14. Would You recognize a Rich Person?

Warrant Buffet once said of his modest home, “For the $31,500 I paid for our house, my family and I gained 52 years of terrific memories, with more to come.”

Buffet could've invested in a multi-million dollar home but instead focused on the value that his family gained by keeping the same house. The house is now worth over $350,000 and his portfolio is over 40 billion!

There are a lot of books out there on what it takes to become a millionaire. One that stands out is The Millionaire Next Door by Thomas Stanley and William Danko. The book is based on years of studies, interviews, and case studies of millionaires. It can also be found at halfpricedbooks.com as well as your local library for free!

There are many people who earn high incomes yet fail to accumulate any lasting wealth. These people spend their money as fast as they earn it. They don’t invest money and think of the future. One finding by Stanley and Danko is that a person must not only have a high income but also develop frugal spending habits. Most people and even financial literature focuses on one or the other: earning more or spending less. This book suggests and gives evidence for the need for BOTH to be present for a person to succeed. 



Here’s some interesting finds in the book:


*80% of America’s millionaires are first-generation rich. This is contrary to those who would have you believe that wealth is usually inherited.

*20% of millionaires are retired

*50% of millionaires own a business
*97% of millionaires own their own home



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“In the course of our investigations, we discovered seven common denominators among those who successfully build wealth.”
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The seven characteristics are: 

1. They live well below their means.

2. They allocate their time, energy, and money efficiently in ways that are conducive to building wealth.

3. They believe that financial independence is more important that displaying high social status.

4. Their parents didn’t support them financially.

5. Their adult children are economically self-sufficient.

6. They are proficient in targeting market opportunities.

7. They chose the right occupation.



For details continue reading by clicking this post with a more thorough bookreview of the Millionaire Next Door… Otherwise, thanks for stopping by! 

What do you think? Do you agree with characteristics above? Leave a comment! 

13. A Book Review: The Millionaire Next Door

A book review on The Millionaire Next Door by Thomas Stanley and William Danko. You can also read it for free here. Here are the seven characteristics that the authors found millionaires to have in common with each other:

1. They live well below their means. Millionaires spend less than they make but develop over time an identify that is synonymous with being frugal. They pay for quality but not for image. Typically millionaires don’t spend more than $399 to buy a suit. About half of the surveyed millionaires spent $140 or more in buying a pair of shoes.

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If you’re not wealthy and want to be wealthy someday, never purchase a home that requires a mortgage that is more than twice your household’s total annual realized income.
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2. They allocate their time, energy, and money efficiently in ways that are conducive to building wealth. Millionaires plan their investments and budget. They keep money on hand for a rainy day (also known as an emergency fund). They invest early in life. Millionaires spend more time or about 8.4 hours per week planning and managing their investments than non-millionaires who spend about 4.6 hours per month planning theirs.

3. They believe that financial independence is more important that displaying high social status. The authors point out on multiple occasions that millionaires don’t have fancy cars. Millionaires drive the same vehicle for years.

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“There is an inverse relationship between the time spent purchasing luxury items such as cars and clothes and the time spent planning one’s financial future”

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Of interest…

*Over 80% of millionaires purchase their vehicle while the rest lease.

*Only 23.5% of millionaires interviewed only a brand new car.
*A typical millionaire only spends on average $24,800 for his or her most recent car purchase.
*About half of the millionaires surveyed never spent more than $29,00 for a single vehicle. 

*Most American millionaires like to buy American-made vehicles such as Fords, Chryslers, Chevrolets, and Cadillac’s.



4. Their parents didn’t support them financially. The correlation was the more dollars an adult child received from their parents the fewer they accumulate. On the other hand, those who were given fewer dollars accumulated more.  Perhaps this has to do with understanding the value of money when one earns a dollar verses when one gets a dollar. Goes back to the whole give a fish or teach a person to fish type thing. Those who received help from their parents tend to manage their money in a poor manner, invest less, and spend more.

Giving a child a cash gift or financial assistance is not always the best solution to helping that child have a better financial life. Sometimes parents enable the very behavior they are trying to correct by gift giving to particularly irresponsible kids.



5. Their adult children are economically self-sufficient. The authors clearly indicated millionaires believed that giving money to adult children damages their ability to succeed. Of interest is that the sons and daughters of millionaires are more likely to become doctors and lawyers in society than those who had non-millionaire parents.

Here are some of the guidelines of those who are wealthy on how they raised their children:


a. Never tell children their parents are wealthy.
b. No matter how wealthy you are, teach your children discipline and frugality.
c. Assure that your children won’t realize you’re affluent until after they have established a mature, disciplined, and adult lifestyle and profession.
d. Minimize discussions of the items that each child and grandchild will inherit or receive as gifts.
e. Never give cash or other significant gifts to your adult children as part of a negotiation strategy.




6. They are proficient in targeting market opportunities. The authors discuss how one of the best ways to make money is to sell products needed or desired by those who already had money.  Those who provide accounting, tax, and legal services fall into this category. 



