Money 104: How To Have The Mind Of A Millionaire

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Money 103: Setting Goals & Budgeting

Most millionaires fit a specific profile

  • The perceived (and false) demographic of a typical millionaire:
    • Late 20’s to mid 30’s without children
      • If any children, the adult children are heavily dependent on parental support
    • Makes a very high income from a professional trade or art
    • Works 60+ hours a week or less than 30
    • Later-generation affluent, usually as an heir
    • Drives the newest cars and has many expensive hobbies
  • The demographic of a millionaire, according to statistics:
    • In late 50’s and married with three children
      • Adult children are economically self-sufficient
    • Self-employed in a practical business that supplies needs for people
      • Typically not retired
      • Works 45-55 hours a week
      • Skillful at targeting opportunities in a market
      • Fairly well-educated, usually with a college degree
      • First-generation affluent
      • Allocates time, energy and money efficiently in ways that are effective in building wealth
    • Has a lot of value, but built slowly over time
      • Invests about 20% of income
      • Median household income of $131,000
      • Average net worth of 3.7 million
      • Owns a home worth approximately $350,000
    • Lives well below their means
      • Drives older-model automobile and buys rather than leases
      • Attended public schools, but likely to send children to private school
      • Still clips coupons and looks for discounts
      • They live in a way that doesn’t show their wealth

Be focused

  • In some ways, the amount of money you have is a direct measurement of how much value you have added to others’ lives
  • There is a direct tie between being passionate and being financially successful
    • This passion will show itself in lifestyle choices, which is necessary to succeed
  • If you have a burning desire to accomplish, you’ll want to make big sacrifices
  • This has to be a decisive and intentional priority or it will not happen, both as a consumer and as an investor
    • Say “no” to your present self and “yes” to your future self
    • Stick to your standards or the planning and budgeting was a waste of time
    • Don’t skip budgeting and don’t dismiss the numbers you’ve set for yourself

Be optimistic

  • “Get rich quick” is definitely possible, but it’s extremely difficult
  • You have to believe that you can attain your goals and that things will work out in the end
  • You need to be a positive and charming person or you will repel the most important people that can help you attain your financial goals
  • The long-term gain must be seen as worth the short-term pain
  • Prayer does work, and God does listen
    • Sales and windfalls can miraculously happen
    • Catastrophes or hardships can be avoided by some improbable circumstance

Be realistic

  • You need to be honest with yourself about your fears and beliefs about money
    • You are the means to acquire your wealth, not anyone else
  • Avoid overconfidence about vague financial plans or major decisions that have not been researched
  • If your health deteriorates as a result of your money habits, you will not be able to enjoy the results of your frugal lifestyle
  • Small numbers don’t make millionaires, especially when saving pennies can sabotage opportunities

Be tenacious

  • Learn to hate debt, hate instant gratification, love saving money, love investing and love giving money away
  • Building wealth is a marathon, not a sprint, and it takes a lot of persistence to get where you need to go financially
    • Wealth is not an event, it is a process
  • Spend less time dreaming about the future and more time working towards it
  • Good money management can only come from learning to be confident and fearless about decisions you make
  • You have to go on the offensive to acquire wealth, not simply be defensive about risks

Fight against materialism

  • Materialism is a lousy measurement of success
  • The more content and happy you are, the easier it is to save money
    • Gratitude has been scientifically linked to better spending habits
    • Happiness is a choice, not a financial decision
  • Become a producer instead of simply a consumer
  • Learn to live below your means and how to be frugal
    • Avoid “small purchases” or things you feel you “deserve”
    • Look at a small recurring expense based on how it will play out in 10 or 20 years instead of moment-by-moment
    • If you have to think about whether you can afford it, you can’t
  • Your frugality should point to trying to expand your means by investing into something that will profit
    • When handled properly, money yields money
    • Be ready for high-risk investing, since the rich only use interest returns for income and more investing and not for attaining wealth

Fight against peer pressure

  • Stop following “conventional” wisdom about wealth
    • Conventional people aren’t wealthy, so their wealth tips aren’t any good
  • It is easy to be distracted by your friends’ or family’s lifestyles, especially when it involves something fun
  • There is no genuine way to compare your lifestyle to another’s, but it is easy to think there is
  • You need to be committed to your goals, regardless of what others think
    • It is easy to be overwhelmed if you care a lot about appearances
    • Have pre-planned responses to what others will say when they see your lifestyle
    • Your drastic lifestyle changes may involve your friends making fun of you

Be flexible

  • If you are not open-minded, you will miss out on many opportunities
  • You must be willing to change from being a consumer to being a producer
  • Always be on the lookout for new ways to learn and apply what you’ve learned

Be disciplined

  • Maintain your habits until they become automatic impulses
  • Live by guidelines instead of by rigid rules, since you are still human
  • Work hard, both in your career and in your spending habits
    • High income, however, is not high net worth, which is what actually measures wealth
    • Avoid the trap of serving your lifestyle:
      1. An active job creates income
      2. That income inspires a lifestyle
      3. The lifestyle creates financial obligations
      4. The obligations make the active job necessary
      5. Get a higher-paying job and repeat
  • Managing money is managing life, and therefore investing in your own development is one of the best investments you can make
Next: Money 201: Wise Spending Concepts