The most common ideas about millionaires are not true. That was the result of a decades-long study of millionaires, which were summarized in a book. While many people envision luxurious lifestyles and expensive cars as well as houses, this is not always the reality for many millionaires.
Author and researcher Thomas J. Stanley spent years observing and interviewing millionaires to learn about their habits. Later, his daughter, Sara Stanley Fallaw, continued the investigation. In their research, the two found that many people who have achieved millionaire status do not conform to popular belief. In Fallaw’s follow-up to her father’s book, The Next Millionaire Next Door, she shares several myths about the process of wealth building that keep others from reaching millionaire status themselves. Here are three misconceptions she points out in her book.
1. You cannot influence external factors – but how you spend your money can
Most of the people who interviewed Fallaw and Stanley were not born into riches. The vast majority had to work hard, make money, and make investments to achieve their status. You had to maintain this standard through careful planning, thrift, and labor.
There are certain things that cannot be controlled. In this decade, rising healthcare costs coupled with stagnating wages have set people back. The coronavirus pandemic and its economic effects are also an example of the stagnation in possible wealth accumulation. It should not be forgotten that gender and social differences in prosperity also create significant barriers for some people.
Apart from external factors, however, we have some of the wealth accumulation in our own hands. “We cannot control costs, government policies, or financial markets. But we can influence what we spend and how we invest. We can control the opportunities we seek and seize, as well as other aspects of our financial life, ”writes Fallaw. In her research, she found that people’s mindset is a great indicator of wealth. “People who believe they will never get rich generally fulfill this prophecy,” she writes.
2. Income is not the same as wealth – it depends on what you do with it
High-earning people are not all millionaires. And not all millionaires have high incomes either. Many people think that income determines wealth. However, based on Fallaw and Stanley’s research, that’s not the case. While interviewing for “The Millionaire Next Door,” Stanley spoke to many high-income individuals who hadn’t made a lot of money. They had spent their high incomes on expensive cars, houses, jewelry, and other material items. Often times, those who preferred spending to saving and investing got caught in a cycle of excessive spending.
The results of the research carried out by the father and daughter are clear: income is not wealth. Instead, it is the way the income is used that makes someone wealthy. Choosing to invest and save instead of spending money is why many millionaires achieved this status in the first place. These are the findings of the study. Only income that is used efficiently can really turn into wealth and prosperity.
3. Material possessions do not define wealth
Things like luxury cars, designer pieces, and other traditional status symbols can portray someone as wealthy. But these things are often meaningless. The cars that millionaires drive were an important part of Stanley’s original research in The Millionaire Next Door. The results are consistent: most true millionaires don’t drive luxury brands. “The average price millionaires paid for their last car purchase was just under 30,000 euros,” Fallaw wrote based on most of her research for the 2019 book. Most models from Mercedes-Benz or BMW start at a higher price. The opposite is the case for many owners of cars from prestige brands. “Many luxury car drivers do not have the income level or wealth that would qualify them as business millionaires,” writes Fallaw.
For millionaires, buying a car is less about status and more about practicality. In Stanley’s original book, The Millionaire Next Door, he interviewed a millionaire who turned down a gift from Rolls-Royce. The car wasn’t convenient for his favorite hobby, fishing, or visiting his company’s manufacturing facility, he told Stanley. So he refused the luxury car. For those who can’t really afford these luxury cars and items, buying them can keep them from building wealth. It’s a myth that works both ways. Not all who have flashy, expensive possessions are wealthy, and not all who are wealthy own such material things.
This article was translated from English and edited by Julia Knopf. You can read the original here.