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May 05, 2010


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Isn't that great book? I had a blast reviewing it! I do hope Carol continues to write.

The excerpt from the author rings true! One of the millionaire friend that I know started out carrying drywall at a construction company. He worked his way up in this small business to become partner, then sole owner (the other partner retired early very rich). He also owns commercial land and buildings that he rents to other small businesses.

His "weekend car" is an "in mint condition" muscle car from the old days.

The term "Millionaire" doesn't begin to have to same meaning that it did even 20 years ago. For example, in the housing development (built in 1972) in which I live every single home is in the range $900K to $1.15M and since the majority of homeowners are retirees that bought their homes years ago for between $60K and $200K I would suspect that just about everyone here is at least a millionaire. Maybe this article just doesn't apply to Silicon Valley, an area that has seen huge increases in real estate values and is still holding up very well in the top 20% of the market which is $1M to $5M. You would be hard pressed in my city to find a nice starter home for much under $500K.
I am a retired aerospace engineer, as is another neighbor, others include a retired junior high principal and a couple of small business owners.

I really enjoyed this and you give some very good advice. Excelent article, Thank you for sharing.

My parents are millionaires, but you'd never know it. My dad was a civil engineer and my mom retired 20 years ago from being a biologist at a waste water tretment plant when they got married and my younger sister was born.

They are in their mid-late 50's, retired, and visit family for fun. Their biggest splurges are bicycles that cost an arm and a leg, but they ride them all the time.

I know they have at least a million but probably a lot more and my dad has a small pension. They have no debt, buy all cars in cash and drive them forever, still live in the house they financed 20 years ago (but paid off in 9 years total), and have a rent house to put on the market. They act even more frugal than other upper-middle class couples I know, but they seem happier.

That's my have enough money to do what we want within reason and to be happy now and in retirement.

great post, gives me and im sure all others the belief that it is possible. I do understand that times have changed, but the basic principles are still the same. save, live within your means, and budget are the foudnations of a succesful financial life.

Preferred Financial Services

All bought their houses in cash after saving up to do so

It's all about ratios.

Some people could never pay off their home, due to exotic morgates and buying too much house

I'm glad my hobby is personal finance. Plan to pay off our home very soon and stack lots of cash thereafter

One of my associates' father was a "Millionaire." He had a million in the bank, but could have lived, according to her, more comfortably. Much of his life and conversation was about how to conserve money, rather than experiencing the situation [like a meal out] for what it was. To him, it was a habit [healthy habit, yes, but one can argue that it might not be a happy habit]. To others, his "habit" lessened their experience [e.g. criticizing how much a meal cost lessened the others' experience of how good to food or pleasant the company was.]

Either way, his second wife got into an argument with him, and threatened him with a gun. The neighbor called the police, and even though they didn't want it, the couple went through the domestic violence system. He was in his seventies, and the stress of it all made him sick quickly, and he died.

My associate look back on her father, and I can tell through conversations that even though his "habit" was a healthy one, I am not sure she felt that he was happy in his life.

I like this saying, "the greatest unhappiness is not knowing when is enough." It goes both ways [too much, too little].

My parents, in their late 50s; dad's 401k was well over a million last I checked:

- did not start with any inheritance

- never owned a business; dad worked for 30 years doing software work at a telecom and mom stayed at home with the kids (8 of us) and is now a part-time teacher

- stayed out of debt, except for the 5-bedroom home (needed for all the kids) they bought at a good price and low rate many years ago. I remember their house payments were $239/month in the early 2000s.

- never buy new cars, only old beaters; dad rode the bus to work. Buy clothes at thrift stores. Buy furniture at thrift stores. Even stuff they buy new, dad finds the best price online, and they're pretty patient looking for good deals. Mom clips coupons, reads all the grocery ads, and shops at multiple stores to get the best overall deal.

- rarely ate at restaurants, never went out for coffee, and didn't buy things like snowmobiles. Pretty much avoided "luxury" things and status symbols. They did buy a used RV, which allowed the family to travel much more cheaply than it would have cost to stay in hotels.

- Total spending was maybe half or 2/3 of take-home pay; the rest was saved in tax-advantaged ways or put toward various charities. Would push giving onto one side or the other of New Years Day to take maximum advantage of tax laws and company matching. Did a lot of direct charity work.

