Yesterday, I was listening on the radio to my frugal mentor, Clark Howard, and he was talking about the millionaire next door. In particular, he was talking about the fact that there are ordinary people in America who are indeed millionaires. They became millionaires not from what they make each year, but rather from what they don’t spend. I love this principle and I wish more American adopted this lifestyle, rather than indulging their champagne tastes when in reality they should be on a beer budget. Which of course leads to debt and financial stress in your life.
According to Clark, here are 3 examples of how the millionaire next door lives their life.
1. Bottle of Wine. So when planning a dinner party, do you buy the $37 bottle of wine or the $13 bottle? The millionaire next door opts for $13 bottle every time.
2. The Wristwatch. You need a new watch. Do you buy the $50 watch or the $5,000 Rolex? This one is pretty obvious. Although Clark, who is no doubt a millionaire, says he bought his watch for $19.99. He must have found a great coupon!
3. The Automobile. Do you drive a luxury car or opt for the modest sedan? The millionaire next door cruises in the sedan and doesn’t worry about impressing somebody at a stoplight.
The bottomline: It is how you handle and save your money that really separates those with money and those who struggle with their finances. So think before you spend and never borrow or go into debt to impress others.
Please chime in with your thoughts. I look forward to reading your comments.
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{ 16 comments }
I do these!
1. All our wine is in the $6 (SALE!) to $15 range.
2. My ~$100 very classy and acceptable watch was a GIFT!
3. We drive a great used Civic.
Score. Maybe I’m on my way!
1. Rarely buy wine, but it’s in that $10-15 range
2. Don’t wear a watch.
3. I traded in my BMW for a Jetta. So much cheaper to repair!
I would point out that while the Millionaire Next Door may not spend much on wine, a watch or a car, it’s likely because it’s not something the Millionaire Next Door values. I think there is a lesson to be learned that being frugal isn’t just about spending as little as possible, it’s about spending on what matters, and going cheap on the things that don’t. The amount of money I am willing to spend on eating out and travel may be exorbitant to some, but on the flip side, I drive an older car, rarely go out to bars or concerts, and analyze my trips to Target to the penny.
That being said, that Millionaire next door may save on wine so he can spend on travel or so he can donate to a cause that is near and dear to his heart. And there’s nothing wrong with splurging on what means the most to you, so long as you’re holding in the reigns on things that don’t.
The book The Millionaire Next Door is very inspirational to me for my change toward underspending. I highly recommend it! It studied the habits of people who are net-worth millionaires (not owing millionaires) in the 80s (maybe 90s) and they definitely do not live to impress.
Agree with you always go for the ceaper option 🙂 thanks for the coupons 🙂
Melissa commented above with pretty much my entire point, so “ditto”.
Good point. Living below your means is the best way to build wealth.
Great tips! For ideas on how you can take charge of your own health care costs, check out Whatstherealcost.org.
Being frugal is about more than just saving money. It’s also about being more efficient with our time and making the things we already have last longer simply for the sake of doing what’s right.
I purchase wine at $4.99 on sale and it is delicious! I’ve had my watch for 10 years, and have found awesome jewelers who will fix it when it stops working. We now only buy USED cars. We will never buy a new one again, plus we keep our cars way past 10 years. Although I’m still not a “millionnaire”, I hope to have a net worth of at least that by the time I’m 60! (Um, that’s only 11 more years…..)
Great post!
It’s funny he mentions the wristwatch part because ppl tend to look strangely at me for sometimes wearing digital watches which have never costed me more than fifteen bucks. It’s just that for some reason I do not like watches with hands plus i prefer using military time.
Now as for the car, when I become a millionaire I will get a nice luxurious one that is if you consider the new Buick Lacross 2010 luxurious enough?!
Honestly, I saved money on the wristwatch by not having one. There’s cellphones which I usually carry (and can’t imagine a millionaire not having one). It just never became a habit for me to wear a watch in the first place.
That is very true. I know people who do not make a lot of money but have a very comfortable retirement account and are very comfortable with their finances. I also know people who make a lot more, but they are always struggling with their money. The thing is, you can almost always find something cheaper if you are willing to look for it and wait for it. It’s very hard in practice though as people are used to having that new item now, even if they have to use a credit card to buy it.
I love the life I live and I live the life I love. I’m a practitioner of living below your means and it is easy to practice that when you spend most of your time living in Cambodia, Laos, India, Sri Lanka and the Philippines, where most often than not, one American dollar goes 3 to 7 times further than it does here in the States. I’ve been dancing with death with Agent Orange Cancers from the Vietnam Era and seeking alternative treatments throughout many decades and medical tourism is affordable and sometimes effective. Enjoy each day as if it were your last and cherish those close to you, always.
Great article, thanks. I read one time about an interview an author was doing with a group of millionaires and set up this really expensive buffet full of caviar, etc but none of them wanted any of it because that was not the way they were used to eating. They ate the same stuff anyone else would that wasn’t a millionaire.
I work for an estate planning law office, so I have the opportunity to look at a lot of balance sheets. I can confirm 100% that the “rich” are almost never the ones you would pick out of a line up. When I go past those little tiny, cookie cutters houses in the “working class” part of town, I think of all our clients who live in those tiny houses and have 2-3 million stashed away after years of working average jobs. The world is a very different place financially then I would have ever guessed.