Category Archives: Wealth

10 Millionaire Lifestyle Secrets

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10 Millionaire secrets about how they live!

Millionaire Lifestyle

I’m going to review the following list from a SmartMoney article.

The following list is written as if the average millionaire is talking directly to us.

  1. “You may think I’m rich, but I don’t.” – This is why so many millionaires declare themselves middle class, and in New York and other big cities… They are very correct in their assessment!
  2. “I shop at WalMart . . .” – This was surprising to me!  I thought they would shop a little more upscale to avoid us “the masses” folks.
  3. “…but I didn’t get rich by skimping on lattes”. – Most of them earn well over $100,000, so they really don’t need to skimp here.
  4. “I have a concierge for everything.” – I believe this is for the more high-end millionaires.  I don’t know any millionaire that uses such a service for personal chores.
  5. “You don’t get rich by being nice.” – This really is talking about in a business setting.  They are all business when it comes to making money, and rightfully so!
  6. “Taxes are for little people.” the top 1% of earners pay 40% of the federal income taxes.  It’s no wonder why they try to reduce taxes as much as possible within legal means…  I would too if I were them (and so would you!).
  7. “I was a B student.” – Interesting!  Maybe a C, B student still has a chance after all!  The median grade point average for millionaires is 2.9!  That’s the median folks!  And most attended state college or a university!  So I guess it really is more than just grades in school!  46% do have advanced degrees though!
  8. “Like my Ferrari? It’s a rental.” – It seems like a smart enough move to me (In fact, I was going to post using rentals instead of purchases in a future post).
  9. “Turns out money can buy happiness.” – This was a shocker for me.  Usually, I hear the “money can’t buy happiness” matra, but common sense would dictate that having money affords you more opportunities to make yourself happy!  Trips overseas, Disney vacations, flying, etc…
  10. “You worry about the Joneses — I worry about keeping up with the Trumps.” – Yes, there will always be someone richer than can afford something that you can’t.  They are also worried about a declining lifestyle in retirement (just like the rest of us).

In the category  #3″…but I didn’t’ get rich by skimping on lattes”, they mention that most millionaires still have mortgages.  I checked and around 40% of millionaires don’t have a mortgage at all, and the median mortgage balance was under $100,000.  So even though 60% have a mortgage, it’s small potatoes compared to their level of wealth…

My belief is at the beginning of the journey to become a millionaire, it makes sense to skip the lattes, if later, you decided that the lattes need to be added, so be it.

The most surprising piece of information I read was:

That means buying luxury items on sale, hunting for bargains – and even clipping coupons. In fact, affluent households, including those with income above $100,000, tend to be heavier coupon users than those with lower incomes, according to a 2009 study by Nielsen and market research firm Inmar.

This should not have surprised me…, of the few millionaires that I know, most are always looking to get things at a cheaper price.  See Wealth Tip #3: Be Cheap, Don’t Show Off for my personal observation.  I just have a hard time envisioning Warren Buffett or Bill Gates clipping coupons (lol).

Do you know any local millionaires?

If so, are they like frugal middle-class millionaires or more like Hollywood “Paris Hilton” style, high consumption millionaires?

-D

Wealth Tip #3: Be Cheap, Don't Show Off

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Frugal is a new word I started hearing in the last 5 years. Before that word became popular, frugal people were lumped together will people that were mostly called cheap.

And this brings me back to my rich friend Jay (I mentioned him in Wealth Tip #2).  Now, you might think since he is worth over 7 million dollars, that he would have the best of everything… but he doesn’t!

 Perhaps you might hear about his fancy vacations, after all, he’s been to the following places:

  1. Alaska cruise
  2. Mexico
  3. Hawaii
  4. Ireland
  5. Las Vegas

What you don’t realize is that he gets most of those vacations from rewards via his credit cards, or through prizes offered from suppliers for buying their product.  Even when he is on vacation, Jay and his spouse buys cheap, and even stocks the refrigerator at the resorts they stay in.  Yes, during vacation he will play golf, but usually it’s at a cheaper course (golfing is an activity he has picked up during the last 10 years).

He does have newer cars, but they are domestic SUVs that are used for his job.  Even though they are typically bought new, he’ll hold onto them for at least 5 years.

Does he tips well?  Not really, usually if he likes the service he’ll tip 15%, but if the service is crummy, expect either a 10 or 5% tip (in cases where the service is really bad, no tip at all, but this is rare).

With as cheap as he is with everything, you’d expect him to be cheap with charity too, right?  Wrong, he give over 10% of his gross wages to the church, and is generous with his family and friends.  Ironically, while he is giving thousands away, sometimes his jeans will have holes in them (albeit small ones and in good taste).

When he does eat out, it’s usually one of the cheaper meals on the menu.  I’ve never seen him eat a porterhouse, or New York Stripe steak.

