The word millionaire conjures up different images to different people. Some assume millionaires are all born with a silver spoon in their mouth and carelessly spend money on lavish material goods like diamonds, sports cars, and mansions.
It’s this line of thinking that could lead you to believe millionaire status is completely out of reach. But this definition represents the iconic millionaires you see in the news and featured in People magazine. The fact is, most millionaires don’t fit this definition at all.
Dr. Thomas J. Stanley (The Millionaire Next Door
You can learn from the success of these millionaires no matter what stage of life you are in, financially and otherwise. I say, fake it ‘til you make it – imitate their behaviors to get ahead in life. Act like a millionaire.
How to act like a millionaire
Focus on the long term
Begin with the end in mind (this is one of Steven Covey’s The 7 Habits of Highly Effective People
Be deliberate. Instead of being reactive, take the time to respond in ways that will get you to your long term goals. This often takes the form of delayed gratification. For example, if you are driving an older model car, take the time to save money each month to pay cash for a new(er) car a couple of years from now, rather than just going out and borrowing for a new car today.
Make saving and investing a habit
Make it automatic. Saving and investing should be a requirement, not an option. Have automatic deductions taken directly from your paycheck and invested in your 401k, or set up an automatic transfer to your investment and savings accounts on payday. Treat this just like you would any other bill and pay it each and every month. (Take it a step further – when you get a raise, increase your automatic savings at the same time.)
Most millionaires habitually save and invest their money. For them, there is no alternative – they save and invest first, and only spend what’s left.
Continuously learn
You don’t stop learning when you get out of school. At least you shouldn’t. Learning is part of what gives you purpose in life. And if you don’t understand something, or need to find a solution to a problem, seek out the answers.
Read books and articles (or listen to podcasts and audio books) to find answers to your questions. Take a class. Learn from the expertise, experience and mistakes of others.
Get help when you need it. Don’t hesitate to enlist the help of people with specialized knowledge and understanding.
Most millionaires are lifelong learners. And they wouldn’t hesitate to ask for the help and opinions of others when faced with a tough problem or decision.
Only spend on what you understand
Research indicates those with high wealth potential track their own spending and do most of their own investing (rather than hiring someone to do it for them). They have taken the time to understand their own financial situation and gained enough knowledge to be confident in their investing decisions.* (This relates back to the previous point about learning.)
There is nothing wrong with a ‘know nothing’ investor who realizes it. The problem is when you are a ‘know nothing’ investor but you think you know something.” – Warren Buffett
*Investing isn’t difficult. If you don’t think you have enough knowledge, research index funds. It’s the simplest, most effective way to invest (that anyone can learn and do).
Be Thrifty and Spend Intentionally
Differentiate between wants and needs. If you constantly keep the end in mind, this is easier to do. Do you really need that brand new car? Will that $25,000 loan and $450 monthly payment help you reach your 10 year goals?
Related, don’t judge the cost of something by it’s monthly payments. Always, and I mean always, look at the total cost. Maybe $100/month for new furniture fits nicely into your monthly budget…but do you know exactly how much you will be paying for it in the end ($1000?, $2000?, more?)? And is it worth it to make payments on furniture that won’t seem quite so new and amazing 6 months from now?
Eat home cooked food and drink domestic beer (or brew your own – see this tutorial from Mr. Crazy Kicks). Contrary to what some may think, most millionaires aren’t going out to fancy restaurants and drinking $500 bottles of wine. When you do go out, save for it and plan ahead.
Wear classic non-trendy clothing. Quality is nice, but that doesn’t mean it has to be a designer label in the latest trend. Focus on quality, timeless pieces that will last for a decade or more.
Keep up on the maintenance of your car and home to extend longevity. Take care of what you already have to make it last longer (this will save you big time!).
Learn to DIY. Related to maintaining your possessions, learn the skills necessary to do maintenance and home improvements yourself. For example, you can paint a room yourself for $50 and a few hours of moderate labor or hire it done for $500+. I know what I would do.
Value your time and loved ones
The smartest millionaires place a high value on their time and the people in their lives. Though you might not want to spend on a destination vacation (I would guess many millionaires don’t), do take the time to relax, enjoy life and spend quality time with your friends and family.
Begin with the end in mind. When you’re 95, will you look back and have regrets about not spending more time with the people you love?
