly/9WxV8l) and felt to add some of our own insight into the concept of wealth and riches.  People, Passion and Purpose make up Jason’s 3 Ps, though all of them revolve around building relationships and the people with whom we interact day to day.

What it means to be richI added a comment regarding what we teach about being rich. In a way similar to the 3 Ps standing for true wealth, being rich involves setting personal goals that require money and then making your money work for you in order to reach those goals.

Being rich is not an amount, an income, or a lifestyle. It’s not about showing off. It’s not about envying and wishing. It’s about doing what’s important to you. Accumulating money, unfortunately, serves as a pseudo-goal for too many people.

“I want to be rich” is a phrase we hear far too frequently. Having a lot of money is a relative concept. For someone living in poverty, a few hundred dollars could be a lot of money. For a recent college graduate, a lot of money might be a $40,000 annual income. For others, it might be $1,000,000 lottery ticket (Please!!! Don’t get me started about the lottery unless you’re truly willing to listen).

The reality, though, is that if we were to set a financial goal to have or earn a certain amount of money, we would find that amount insufficient to satisfy us once we reach it. It’s not how much money you earn or have that counts so much as how much you keep. By “keep,” I mean hold onto in order to reach your own truly satisfying personal goals.

A goal needs to be specific (in outcome, time frame, and amount of money needed), but it needs to be, most of all, motivating. What is it that truly inspires you? Relationships? Accomplishments? Charitable work? Respect? Admiration? Knowledge? Time with family or friends? Experiences? Ask yourself, “When all is said and done and my time on this earth is over, what do I want others to remember me for?” How’s that for a question to get you thinking?

Whatever your goal may be, write it down and keep that goal on top of any spending plan (budget) you every work on. Post it on your fridge. Tape it to your bathroom mirror. Carry it in your purse or wallet. Look at it regularly and recommit to it every day. You’ll soon find that you have little care for spending your money on “stuff” that you’ll now see as frivolous. Saving for an important goal will become fun and exciting.

Once you have your motivating goals in place, it’s then time to act like you’re rich already. But remember that the rich don’t work for money (duh!). Act like the rich by making your money work for you (savings, investments, lending). You may not have hundreds of thousands of dollars to act like the rich, but first of all, you have to get rid of the Hollywood stereotypes of the rich. Most millionaires do NOT drive luxury vehicles, don’t live in mansions, don’t have butlers and maids, don’t take vacations every month, don’t fly in personal jets, don’t frequent trendy boutique shops, and don’t call attention to themselves with what they wear, drive, or live in. That sort of ridiculous spending is targeted at members of the middle class who think that they can spend their way into the upper class. Seriously? How can you spend your way up the wealth ladder?

Most millionaires earn their own wealth through running their own business or being careful with their own money and investments. They are conscientious about and control their own finances. They make they’re money work for them, not the other way around. When they do spend, they spend with purpose. And that purpose is what we’re talking about today.

What’s your purpose? What do you want to accomplish and do in life? How much money will that require? Does it really involve a $500/month car payment and designer clothing? Does it require the biggest home mortgage you could possibly qualify for?

Goals goals?

Goals are the Key to Financial Success and Personal SatisfactionWrite them down! Write them down!  Write them down!

Goals that are not written down are just wishes, and except in fairy tales and the movies, wishes are earned, not granted.

Best wishes for financial success in reaching your own goals!

Todd Christensen
Director of Education
www.NationalFinancialEducationCenter.org
Education@NationalFinancialEducationCenter.org
Facebook: MoneyDay2Day
Twitter: Day2DayMoney