7. They chose the right occupation. Of interest there is not magical list of businesses from which those interviewed became wealthy. Among the lists are those who build cabinets, sell shoes, make boxes, become dentists, become plastic surgeons, become dermatologists, become psychologists, become chiropractors, etc. The book notes that self-employed individuals are four times more likely to become millionaires than those who are working for others. 



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“Most of the affluent in America are business owners.”

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Was this book review helpful? Are you interested in reading the book? Do you agree or disagree with the authors of the book? Leave a comment! 

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12. What are steps to get out and stay out of debt?

Here's a basic guide to getting out and staying out of debt. There are quite a few more resources out there but this is a good starting point. 

1. Make the Resolution: Spend less than you make. This is a tough one. Spending more money than you earn is common practice in the U.S., and increasingly in other countries around the world.

Learn to just say “No.” You must learn to say no to yourself, your spouse/partner, and your children. This is called delayed gratification. It is essential to getting out of debt. A) Are you ready to make the resolution?

“Live like no one else [today] so you can live like no one else [in the future debt free].” – Dave Ramsey

2. Educate Yourself: The local library is a great resource. If you eventually want to purchase these Amazon.com or Half Priced Books is a good place to look. We used Dave Ramse's methods and went through Financial Peace University twice (first the audio CD and then the Dvd series) and I can tell you it works. We became debt free in the summer of 2011! We have since purchased a house so we do have a mortgage. B) Have you considered taking DR’s Financial Peace University course? The new FPU DVD course is only 9 weeks (1.5 hour sessions) long now instead of 13 weeks (2 hours sessions).

Some good personal finance books:

• The Total Money Makeover By Dave Ramsey

• The Millionaire Next Door By Stanley and Danko

• The Richest Man in Babylon By George Samuel Clason

3. Motivate Yourself: Getting out of debt takes commitment, energy, and intensity. This will require sacrifices. Set clear and achievable goals on one page or less. (I’d recommend the “The One Minute Manager” by Kenneth H. Blanchard and Spencer Johnson.) Put these goals on the fridge or as you walk out the door so you see them every day. Starting a financial journal on the GRS forum is a great idea. Reward yourself with little treats as you accomplish your goals. Normal = spend like there is no tomorrow. Being different or even “weird” by seeking to become debt free is a good thing. C) How are you and/or your spouse/partner motivated?

4. Organize Yourself: Create a balance sheet. This helped us a lot when looking seriously at getting out of debt. D) What is your total debt? How much is the interest rate associated with each debt? What is the total pay off? What is your total Net Worth? How are you tracking your expenses (Excel Spreadsheet? Mint.com?)

Assets(stuff you own) – Liabilities(debts) = Net Worth

5. Choose: D) How are you going to get out of debt? – Lowest balance (Debt snowball) or highest interest (Avalanche).

If the debt snowball…

1. Create a list of all of your debts: credit cards, car loans, student loans, mortgages, etc… (Note: You probably need to exclude your mortgage from the list until you have the other debts paid off)

2. Next to each one write down the total balance owed.

3. Re-order these from smallest to largest debts (use Excel to make this simpler.)

4. Pay the minimum payment on all of the debts – except the smallest one.

5. Put every extra dollar you can find towards paying off that smallest debt.

6. Celebrate like crazy when you get that first debt paid off.

7. Take the amount you were paying towards the first debt and put towards the next smallest debt. Do this until this next one is paid off.

8. Celebrate again!

9. Continue this process until each one is paid off.

If the avalanche method…

1. Create a list of all of your debts: credit cards, car loans, student loans, mortgages, etc… (Note: You probably need to exclude your mortgage from the list until you have the other debts paid off)

2. Next to each one write down the total balance and interest owed.

3. Re-order these from smallest to largest interest rates (use Excel to make this simpler.)

4. Pay the minimum payment on all of the debts – except the one with the highest interest.

5. Put every extra dollar you can find towards paying off that loan with the highest interest.

6. Celebrate like crazy when you get that first debt paid off.

7. Take the amount you were paying towards the first debt and put towards the next debt with the second highest interest. Do this until this one is paid off.

8. Celebrate again!

9. Continue this process until each one is paid off.

6. Cut Expenses: Sell something. Create a budget. Cut. Cut. Cut. F) What are some ways you can cut expenses out of your budget? See savings tips starting with this post. Once you’ve created your budget evaluate it periodically but most importantly - Stick to it!

Expenses > Income = Bad & Expenses < Income = Good

7. Spouses/Partners get on Same Page: While every couple is different, you could consider reading the same materials, talking openly about your feelings, and sharing like goals. When you share goals, you are usually more likely to take the necessary steps to accomplish your goals. If you or your spouse/partner are not on the same page, the process will be a lot more difficult. Communication is the key. Determine not to live life in the bondage of debt. Credit Cards are not the answer. G) Are you and your spouse/partner on the same page? What would it take to get on the same page?

