While being a 'millionaire' isn't what it once was in today's world, it's a nice round number people still fixate on.
The Millionaire Next Door was originally published in 1998 and was a robust study of common traits -- many of them surprising -- of millionaires. Many of its findings are still relevant today. Below are a few of my favorites.
Good Grades = Success, Right?
What most people don’t know is that GPA is a very poor predictor of success. The Author's wrote, "I find no substantial statistical correlation between the economic-productivity factors (net worth and income) and SATs, class rank in college, and grade performance in college." And further, "Overall, there is an inverse relationship between taking financial risk and various measures of analytical intelligence such as SAT scores."
When asked what their teachers did compliment them on, what was the most common response? "Most dependable."
When asked what they did learn in college, 94% replied “a strong work ethic.”
Not I'm not going to set the GPA expectations bar low for my young daughter, but I will do my best to consciously encourage her to work hard, be dependable, do what she says, finish what she starts, and take calculated risks.
Risk, Reward & Entrepreneurship:
"Twenty percent of the affluent households in America are headed by retirees. Of the remaining 80 percent, more than two-thirds are headed by self-employed owners of businesses. In America, fewer than one in five households, or about 18 percent, is headed by a self-employed business owner or professional. But these self-employed people are four times more likely to be millionaires than those who work for others."
Yet ... "No matter how you measure new firms, and no matter which developed country you look at, it appears that only half of new firms started remain in business for five years, and less than one-third last ten years."
Risk can yield return especially when hard work is applied. Failure is okay. Learning and growing from it is key.
The Vehicles They Drive:
"Approximately 70,000 Mercedes were sold in this country last year. This translates into about one-half of 1 percent of the more than fourteen million motor vehicles sold. At the same time, there were nearly 3.5 million millionaire households. What does this tell us? It suggests that the members of most wealthy households don’t drive luxury imports. The fact is that two out of three purchasers or leasers of foreign luxury motor vehicles in this country are not millionaires."
Similarly, they tend not to spend money on other luxury items or expensive clothing. Rather, they tend to be thrifty.
Does that mean you shouldn't buy a nice German automobile? Of course not. Just realize that you are deciding to have it at an opportunity cost of something else -- like accumulating wealth greater and becoming financially independent at an earlier age.
You decide what's important to you. Just be thoughtful in your decision making.
To Your Prosperity,
Kevin Kroskey, CFP®, MBA