Inside The Millionaire Mind of Mush—How We Became Millionaires

Here's a guest post from Can I Get Rich On A Salary. My personal story is very similar to this one except I don't think of my mind being full of mush. ;-)

I first started this post by writing, “Now that we’re millionaires,…” But then I couldn’t stop laughing. I guess I find it hard to take myself all that seriously just because our net worth has gone over $1 million.

Hitting the million-dollar mark still seems to be a big deal in many of our cultures. Think how much the words “million” and “millionaire” are used in media and publicity. A quick search of any bookseller website turns up tons of titles—5,891 on Amazon. Books like The Millionaire Next Door, The Millionaire Mind, Secrets of the Millionaire Mind, and The Automatic Millionaire were all mega-sellers. Television shows span the gamut, from the Who Wants To Be A Millionaire game show to The Millionaire Inside personal-finance advice show. (And let’s not forget The Six Million Dollar Man—though with inflation, he’d probably cost over $16 million dollars today.) And it took me no time at all to turn up over 10 personal-finance blogs with “million” or “millionaire” in their titles. There’s at least a mild obsession with getting inside the minds of millionaires, presumably to unlock the hidden secrets of how to become one.

Looking inside my mind, unfortunately, revealed a big ball of mush.

The most interesting thing about our net worth being over $1 million is that there was and is no secret to unlock. Our net worth progress has been remarkably boring. The entirety of it can be attributed to: how much we saved and invested.

Most of our personal-finance plan revolves around automating how we save money and get it into the stock market. And the stock-market piece is made up mostly of index-based ETFs and blue chips. And as much as I’ve strayed and taken a big hack here and again, we’ve hit no home runs.

There’s no one stock in our portfolio that makes up more than about 3% of our net worth. The equity in our home makes up over 20%—but if you excluded it, our net worth would still be over $1 million. We have one investment property, and our equity in that might make up around 4% of our net worth. We never started, ran, bought, or sold a business. We never had stock options in a company that got acquired or had an IPO.

We’re in our late 30s and early 40s respectively. We live in an expensive area of the country. Our incomes are pretty good. We’ve been in our careers for about 10-15 years respectively—and did not start saving and investing regularly until quite a few years in. We’re decent savers. But the more blogs I read, the more I would rate us as average to mediocre on the frugality scale.

So if I had to break down the top few financial steps that we took to get here:

• We stopped and made a plan. Not a complicated plan, not even a written plan. Just a plan. This may seem rudimentary, but until we stopped and focused on our finances, they were pretty scattershot.
• As the #1 feature of that plan, we automated much of our saving and investing. We certainly did a lot in our respective retirement accounts. But we also piled on top of that with automatic investments in non-retirement accounts and also in 529s.
• We splurged here and again. I don’t think we (meaning I) would have been as good about controlling our spending overall without building in some more ephemeral rewards.
• We also did “manual” saving, setting aside some money each month that did not automatically go into investments. It just sat in high-yield savings accounts. This was a hedge for cash flow, splurges, and unanticipated expenses. And at the end of each year, there was usually some amount left, which we could then invest in a lump sum.
• We advanced our careers, which led to increases in our income.

When I think about it now, our very boring story is pretty exciting. Because it means that lots of people can replicate it. Because it means that the advice on this and other blogs on how to become a millionaire or how to become wealthy worked.

You too could have a millionaire mind of mush.

Comments

[Minimum Wage]

So it's not about frugality, it's about having a lot of income and not spending all of it.

[Traciatim]

Wow, I really hate to admit it . . . but the reason I came here unfortunately is to agree with Minimum Wage. It looks to me from this story is the trick is to simply make a boat load of money. Pull that off, and you too can have great wealth.

[FMF]

Triciatim --

Actually, if you spend less than you earn, you can have similar results no matter your income. Of course, the size of your net worth in the end will vary with how much you make/spend, but the "trick" works as long as you apply the basic principles.

Much of personal finance is very, very simple (as I've said many times before.) See this for example: http://www.freemoneyfinance.com/2006/09/how_to_get_rich.html Apply the basics, and you'll become wealthy.