8. Get an Accountability Partner/Coach: When you are getting out of debt, you want to be influenced by people who support your decision. Not everyone does. This can even include family. Hang out with friends who are frugal. Befriend people who enjoy movies at home instead of in the theater. H) Who do you know would be a good role model for you in getting out of debt and holding you accountable to your goals?

9. Save up for an Emergency Fund: $300 (if you make less than $15,000 a year), $500 (if you make more than $15,000 and less than $24,000 a year), or $1000 (if you make more than $24,001 a year) respectively. Do this quickly hopefully in less than 2-3 months. Emergencies can and always will happen – car repairs, home repairs, hospital bills, etc. It is better to be prepared for when the emergencies happen. I’d say a good goal would be an E-fund with 3-6 months of household expenses. We have 9 savings accounts we use to save for emergencies and expenses we know will happen – car repairs, new car, new computer, medical bills, baby related, purchases, vacation, etc. We don’t even touch our E-fund anymore for most emergencies. I) What system do you think would work best for you?

10. Increase Your Income: Seeking a raise is a good place to start. Getting a second job part-time is a good idea too. If a couple perhaps the spouse/partner who isn’t the main bread winner could get a part-time job making $1000-2000 per month. Or what about having a yard sale? Hopefully this extra income will lead to you paying off your debts sooner. Your income is your greatest asset. Time to stop giving other people portions of it through interest and fees! J) What ways could you earn extra income?

11. Set Financial Goals: Goals are the fuel that propel you through the slow days of debt repayment. Hey, the process will get hard and it will seem to drag on at points. You’ll want to quit and give up. You’ll start to think that your old way of living wasn’t so bad after all. These are the days you need to look at your goals and remind yourself of why you are making the decisions you are making. Make sure your goals are SMART – Specific, Measurable, Attainable, Realistic, Time specific. K) What goals do you want to establish for 2012? What are your long term goals over the next 5-10 years?

12. Stop Making Excuses: Sometimes, not always, we make excuses. I would get out of debt but … [fill in the blank with poor excuse].

Right now you have a perfect opportunity to change your life and create a new financial identity. Accomplishing goals always feels great. Imagine how you would feel if you paid off all your debt and didn’t owe any money to anyone! You are on the right road to change your family tree! L) Are you ready to make the changes necessary to get out of debt?

Have something to add? What has worked for you to get and stay out of debt? Leave a comment!

11. Tips to Save Money - Part 2

Here’s some personal experience on great ways to save an extra buck. I'd love to hear your tips! I have a list of about 60+ tips to save money. This is part 2 tips 5-7. I hope you enjoy! 

5) Clip Coupons

5a) Last month I saved $25 on groceries and I’m not even that serious about it. Buy the Sunday paper! It is easy to save upwards of $50 a month if you enjoy it. Sometimes things can be bought for pennies or even free!

6) Groceries

6a) Write a list before you go shopping – and stick to it. There are people hired just to make sure the milk and eggs are in a section of the store… Or that you will have to go from groceries in the middle of all these clothes to get to your home goods or toiletries.

6b) Never shop while hungry! Don’t fall for it! Also don’t buy things at the checkout aisle. They are marked up usually and are impulse buys.

6c) Buy in bulk at wholesale box stores such as Sam’s Club or Costco. If buying in bulk for a smaller family or even singles makes wholesale unaffordable then get a shopping buddy! You can split the cost and the product with your buying buddy. Or even split the cost of membership! I do this with a relative. You are allowed two membership cards per account.

6d) Make a comparison shopping list. I made an excel version of this and compared basic items we buy every week. Basically compare your major stores for the items you buy over about a two month period.

You might be surprised to know that where you think is the best prices may not be. Wal-Mart for example in our area is usually more expensive in many every day grocery items than Kroger or even Target. If you don’t mind generic, store brands Aldi’s is a great option as well on a variety of items.

You can also see the local adds online and shop before you go to the store.

7) Go Out to Eat or Make it Yourself?

7a) We realized that going out to eat once a week is a lot more special. We also save a lot of money this way. Currently I bring my meals from home to work. I brown bag it, eat leftovers, or bring a frozen meal. (An occasional meal out is not bad though for variety.)

7b) Of course now I’m married so life is even better! I make some mean egg/omelets and of course my wife is a fantastic cook! We save a ton by eating in.

7c) However, if you do go eat out check these three websites:

restaurant.com sells $25 restaurant gift cards for $2 to $10 to thousands of restaurants around the country. These are great gifts as well!

On groupon.com you can get discounts on a variety of things. We have gotten Groupons for 50% off or more at local restaurants. In fact restaurants are just one thing you can get discounts on. I’ve found massage offers, jet ski offers, family photo shoots, and more!

EntertainmentBook.com sells restaurants, shopping, attractions, and travel booklets for discounts!

Which tip did you like best? What tips have worked for you? See the full list of tips to save money for the other tips and parts! Leave a comment! 

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