Tag Archives: Millionaire

The Curse of the Accidental Millionaire

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The Curse of the Accidental Millionaire is not realizing that you are a millionaire!

What I mean by the previous statement is that instead of saving the money you earn and making it work in investments to become rich, you just increase your lifestyle to match your new income level and status. 

The problem is your stint as an Accidental Millionaire may be short-lived if you don’t have the assets to back it up!

The Curse of the Accidental Millionaire is really about a friend of mine.  At one time he was a highly paid director for a decent sized company where he had about 46 people reporting to him.

He had it all, a BMW, a half million dollar house in the mid-west (which is the typical McMansion that everybody talks about), a country club membership, and the most elaborate vacations!

Why I remember him telling me that for New Years Eve, he took his wife to the Hilton hotel and spend over $1,000 just for that night!  Speaking of his wife, she of course has a $10,000 diamond wedding ring, with an equally expensive wedding wrap.  My friend and his wife would eat at restaurants that ran well over $100 for just the 2 of them.

Then misfortune happened, while I’m not sure of the exact details, he decided to work for a different company.  That company paid well too, until they laid him off…

Today he has nothing, my friend and his wife got a divorce and together they owe about $100,000 in debt.

If my friend had sunk that money in a balanced investment portfolio and controlled his spending by living below his means, I calculate that he would have a net worth between $750,000 to $1,000,000 dollars today, or perhaps even more! 

So the takeaway for me from watching his experience with money are as follows:

  1. Live below you means and don’t scale you spending up as your income increase by large bounds.
  2. Buy into investments that reduce your taxes while you are earning such a large salary… such as 401ks, IRAs (if you qualify) and other retirement options.  That way you actually save more of what you earn instead of paying the tax man.  Later when you are retired and you are in (most likely) a lower tax bracket, they will get less of your hard-earned money!
  3. Chose a practical, frugally logical spouse over one that has no clue about money.  I married a frugal accountant and that made all the difference!
  4. Pay attention to past stories about your potential mate, if they tell stories of going on elaborate vacations and still have an actually engagement ring from a previous failed engagement… These little warnings should set off loud alarm sirens in your head!!!
  5. Schedule an appointment with a fee based financial advisor!  Perhaps those third party eyes will tell you if you are on or off the proper financial road or not!

And so concludes the story of my friend that fell victim to the curse of the accidental millionaire.  Don’t let this happen to you, learn as much as you can about finances today, and work with your spouse to try and establish your financial goals, to ensure a smooth path to riches!

Readers, do you know of any accidental millionaires that were cursed to lose it all because of poor financial planning or other issues?

-MR

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

Millionaire Clubbing With a Friend

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Move over doctors & lawyers, make room for me because I’m on my way UP!

Big Yep, I decided to join Mr. J. Money’s (@ budgetsaresexy.com) “Millionaire’s Club”.

Million Dollar Club

Actually former blogging buddy Jane @ “SeeJaneGetRich.com” and I both jumping in together with both feet! (Alas, my good blogging buddy Jane is no longer blogging, we’ll miss you, Jane)

Without further ado…  Here is my Pledge List:

In order for me, MR, to become a millionaire, I pledge to do the following:

First the normal “run of the mill” list:

  • Contribute the maximum to my 401(k) plan at work (done and doing)
  • Anything that is left over will be sent to maximize my Roth (nothing left 🙁 )
  • Be as frugal as possible, pinching the pennies till they scream, but still maintaining the balance I currently have! (done and doing, but less and less)
  • Identify areas I’m being overcharged in chop them down to size. (done and doing)

Second the “sort of” unconventional list.

  1. Develop Dividend steams to replace present-day expenses (done and doing)
  2. Develop a Side Income stream(s) – contracting, blogging, whatever (meh)
  3. Be happy and positive in my pursuit of becoming a millionaire (meh)
  4. Expand my social network, and be open to different opinions. (meh)
  5. Continue my journey while funding my kids’ 529 plans. (done!)
  6. Continue to find things to sell online for a profit. (meh, I need to do this again)
  7. Keep a close eye on ole “Mr. Lifestyle Creep”, cuz he’s tricky! (decent)
  8. Invest outside of retirement (done and doing)

I know, #7 and #8 don’t really look like they belong, but really they are crucial to my strategy.  With positive motivation, the journey is much more enjoyable.

While my ultimate goal is to increase my net worth to over a millionaire level, for tracking purposes, I’m going to be tracking my Brokerage accounts.  The idea is to increase those so that they can produce a dividend stream to replacing my expenses.

So if things go well, I should be able to save at a minimum $30,000+ a year (and hopefully over $40,000) towards obtaining the Millionaire Club goal. (decent, but not quite)

The key is to Maintain a Balanced Lifestyle!  In the next few years, I still plan on taking better vacations and living a full fun life.

Ironically, now that I’m debt-free, I’m debating with myself about creating a full-fledged budget (instead of a spot budget) to help me manage (balance) my money planning better…

As that frugal master, Yoda once said  “Do, or do not. There is no try”

So I chose to Do!

-D