Until recently, my mind-set about money has been all wrong. My parents taught me how to hustle and make money, but never how to save or spend it. I’m what “The Millionaire Next Door” by Thomas J. Stanley and William D. Danko, calls an “under accumulator of wealth,” UAWs. Meaning my net worth doesn’t match my money making/spending strategy. “UAWs spend more time worrying about ‘financial issues’ than taking proactive steps to change their tendencies to overconsume and under invest.” I‘m sure all you Broke Bitches can relate.
The last two years, I have been trying my damnedest to live below my means and save up. I started an employer matching 401K, so I think I’m headed in the right direction. I have built up an emergency fund ($1000) that I should probably put in a separate account from the one I pay all my bills, as suggested by several financial podcasts to which I listen. So, this maybe this puts me in the “Average Accumulator of Wealth,” AAW (someone who is aware of their financial habits and is taking action to improve), and on the track to becoming a “Prodigious Accumulator of Wealth,” PAW (someone who invests, saves, and under-consumes). Next step: Investing in mutual funds or something of the like.
“The Millionaire Next Door” study noted that you don’t have to be well-educated to be a millionaire – you can come from any walk of life as long as you have the determination to do it. I found that inspiring because I’ve had one pretty crappy life! It’s hard to figure it all out on your own, ya know?
I grew up a farmer’s and truck driver’s daughter; both my parents were blue collar workers with little education and very little knowledge of financial accumulation. In fact, the majority of my family is blue-collar and several of them business owners; however, none are millionaires (that I know of). I found it quite interesting that blue-collars are the ones that are becoming self-made millionaires according to “The Millionaire Next Door.” Other millionaire producing career paths include welders, janitors, construction workers, auctioneers and ranchers, to name a few – mostly because they are entrepreneurs that know how to live below their means, and that seemed to be a general theme the authors pointed out.
But just because you are an entrepreneur, doesn’t mean you’ll be a millionaire. I think if they did the study today, they would find out that many software and web-based businesses are producing more millionaires than just those blue-collar workers.
I also found it interesting their study found that just because you make a lot of money, doesn’t mean you’re rich. Many high-income producing households are poor because they have to keep up with the Joneses. They spend most of their income on material things (name-brand clothes, luxury cars, expensive vacations, houses in high-societal neighborhoods, etc.) instead of investing that money. Kinda made me feel sorry for all those doctors and lawyers who have to keep up appearances… they’re just acting rich. All the cool kids you went to school with, their parents weren’t really wealthy, they had debt oozing out their ears trying to buy their kids fancy cars, expensive clothes, the latest toy/trend, paying for their college!
In Texas, we have a saying, “All hat and no cattle.” That’s what these people were— they tried to look the part, but couldn’t back it up. In the book, they used “Big hat, no cattle” which I thought was equally amusing.
These “rich folk” were also teaching their kids to spend extravagantly. Millionaires teach their children how to spend thriftily and save. The book compared this to “teaching your children to fish”; you know, from that saying, “Give someone a fish, they’ll eat for a day; teach someone to fish, they’ll eat for a lifetime”? These “rich” kids were learning to use their parents as “fish-dispensing machines”. That usually translates to them being unproductive members of society. (Think: the Affluenza Teen in the news.)
So in a way, I’m thankful my parents didn’t give me everything I wanted, but at the same time, I developed a poor-man’s mentality: I work so hard for what? Why can’t I have all these fancy things? But of course, now approaching my 40s, I realize those things are cool, but don’t really matter. I don’t HAVE to have extravagant clothes, the latest technology or drive the coolest car. I’m happy with my old smartphone and my 12-year-old pick-em-up truck.
I happened to be one of the kids, back in the day, that drove a beat up farm truck that I paid for, clothes from Walmart, and played with my friends’ cool toys. And, no, I still haven’t paid back my student loans. Sure, my parents would help me out if my truck broke down and gave me lunch money. But beyond that, in high school and college, I paid my own way; which got me in the mind-set that “it’s my money, I’ll spend it how I want.” And that’s where my trouble began.
I wasn’t saving 15% of my income from the time I started working (at age 13), because I just had to buy the things my parents couldn’t afford. I wasn’t keeping track of where my money went. It seems I just plowed through each paycheck, leaving too much month at the end of my money. Since I became a truck driver, I’ve gotten to itemize on my taxes which forced me to keep receipts and tally up my spending. This book states, to control spending, you must know where every dime goes. If you don’t keep track of each and every expenditure (even the .75 you spend on a soda machine), it’s unlikely you will accumulate wealth. And when I took a hard look at where my money was going, all those Dr. Peppers added up!
Millionaires don’t drive new luxury cars; they buy used vehicles (which what my dad always taught me to do; Yea! Dad! You DID do something right!) They pay cash. They never lease or finance and they are more likely to buy American-made (GM, Ford, Chrysler), because they are cheaper to maintain than foreign cars. In fact, I work on my own vehicle, which saves me tons of money in the long run.
PAWs live in regular neighborhoods, not fancy gated-communities or by golf-courses. They don’t buy “too much” house, just what’s necessary to live in, and easy to heat and cool. I’ve been researching buying a home (it’s in my five year plan, got three more years to go). This book said, “If you’re not yet wealthy, but want to be someday, never purchase a home that requires a mortgage that is more than two times your household’s total annual realized income.” Realized income is your paycheck and doesn’t include money that has been invested or inherited. So basically, at this point, I figure I can afford a crack shack…
I’ve been looking at less costly areas in Texas to live (I live in my truck right now — which is getting old and claustrophobic) — a suggestion they made in the book. You’ll pay less for your home and on property taxes. Let’s face it, land in Texas is ridiculously expensive, and I want a farm…
I’ve also been testing the waters with my own businesses, a Wine Guide for The Traveling Vineyard, a direct sales company and I use it more as a hobby than anything else, and as a freelance writer, which I don’t have a lot of time for seeing as how I work 15-hour days anyway. But we’ll see how they fan out. I know I can do it, if I can just make the time. It beats working my ass off at a 9-5 making someone else rich for sure.
Something I realized after reading this book was that I have had several careers that should have set me up to be a millionaire. Had I known about these tips earlier in life, I probably could be. This book came out in 1996 – one year before I graduated high school. I wish I had been exposed to it then instead of 20 years later…
To sum it up, to become a millionaire, you need to be doing three basic things: Be frugal (living below your means), Invest (mutual funds, stocks, 401K, etc.) and do it sooner than later, Commit (have a plan and work it).
I’m working on it.