Of course it is easier to become wealthy if you make more -- and it's even easier if you make more AND control your spending. That's why I write a lot about growing your income, managing your career, etc. as well as ways to save money. Combine the two of them, and you have a very powerful combination for becoming wealthy.

[Beyond Paycheck to Paycheck]

There are countless examples of people with above average incomes struggling from paycheck to paycheck. If you spend more than you make, it makes no difference how high your income is. Spend less you make and you will create wealth no matter how low your income.

Of course the higher your income, the easier it should be to save. But far too many folks with decent incomes still struggle, many of whom are looking for the "trick." Can I Get Rich on a Salary simply states that the "trick" is that there isn't one and I believe he's 100% correct. It won't get either one of us on the front page of a magazine, however.

[rwh]

Boy I sure didn't read this the way Triciatim and MW read it. My wife and I don't make a boat load of money. This year was the first year we hit 100k between us, and we've been at our jobs over 20 years. But we essentially do the same things as the author of the piece, except we don't own any investment property.

We're almost at that magic million mark, probably another year or two. And the day it happens........... we're both going to get up and go to work for another 10 years or so.

[rwh]

Boy I sure didn't read this the way Triciatim and MW read it. My wife and I don't make a boat load of money. This year was the first year we hit 100k between us, and we've been at our jobs over 20 years. But we essentially do the same things as the author of the piece, except we don't own any investment property.

We're almost at that magic million mark, probably another year or two. And the day it happens........... we're both going to get up and go to work for another 10 years or so.

[Zook]

Man...

What downers...

This is an article that should motivate and educate a bit...These folks didn't buy Google at $100....These folks didn't start a business...These folks didn't collect an inheritance...These folks simply made a good buck and saved a ton. They automated their savings and also saved on top of that.

I bet they have good credit and pay their bills on time too! And Michelle Blackburn knows the importance of a good credit score, right?

Minimum Wage...I have asked you this 100-times...When will you stop ruining the online experience with your downer ways? If you make $5.15 an hour, get a new job or save .10 an hour into a savings account. Do something. Start somewhere. Please, at some point, show the slightest bit of education from YEARS of posting and reading finance blogs. Have you taken something away from reading hundreds if not THOUSANDS of posts besides sarcasm?

[Anonymous]

High income is not the key, though it certainly helps. Saving a significant portion of your income, investing it wisely, spending less than you earn and having a plan are the keys.

My father-in-law is a lawyer in private practice, and is about 30 years older than I am. He is a good and kind man to his family, and very kind to me. I am certain that if properly focused, his income could be 1.5 to 2 times mine, very easily. Yet at age 33, I easily have 5-8 times the amount of savings he has available for retirement, and my retirement savings are in the five-figure range, not six. Why?

1. He has never met a splurge he could pass up to put away dollars for tomorrow.
2. He does not invest.
3. He does not try to learn new ways to spend and save to be more efficient with his money. If it requires a new habit, or behavior change, he's not interested. I could run his office for half the money he spends running it, but he would have to learn new ways of doing things, which he simply doesn't want to do.

His house currently has a broken window on the first floor- it's nothing but a screen, no glass. His monthly oil heating bills this winter were much higher than usual. Does he think to fix the glass and reduce the amount of heat escaping his house? No, but he does take spur-of-the-moment trips to cities on the East Coast.

At certain levels of poverty and lower-income earning, it is extremely hard, if not impossible to get out of the "poverty trap" even with courageous frugality and positive financial behaviors. But for others, like my father-in-law, the long march from paycheck-to-paycheck to comfortable financial security can be significantly influenced by personal behaviors.

[Jake]

Anyone with a college degree currently making minimum wage is clearly unmotivated and doesn't want to help himself.

Altneratively MW could be lying.

Assuming he's not lying, his best course of action would be to get a job as a cashier at Walmart and pocket the $3/hr raise he would certainly get from this course of action. That would be $120/week of savings, or over $5000/year, and would be a great start.