So, what have I learned by observing his spending behavior?  Being Cheap (or really frugal), is part of the wealth building equation…  My friend has increased his lifestyle a little more over the years, but he still lives more frugally than my poorer friends. 

If he can do it, then so can I!

Wealth Tip #2: Working Both Harder and Smarter Can Make You Wealthy

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I have a wealthy friend who while working through college, became wealthy by eventually buying out a partner in the company where he worked at.  This was a risky but very successful move for him.

My friend (let’s call him Jay) was studying to be a mechanical engineer.  Jay comes from a family of 7 kids, and money was always tight for his parents so he had to pay his own way.  Every year, Jay had to work during college and during the summer.  He went through a few different temporary jobs, but the last one was with a small construction company.  At first, he worked as a construction worker, but eventually the owners of the company realized he was a smart kid and really good with numbers (plus he had people skills to boot).  So they hired him as an estimator/bidder for construction jobs.  He thrived at this, it was a great fit for him!

Jay graduated with a bachelor’s degree in mechanical engineering, but never used it.  Instead he got lucky, one of the partners of the construction company decided to retire.  They offer Jay an opportunity to buy the retiring partner out (of course, the other partner retired very wealthy).  Jay, being a fresh out of school graduate, didn’t have the money, but said yes to the proposition (they worked out payment plan for him).

For the next 10 years, I didn’t see Jay much, he was constantly working, over 60+ hours a week (although we still kept in touch with an occasional game of tennis,  he also played in a basketball league).

Today, he’s a multimillionaire.  He still works long hours than most of us, but not over 60 anymore.

The point of this post, is that it’s still possible to get ahead with hard work and living a modest, frugal life.  Take Jay for example:

  • Jay never owned a luxury car,
  • his house is a little more expensive than mine (by  around $35,000 to $50,000 dollars more),
  • he does a lot of DIY projects (I’ve seen him even install a new kitchen fluorescent lamp).
  • You would think that since Jay is a multimillionaire, he’d hire people to do this yard work… but the doesn’t…  Every week during the summer, you’ll see him mowing 2 acres of his 10 acre property on his lawnmower.  You might be wondering why does he only mow 2 acres?  Well, he leases the other 8 acres to a local farmer.
  • Jay still works over 50 hours a week, but by choice now (or maybe even habit).
  • Jay still does the bidding and many other functions now.  He works very hard maximizing his return.

You might think that Jay is fortunate that he got lucky and was at the right time at the right place.  Yes, this is true, but I bet most young graduates would have passed on the offer (I know I would have).  Open your eyes to the possibilities around you.  You never know what may present itself through hard work and making smart decisions.

Jay, got a head because no matter where he worked, he gave it his all in a friendly likable manner (part of working intelligently)!

Do you have any personal successes stories to share, where you had to busting your butt to get ahead?  That’s what it takes sometimes!

Wealth Tip #1 – Controlling Lifestyle Creep After Getting a Raise or an Additional Income Stream

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Controlling Lifestyle Creep

“Lifestyle Creep” is when we finally get a big raise or pickup side income from other sources, we start to spend more.  We should be able to save this additional money, but instead the money is spent on increasing our lifestyle (via buying a new fancy car, bigger and more expensive vacations, adding new costly daily habits like lattes and buying expensive lunches).  This is the kind of behavior that keeps us from becoming financially independent!  We need to change this pattern or better yet, never let it happen in the first place!  If we save that new income, instead of going on a hog-wild spending spree, we would be well on our way to becoming financially independent.

The problem with most of my friends and co-workers is that they do spend that extra money to increase their lifestyle!

Below, I created a simplified chart to show the potential savings if we stop lifestyle creep:

After Taxes Total Discretionary Expense/Income
Total Income Expenses Income Ratio
$40,000 $35,000 $5,000.00 0.88
$60,000 $40,000 $20,000.00 0.67
$80,000 $45,000 $35,000.00 0.56
$100,000 $50,000 $50,000.00 0.5

*Note that the Total Expenses column will still increase a little.  This is expected because of higher tax rates and small increase in necessary expenses like gas, clothing, etc that might be required to make the additional income

The “Discretionary Income” column show how much more we should be able to save!  If we were to control our lifestyle for 10 year, that would add up to some serious savings, anywhere from $50,000 to over $500,000 dollars (depending on if we invested it or not).

The most important thing to note in the chart above, is that once we jump from 40,000 to 60,000, we add $15,000 to Discretionary Income.  So, in the example chart above, once we start to earn more than our Total Expenses, we get a huge jump in “Discretionary Income” (aka. savings potential)…  This is the key, we need to find that break even point in our finance and try our hardest to get over it by as much as possible!  Whether it be increasing our income, or scaling back our expenses, or better yet doing both!

This is the first in my wealth creation series.  Most posts like this one will be from my personal experiences, but some will also be from hanging around millionaires that I’ve grown up with or currently speak to.