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
Facebook: MoneyDay2Day
Twitter: Day2DayMoney

Published in: on December 10, 2010 at 12:10 pm  Leave a Comment  
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Savings Strategy for Those Living on Main Street

Here’s a comment I left on a CNN Money post about a couple who have been living on half of their income for years and tout the values of frugality. Several comments referred to those not in a financial position (lower income, greater expenses, job instability, etc.) to have the luxury of such frugality.

Some even asked for specific savings tips for those with much more meager incomes. Here is my response:

Start Small if you have to, but Start Saving.

It All Adds Up

For anyone not in the savings habit, we teach at Debt Reduction Services Inc that an “amount” is less important to begin with than just doing it regularly. If you feel that you can only spare $5 a month for your savings, do it. Even better, automate it. Three months later, once you realize you don’t miss that $5, then double it.

Try that pattern for a year, and you could potentially have $225 in savings and $40 being added to it each month. At $40/month, year 2 would see an additional $480 added.

The challenge is considering it an emergency fund, not a “deferred spending” fund as I used to in my younger days.

Is it easy? No. Is it a challenge? Of course. Is it worth it? Definitely.Best wishes!

Todd Christensen
Director of Education
Facebook: MoneyDay2Day
Twitter: Day2DayMoney

Published in: on July 21, 2010 at 11:33 am  Leave a Comment  
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Couponing Basics

Shopping for Deals

Shopping for Deals

Couponing has been making a strong comeback recently thanks to the down economy. The promises of free items or even getting cash back with “doublers” and “catalinas” is more than just merely alluring to many. If you’re tempted to coupon more than just casually, here are some things to keep in mind:

  1. Expect to spend an hour or two each week organizing your shopping trips;
  2. Expand your horizons and be willing to shop at some grocery stores you normally do not frequent;
  3. Be ready to beef up your newspaper subscription (and check out eBay for coupons for sale)
  4. Don’t be discouraged by having to get back in line to redeem another set of coupons, and don’t be distracted by impatient shoppers behind you in line.
  5. Keep your spending in perspective. It’s easy to get overly excited about great deals and make bulk purchases. Always stick to your spending limits.

If you choose to embark upon the rewarding but demanding job of couponing to save your household what could be hundreds or thousands of dollars over a year’s time, find a mentor. Whether you work with a friend or find a blog online that you can trust, learn from others successes (and mistakes) and know what to expect. They may help you avoid discouragement and find encouragement.

Todd Christensen
Director of Education
Facebook: MoneyDay2Day
Twitter: Day2DayMoney