I had to switch up my order of non-fiction reading because this book was due back to the library before Power Thoughts. So, I stopped reading Power Thoughts, put it aside, and picked up
Stop Acting Rich and Start Living Like a Real Millionaire by Thomas J. Stanley.
This was one of the most influential books I've read. I'm seriously glad I read it. If you recognize the author it's because he also wrote The Millionaire Next Door, which I have not read, although Erik has.
Stop Acting Rich is a statistical book that analyzes the purchasing trends of the millionaires and decamillionaires, and makes sense of what the majority of your average millionaires do for a living, do with their money, and where they live.
Would you believe that your average millionaire lives in a house worth less than $300,000? I was shocked. It turns out that millionaires have figured something very crucial out: live in a home below your means. You see, when a person, whether a millionaire or not, lives in an affluent neighborhood (homes upwards of $600,000) there is a social pressure to keep up with the neighbors and their purchases, cars, activities, hobbies, etc. The problem is that these neighborhoods attract the wannabes (Mr. Stanley uses a different name, I just can't remember it). And the wannabes do not have the financial ability to responsibly keep up with the neighbors, so they either go into debt or they are stressed about life. Average millionaires know that to live in affluence, you must continue to be affluent, and that only leads to less satisfaction.
Which leads to the main secret Mr. Stanley found average millionaires believe: to be happy in life, live below your means.
Genius. How have I never gotten that?!?!
There is a three types of millionaires: the glittering rich, the investment rich, and the income rich. The glittering rich make up about 1% of all millionaires and they do live below their means because their income is unbelievably high. On the other hand, high income earners report very little satisfaction in life because they are constantly trying to keep up with their neighbors habits. And still differently, the average millionaires, the ones with investments, report very high life satisfaction. Satisfaction and dissatisfaction have everything to do with spending.
Most millionaires surveyed do not have wine cellars, do not pay more than $10 a bottle on wine, do not own prestige brands of clothes or jewelry, and when they buy suits, they buy them from JC Penny's or Macy's.
The majority of the high-income wealthy have premium watches (several), the prestige cars (European), and typically talk about their purchases. And they have very little investments and savings.
They are also the ones who have high stresses and low satisfaction in life.
What I've learned from this book is to be careful of the messages the brands are sending to me. The premium brands are marketing to wannabes. I consider myself a recovering wannabe, so this is an important lesson. The prestige brands know that the average millionaires are far too sensible to buy $60 a bottle vodka and $5,000 watches. Instead, they market to the people who think that owning these things will somehow bring wealth their way. I can't believe I subliminally bought into that!
I also learned that it's entirely possible to become a millionaire. I thought one had to strike it big in order to attain millionaire level, but that is not typical. The average millionaire became a millionaire at about 45 years of age and while making about $110,000 in annual salaries. And then continued to live at means well below the income. While on the other hand, the high-income earners made average salaries above $500,000 a year and lived that way.
The key to becoming a millionaire is to live below your means, frugally, even after you have reached your millionaire status. Then the occasional splurge can be justified.
I highly recommend this book! It was interesting, and not bogged down on stats, in case you're wondering. The stats were enlightening and the pace was good.
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