[rwh]

There are lots of middle age people who earn minimum wage. I work with many of them in my job in the mental health field. If someone is physically or mentally disabled that's where I want some of my tax money to go, to help people with disabilities get and keep work. It helps them and the community more than it does to pay to warehouse them.

But so far I have not read any comments from MW saying he is disabled. I'll reserve judgement.

[Minimum Wage]

I can't get a "good" job in retail because my credit went in the tank several years ago when I had an extended illness/hospitalization during which I had neurological complications and was unable to work for over a year. Go apply for a retail job at any big box retailer and credit checks are standard these days.

Also I have appearance defects (which cost money to correct) which are no-nos in retail plus I spend three mornings a week as a patient in a medical clinic and therefore can't work a typical day shift.

So retail is pretty much out, and I don't have marketable skills, and my age is an obstacle for even the highly skilled and experienced worker, so I'm stuck in menial labor land.

I have a storage unit full of stuff I'd like to sell online (I bought an estate liquidation intending to start a business) but no room for it in my tiny living space. (Actually, I think I have room for it but my landlord disagrees, so it was banished to storage.)

But there are plenty of middle-aged people earning chump change, and we have three college graduates earning minimum wage where I work.

It's not just for teenagers any more!

[JK]

@Anonymous:
Your lawyer father-in-law reminds me of a lawyer I know.
He never planned or saved, but when he was asked about it, he said he was going to work until he died (which he did). It may be irresponsible and certainly, as a saver myself, it seems short-sighted, but he lived the way he wanted to live. He drove new cars and "spoiled" his children. His only assets at death were his house, his truck, and his life insurance policy (and no debt).

It may not be the way I want to live, but this world would be a very boring place if there weren't people like your father-in-law in it with us.

Just an opinion...

[Traciatim]

rwh, did you happen to notice that you are making a boat load of money . . .

"This year was the first year we hit 100k between us . . . "

Guess what? In 2006 the median family income was 48.2K, so add about 3% for 2007 and you're basically at 50K. That means your making TWICE the median family income. In fact, it's probably enough to get you in the top quintile for family income in 2007.

I hate, as annoying as it is, that I have to side with MW on this one. This is simply a story of "If you make lots, you can save lots". It's simple to live below your means if your means are in the top 20% of the country.

If you look in the about page on the linked site it also mentions that this couple writing both are professionals with 6 figure incomes. That puts them at the bare minimum of pulling in 200K a year, or 4 times median. Yup, I can see how they have a tough time living below that . . . only 4 times what the family right in the middle has. That would also put them quite nicely in the top 5% of the country.

In fact if you put 200K USD in the Global Rich List they are in the top 0.01% of the world. I can see how it would be tough to mass large quantities there. If they lived like the median family and just stuffed their excess 150K each year in a mattress they would have a million in 7 years.

[Lord]

Hmmm. There are two of them, so I would call them half millionaires.

[GBlogger]

Thanks to everyone for the comments! It seems to me that everyone here is trying to help everyone get their personal finances to the best places possible, whatever their circumstances. If this post spoke to you in some way, great. And if it didn’t, well, maybe it’s my fault for not writing it in a way that would be more accessible!

Of course our incomes helped us. Now no one just woke up one morning and handed us our incomes, but I get the point – everyone with our incomes should be millionaires. I totally agree. I wish they were. But I’m not trying to impress or brag. Quite the opposite. I’m trying to say what we’ve done really isn’t special.

Anyway, we and our incomes have become a distraction in this thread. So what if we take us, our incomes, and being millionaires out? Or half-millionaires! ;-)

Let’s look at the parking lot attendant who made $20,000 a year and achieved a net worth of $500,000 by age 69 (real example, at least as it was reported). Let’s look at the school teacher who achieved a net worth of $500,000 by age 35 (real example). They got there by saving and investing. FMF’s post on how to become wealthy describes research that I think is really interesting and (I hope) empowering:

• Income alone doesn’t explain wealth disparities. Some of the lowest-earning households had managed to accumulate significant wealth.
• In fact, income differences explain just 5% of the wealth dispersion the researchers found.
. . .
• In other words, the vast majority of the differences in wealth had nothing to do with income, chance events or investment choices.
• What did explain most of the differences in wealth? Venti and Wise concluded it was this: How much the families chose to save. Those who made it a priority to save built wealth, regardless of their income level, individual circumstances or choice of investments.

