“The definition of insanity is doing the same thing over and over again and expecting a different result” – Tony Robbins
Some books are worth reading once a year. One of them for me is the Millionaire Next Door by Thomas Stanley and William Danko. The book was the result of some research for a private client trust services organization and they wanted to know the traits of their target market.
The key outcome was that: public perception is VERY different than how most millionaires behave.
The television’s “warped version of reality” was very well proven by the research in the book. After all, how many stories of NFL players making millions and yet retiring broke have you heard? How about lottery winners?
While written in 1996, the wisdom of the seven common traits strikes me just as relevant today. These are some good traits you ought to know as a real estate investor.
The Seven Traits of Millionaires
- They live well below their means
- They allocate their time, energy and money efficiently in wealth building activities
- They belief financial independence is more important that displaying high status
- They did not inherit their wealth
- Their adult children are economically self sufficient
- They are great at selecting and seizing opportunity
- They chose the right occupation
It would seem if you want to be rich following those rules would go a long way. The other really crucial point the book presented to me are the following principles:
Wealthy people are great earners. This is one that gets a lot of attention in my mind. However, the one that deserves more focus to me however is the next point:
- Wealthy people are frugal frugal frugal. The work hard at keeping what they earn by effective budgeting and tax planning. The also trade their investment portfolio INFREQUENTLY.
- When it comes to spending in general they will buy suits off the rack and spend little on things like watches.
- Only about twenty percent buy new cars off the lot. This one had a wide dispersion of when they would by. This one makes sense too. Why take all that depreciation of the lot. Why not wait two or three years then buy what you want.
- This one may spark some controversy but it seems to make sense. The millionaire next door has an even-thrifty-er spouse.
Overall, the book is a great reminder of how habits are the key. As hard as it seems for the majority of Americans, saving money really is where it starts. Are their any other points I left out? Other great books about the habits of wealthy people? Leave your comments below.
Photo: Tax Credits
Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.