Do you act like a millionaire? What habits of millionaires did I miss here?
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I always here that millionaires get up early.
These are great principles. I remember my parents neighbors were fairly well-off, and at least one of them was from a wealthy family. The wife wore the same two outfits all the time, and just about every time I was over there playing after school, she was making a simple meal like pasta for dinner. I know they had things they splurged on, but it wasn’t every day things like food and clothing.
+1 for getting up early!
Even in retirement, I’m up earlier than ever — because there are so many fun things to do!!!! 🙂
Yes, Kalie – get up early! That’s a great one. I am working on that. My husband is a night owl, but my preference is early to bed, early to rise! Maybe if I share this…
We might be “Frugal,” but you can still have a heck of at time on the cheap. Aside from saving money delayed gratification also gives you time to find what you’re looking for cheap. The automated investments are also a big one for us, without it we end up with piles of cash and are apprehensive about where to put it. Keeping ourselves out of the loop with regular automated investments works out best 🙂
One of the best things about not having to work anymore, is I have more time to read and learn more. I’ve even been improving on my beer recipes 🙂 Thanks for the mention!
Agreed, Mr. CK! 🙂 I find I usually enjoy the “cheap” fun over the more expensive fun. Any day I’m out in nature is the best – and it’s free. And, yes, automation has been one of the keys to our consistency with saving.
I’d love to try making our own beer (and wine) sometime. Nothing tastes better than something you made yourself. You know, I was looking through a gardening catalog (dangerous) the other day and noticed hops. I had to wonder whether you had ever tried growing your own hops?!
I think one of the big realizations is that even those who do a pretty good job of accumulating and protecting wealth can get frustrated with having to tell themselves no sometimes. If you are struggling to build wealth, remember that cravings aren’t going to go away. You just build a little more discipline over time to say no or become better at strategizing your yes so it doesn’t disrupt the rest of your finances.
Agreed, Emily! In the beginning, automation helped us with this. When the money wasn’t there, it wasn’t spent. And keeping those long-term goals constantly in mind, day in and day out, is invaluable.
Covey’s “7 Habits” book is a great read.
I have recently started focusing heavily on index funds by selling several of my underperforming active funds. They are simple and have great long-term results.
Tracking our spending has also been very important to making our debt-free plan as well.
7 Habits is a fantastic book. Over the past few years, we’ve transitioned over to mostly index funds too. We are working on trying to balance things out as we near retirement, while still avoiding high fees.
Nothing else to add (that I haven’t said a million times already). Just wanted to say that I LOVE this post. It’s spot on.
I also love both the MND and 7 Habits. Have read both several times and applied much of them to my life (with much success). I recommend them to anyone reading this post. Read them, to what they say, and you will be much better off in life.
Thank you, ESI! It’s so great to hear that from you! 🙂
I completely agree – everyone should read these books. Once I read and started applying the principles, life and finances started to change – for the better.
I think continually learning (and adapting) is a huge one. Most wealthy people I know are not afraid of change and they are always learning a new hobby, skill, or new knowledge.
Adapting is definitely a big one, Rachel! The willingness to be open minded and shift gears as you gain knowledge is so important.
Great post, Amanda!! Be deliberate is one of my favorite mottos. Yes, you can fake it till you make it, but being intentional with your time and money helps to build momentum in the right direction. There is no path greater than the one we cultivate ourselves. 🙂
“There is no path greater than the one we cultivate ourselves.” LOVE it, Miss Mazuma! 🙂 Each decision we make affects our lives and being intentional is so important. Thank you!
People that aren’t rich, but want you to think they are usually have TERRIBLE financial habits. They make decisions based on how others will perceive them. A millionaire with solid financial habits doesn’t give a damn what you think about him or her.
That’s spot on, Ty! 🙂 If you can let go of caring about how others perceive your economic status, that’s a huge step. Add in some great financial habits and you’re well on your way.
Having BIG goals is important. It goes back to getting away from having a scarcity mindset and instead believing that you can accomplish the financial goals you set for yourself. I haven’t pinpointed a specific date yet that we hope to be millionaires, but it will definitely happen at some point.
I totally agree, Kathryn. Having the belief that you can accomplish those long term goals is an absolute necessity. It’s awesome that you’re on the path to a million! 🙂
It really changed my life when I read the Millionaire Next Door. Up until then I thought that millionaires were made by owning “stuff”.