It’s not JUST frugality, and it’s not JUST income. It’s both. It’s saving and investing, and everyone can do those to further their goals. $1 million or $100,000 or $100.

Thanks again, everyone. This has been a great opportunity to get feedback from FMF readers!

[An Aussie Reader]

I have to disagree with MW and Traciatim, I think the end point of the post is that we can all save and any small amount you save, will in time, add up. I don't think it's saying we can all be millionaires, but we can all be wealthier by applying some frugal practices and saving what little or lot we can.

Minimum Wage - I feel very sorry for your unfortunate situation, however, I don't understand why you read, and post on so many pf blogs, when what you could do is write your own blog, for people struggling like yourself? You obviously have access to the internet, why not start you own blog. If only to save us all from being so utterly frustrated by your inability to see even the tiniest bit of light in your dim world.

And, I don't like to tell you what to do as I know many others have tried and failed before, BUT surely you could take one piece of "stuff" from your storage unit and sell it, then take another, then another. The fact that you can't fit it all in your unit shouldn't stop you from selling it piece by piece.

I await your response telling my why you can't do it.......

[db]

Aussie:

MW can't do it because he/she is trapped in a mindset of bitterness and brokeness.

[rwh]

Triciatim:

Go to: http://www.census.gov/hhes/www/income/histinc/h01ar.html

The data for 2006 shows a top household income for the 4th quintile of about 97k. We were at about 93k in 2006. You will also see the top 5% starts at about 176k, a long way from where the top quintile begins.

I don't know if we are now in the 5th quintile, but if we are it's just barely, and it took us nearly 30 years of working to get there, my wife and I together.

And we just started a Roth IRA for our oldest teenager, $679, which is all she earned last year. We can't give our kids a million dollars, but we can get them started toward it. I made my first IRA contribution in 1981, when I drove a beat up Plymouth and worked on a landscaping crew for a living.

And you know what? I'm not about to apologize for working, saving and doing without for 30 years, so that I can hopefully work another 10 or 15 years and retire.

[Kevin]

MW - $1 million may not be attainable for you since you claim to make minimum wage. So why not set a lower goal and start somewhere? If you make 10,000 a year and these folks make $100k, why not set your goal at 10% of being a millionaire? Stop being so negative and just do something each day to attain your goal.

Like someone above said, why not sell one piece of the estate at a time? Who says you have to sell it all at once? And why can't you sell it when it's in storage?

Good post by the way.

[Minimum Wage]

Actually, selling it all at once is the LAST thing I want to do, since that will bring in the least amount of money.

I have about 2,000 low-value items. Some are worth more than others and are worth selling individually, while others should be bundled into small bulk lots.

But all should have a picture for maximum salability, and I can't do that if the items are in storage.

It is sustainable, as once I have money coming in from sales, I will be able to buy more stuff which can be resold at a profit.

[rwh]

MW: Perhaps you should sell a few things and take the money and save it. Buy a bank CD which forces you to hold onto the money until the CD matures (or you pay a penalty if you cash it in early).

Then sell a few more things and buy another bank CD. Do this until you have several CDs, then when the first one matures and you feel you want to put that money back into your business, go ahead, but only if there is evidence you can make a profit on that money. Otherwise, keep selling the stuff until it's gone. Then you won't have to pay for the storage unit any more and you'll have money in the bank.

[Finally Frugal]

Great blog! Tomorrow, I'm posting a partial review of a book called 'Middle-Class Millionaires', which discusses the unique characteristics of people who would characterize themselves as middle-class, but who have a net worth of between $1 million to $10 million.

Interestingly, the book doesn't highlight your approach, which is LBYM and investing/saving at a high rate. I like your approach better!