Net result: work for a long time, be careful about spending, avoid debt, save a lot, and retire a millionaire.

Read Millionaires Next Door.

Very good post, always interesting to see common traits of people who reach accomplishments such as this.

The post mentions inheritances, but what interests me more are the traits of those that are truly self-made. My experience with people in this group are that they often live in such a way that you would never be able to tell that they are millionaires.

Specifically, I have known people that almost go out of their way to live modestly. They don't like to draw attention to their relative wealth. They live in solid but unspectacular homes, drive practical cars, and wear good but non-high end clothes. They are good in their careers, and value education - particularly when it comes to their children. These people are also pleasant, and good at building/keeping relationships with family and good friends. They take care of their health as well.

My take is that it is these traits - focusing on what's truly important (health, relationships, and building wealth) rather than being overly materialistic or keeping up with Joneses - that is the foundation for their success. By detaching their happiness from the need to show off to others or have cool toys or clothes, they are then able to focus on other things and find happiness in other places.

I wouldn't draw conclusions from 3 people - hardly a sufficient statistical sample.

Here is what my millionaire' friends are doing (incidentally, do you include primary home equity in your definition of "millionaire" or not?):

1. One had inheritance, but probably saved about as much himself; another one got 200K as a graduation present from his parents; couple of others started with nothing (first-generation immigrants).
2. One is a dentist, owns his own practice. The rest - engineers and one scientist working for a corporation.
3. Neither has ever had consumer debt, but all had mortgages in the past. The dentist whose net worth is about 2-3M has recently bought a vacation home and took a mortgage instead of paying cash even though he had at least twice the value in only one of his investment accounts. He is a strong believer in future inflation, and he considers fixed low interest mortgage a hedge against inflation. Most pay cash for cars now, but had car loan(s) in the past. All buy new cars. None is above taking a loan for a car while keeping cash if the percentage rate is low enough.
4. New cars, not fancy, maintained well, drive until it starts giving trouble. Nobody I know bothers with having a weekend/utility cars. One person did, but I am not sure if he is a millionaire, though he is single and probably has high 6 digit amount.

5. None spends too much on clothes but not to the extent mention. Basically, all buy clothes on sale and in places like TJ Maxx, Annie Sez, Lohemanns; Ann Taylor on sale. One woman "inherites" clothes from her daughters. But everyone does buy new clothes occasionally. The dentist like nicer clothes, but his wife prefers not spending much. So when he wears a $20 sweater she got for him at TJ Maxx, he tells his friends "I got a cheap wife".

6. Nobody I know bought their houses for cash, even if they could. Actually, most bought their houses a while ago, at the time they still didn't have enough to pay cash. The dentist guy is the one who bought a vacation home recently; also refinanced his investment property to 15-year from 30, and he could've paid cash. Maybe if the rates were higher then they are now...

7. True. It's funiture lifetime though, not person's lifetime. Also, if they were moving they'd probably replace furniture. Not sure about quality - most people went for look.

8. Same.

9. When appropriate. Nobody I know negotiates in department stores.

10. True.

11. Varies.

But really, all millionaires are different. I suspect it varies by background.

Great Post! Both of my best friends growing up came from families who were small business owners that became millionaires by the time their kids were in college. Both family businesses provided opportunities for their kids to work for them during summer breaks, etc. One friend even quit her lucrative post-college job and went to work at her parents' company -- she is now a millionaire as well, based on her share of the company. One thing I noticed about these two families is that they both lived WELL below their means and blended well with the rest of our middle class neighbors. Looking at their houses and cars no one would peg them as "wealthy". Most of your observations in this article would describe their lifestyles to a tee. I would say I learned as much watching their spending patterns as I learned from my own parents, whose spending/debt habits showed me what NOT to do!

The only "millionaire" I ever knew was my boss from one of the companies I had previously been employed at. He got his money by marrying into a rich family.

My experience is similar to yours. Both people were generous. And I believe they really enjoyed their work and families.

These people are so admirable. It is hard to manage the kind of lifestyle they had: no luxuries, no credits, no debts.
I also believe it's still all about proper management of one's finances. No matter if he had to get some loans or credits to buy a house or a home, so long as he can manage his finances successfully, then he can be a millionaire someday just like the three.
There are still a lot of things that we can enjoy while we live without overspending, so why not enjoy it when we still have the time and the resources needed for us to have it.

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