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A Millionaire Next Door's Guide To Being Well, Rich And Free

Don Whalen, Contributor
Article from Forbes

Remember when a million dollars was a lot of money? To some, it still is.

Some people seem to be able to stretch a buck further than most can stretch ten dollars. You know who I’m talking about. The thrifty ones –those who clip coupons, drive older cars, stay in less fancy hotels, and eat at less expensive restaurants (when they eat out, that is).

Today, we commonly refer to such a person as the millionaire next door, a title made popular by the 1996 book by Thomas Stanley and William Danko and used to describe the individuals who make up the largest group of self-made millionaires in America.

Why all the financial sacrifice? Surely these millionaires next door aren’t having as much fun as the big spenders. The big spenders impress their friends with their taste in fancy cars and haute cuisine. “Life is short, after all, and if I’ve got it, why not spend it?” they’ll say. Heck, some will even indulge themselves with luxury items courtesy their local lending institution. And why not? After all, they deserve it. Don’t they?

The millionaire next door takes nothing for granted. He takes comfort in seeing his wealth accumulate over time, knowing that with every dollar saved, he is one step closer to financial freedom. It’s the kind of freedom that allows him to have the option to retire or do something that he really wants to do at age 50 instead of, say, age 60 or 65 or… maybe never. It’s the kind of freedom that, in times of general economic malaise, allows him to invest in down-trodden assets, instead of gathering up his antique gold jewelry and heading to the nearest pawn shop to pay his next mortgage bill.

The millionaire next door doesn’t necessarily feel that she deserves anything, but if she is going to spend a dollar of her discretionary income, she thinks about the freedom it can buy and weighs it against the benefit of any non-essential purchases. The choice of working towards the goal of freedom generally wins, but she still somehow manages to enjoy life in spite of the sacrifice. The non-millionaire next door can’t fathom how that is possible, but some day he will likely be forced to figure it out when he realizes that his retirement is woefully underfunded – even after postponing freedom many years more than the millionaire next door.

Are you a millionaire next door? If not already, are you working on developing the habits of a millionaire next door? If so, this blog may be of particular interest to you as you build your wealth and reach your goal of financial freedom.

But beware: This mission isn’t for the faint of heart. You will be scoffed at for not staying at 5-star hotels, ridiculed for not driving the latest luxury SUV, and made to be feel like less of a human being for not indulging daily in a venti, sugar-free, non-fat, vanilla soy, double shot, decaf, no foam, extra hot, peppermint white chocolate mocha with light whip and extra syrup (or some other overpriced, unhealthy beverage).

Still up to the challenge? Here are the characteristics that you either already have or will need to further develop to be a millionaire next door:

1. Spend less than you earn.

If you spend more than you earn, or increase your spending each time you get a raise, you are not and cannot be a millionaire next door

2. Stop trying to impress the Joneses.

To the non millionaire next door: The Joneses are anyone you are trying to impress with the stuff you spend money on. The Joneses are also likely trying to impress you with the stuff they buy. One of you will likely win the race to consume the most stuff and spend the most money. Unfortunately, you will both lose at meeting your long-term goal of financial freedom.

To the millionaire next door: The Joneses are a nice family who always seem to be in a rush. Unlike you, they don’t appreciate the simpler things in life. While you respect their choices, you can never figure out why anyone needs a BBQ grill that costs more than the car that you drive. The Joneses will eventually move away, unless you move before them, and you will likely not keep in touch with each other. You probably didn’t know it, but they judged you based on the things you bought. No longer living in your neighborhood, they continue to judge you for not having spent oodles of money on the latest SUV, or for not staying at the Taj Mahal while on vacation. But even after you reach financial freedom at the tender age of 50, you will continue to be friendly to them, going so far as waving while you drive past their office on your way to the beach or to help out at Habitat for Humanity.

3. Take financial risks.

It was once said “The person who risks nothing, does nothing, has nothing and is nothing.” That said, the millionaire next door takes calculated, diversified risks, knowing that most of his good investment ideas will generate terrific rewards that will more than compensate for any losses experienced in the inevitable less fruitful ones.

In closing, I look forward to sharing ideas with you in my blog on how to be a better millionaire next door. I will share my thoughts on how to invest, spend less money, avoid financial pitfalls, and enjoy the finer (less expensive) things in life.

Be well, be rich, and be free.

Article from Forbes

Turn the hopelessness within you into a fruitful opportunity.