Same here, Laurie! What I read about the millionaires in the book really opened my eyes.
Great list, Amanda! It is easy to immediately think “big spender” when you hear “millionaire,” but it is often quite the opposite.
My favorite is “Continuously learn.” It seems that most people get caught up in work and are too wiped at the end of the day or on weekends to try to learn more. This is a huge loss. Learning not only makes earning more much easier, but it also increases our happiness and makes life more worth living!
Thanks, Matt! Continuously learn is one of my favorites too. It’s unfortunate some people don’t make more time for this. Learning, even when it’s challenging, can bring immense joy. I don’t feel like life is complete unless I’m reading and/or learning something new – it adds to my sense of purpose.
I really enjoyed reading the Millionaire Next Door and think this is a great supplement to the ideas presented there. Your views and points in this article totally align with mine. Great write up!
Thank you, Sean! It’s one of my favorite personal finance books. Sounds like we’re on the same page! Thanks for the comment. 🙂
“There is nothing wrong with a ‘know nothing’ investor who realizes it.” That is a great relief! For now, my investments are automated via work (I’m lucky to have a good, old-fashioned pension plan), and otherwise very, very simple and modest. I believe the day will come when I’ll have to have a better understanding of investments. Maybe it’s time for me to get proactive and actually learn now.
Ruth, I think the most important thing is that you are investing and saving! 🙂 I have to say, I’ve learned the most about investing from jlcollinsnh.com. Mr. Collins also has a great book called “The Simple Path to Wealth” – which is fantastic.
For some reason, it’s taking me a while to get through The Millionaire Next Door. I think I have book ADD and keep bouncing between books. I need to focus and finish the remaining 50%.
I’m certainly a believer in being a life-long learner. Staying curious has resulted in good things for me so far 🙂
I do that too, Mr. Need2Save. The problem is I want to absorb all the info NOW and I bounce around trying to get it all at once. And it doesn’t work well. And, yes – it’s that curiosity that drives the learning! 🙂
I’m familiar with all of these but it’s always good to get a reminder. This weekend I was on a trip and it was so tempting to buy kitchy stuff like candles and intention journals (lol what can I say, I’m into that), but I held off thinking, “or I could buy a $1 notebook from the 99 cents store instead of this $30 journal.” I think I’ve come a long way when it comes to conscious spending.
Well, you got my attention at “intention journals”, so i totally understand that. Love that you found an economical solution that could still satisfy that desire, Tonya! 🙂
Great advice! I especially appreciated the medium and long term goals, and this is something I definitely don’t do enough of!
I didn’t used to focus too long term either, Dan. But as I get older and look back at how far we’ve come (financially speaking), it’s easier to see how far we could go. It’s great to set those long term goals and work on them each and every day, even if it’s just a few minutes. It works!
I love this post, Amanda! +1 on getting up early – I don’t but Mr. G does and he follows the habits outlined in Miracle Morning. Also +1 on Millionaire next door.
Another thing I realized when reading this is that many of us who have developed successful saving/investing/spending habits actually ENJOY the process. We enjoy the conversations, the budgeting and looking at the numbers, the planning, etc. I’m not exactly sure how you can get someone to find it fun if he doesn’t. But it sure helps.
Thanks, Mrs. Groovy! Oh, you’re so right! It is completely enjoyable. I love it all! 🙂 It became fun for me when I realized I’m controlling where the dollars are going (they’re not controlling me). It took a while – and some debt repayment – to get there. And, then, when I started learning about the possibilities of FI, I got really into it and couldn’t stop thinking about it.
Spot on Amanda, it’s these simple habits that makes a millionaire, not some grand elaborate scheme. Anyone can be a millionaire as long as they work hard and work smart!
Thanks, T! 🙂 Definitely! It may take a little time, but these are the habits that get you there!
I love DIY! It satisfies the learning, understanding, frugality, and quality time categories and adds so much personal satisfaction as well.
Same, Julie! I LOVE DIY! I’m partial to home improvement projects and creatively using old or leftover materials to create new pieces.
Loved that book. When people hear “act like a millionaire” they instantly think of the rich and famous who spend like there’s no tomorrow. But the majority of millionaires are the ones next door who work hard, save, invest and spend modestly.
It’s definitely one of my favorite personal finance books. Goes to show it can be done with a little hard work and frugality!