How to Live Like a Millionaire

how to live like a millionaire

 How to Live Like a Millionaire

First off,  income does not mean wealth.  Yes, people who make more money have more wealth than poor folks, but the size of  your paycheck only explains 30% of the differences between the rich and poor. What really matters is how much of your income is invested. Millionaires invest nearly 20% of their income.

Authors of the book The Millionaire Next Door: The Surprising Secrets of America’s Wealthy, Danko and Stanley offer a formula for determining whether you have a net worth commensurate with your income:

Multiply your age times your realized pretax annual household income from all sources except inheritances. Divide by 10. This, less any inherited wealth, is what your net worth should be.

The authors call it a “simple rule of thumb”; those in their mid-40’s and up could meet this metric, were they to save 10% to 15% of their incomes throughout their careers, or started later but saved 20% to 25% of their incomes. This may not be common, but it’s not impossible.

rich people tricks 1.

Know where your dough goes. Millionaires invest before they spend and they keep track of all of their spending.

in fact, two-thirds of millionaires can answer “yes” to this question: “Do you know how much your family spends each year for food, clothing, and shelter?” In contrast, only 35% of high-income non-millionaires answered yes to this question.

Home is where the heart is–stay in yours for a while. Half of all millionaires have lived in the same house for more than 20 years.

In Thomas Stanley’s book, Stop Acting Rich,  the author found that  folks who live in a high-price home, in an exclusive community, spend more than they should and save less. People who live in million-dollar homes are not millionaires. They may be high-income producers but, by trying to emulate glittering rich millionaires, they are living a treadmill existence.

Stanley cites several statistics to back this up, including:

  • Ninety percent of millionaires live in homes valued below $1 million; 28.3% live in homes valued at $300,000 or less.
  • On average, millionaires have a mortgage that is less than one-third of the value of their homes.
  • If you really want to reduce your housing bill, join the 67,000 millionaires who live in mobile homes.

Love the one you’re with. Wealthy people are married and stay married to the same person. Several studies show that people who are married accumulate more wealth than those who are single or divorced.

However, it’s important to marry someone with the right financial habits. In the majority of millionaire households studied by Danko and Stanley, the husband is the main breadwinner and tends to be frugal, but the wife is even more frugal. As they wrote, “A couple cannot accumulate wealth if one of its members is a hyperconsumer.”

Wealthy people don’t show their wealth on four wheels, and when they do, they own the car their driving.

So who’s driving all those  BMWs and Mercedes-es? Not millionaires. Eighty-six percent of “prestige/luxury” cars are bought by non-millionaires. In fact, Stanley writes that “one in three people who traded in their old car for a new one were upside down and owed more on the trade-in than its market value.” It’s tough to get wealthy doing stuff like that.The most popular car maker among millionaires, according to Stop Acting Rich? Toyota.

Bonus: The Rich Are Different — They’re Happier

rich people tricks

At this point, you might be wondering whether all this living below your means is worth it. Sure, millionaires having bigger portfolios — but are they happier? Danko and Stanley’s research indicates that they are. According to their research, “Financially independent people are happier than those in their same income/age cohort who are not financially secure.”

First of all, millionaires worry less. There’s a peace of mind that comes from living below your means and having money in the bank. But they also don’t expect “status” purchases to improve their happiness, because evidence shows it doesn’t happen. Among the people surveyed, those who drive a BMW and wear a Rolex are not happier than those who drive a Honda and wear a Timex.

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