How do you think millionaires lifestyle is like? Commonly whenever we think of millionaires, we think of the nice big beautiful house they live in, the one built on the hill slope or the one beside seashore. When comes to car they drive, we think of those exquisite million dollars european car, only a few on earth. The percepted millionaires wear branded clothes that only could be found in those upmarket boutiques that cost a few hundreds or thousands of dollar per article.
That is how media portray millionaires, MTV show like The Cribs shows that millionaires live in those big nice houses with state of the art entertainment system, space age game room, wine storages that never used, fridge full of expensive food, european style decorations, private gym room and those pimp-up rides. Well, this does attracts lots of attention, MTV sure get lots of viewing from these programmes, however this is not how real self-made millionaires live their life! Instead this is one of the biggest lie we were told.
According to the author of the best selling book – The Millionaire Next Door and The Millionaire Mind, who interviewed more than 500 millionaires. Shockingly almost all/or more than half of the self-made millionaires still live frugally in middle class neighbourhoods, a few percentage of them live in high class neighbourhood, yet they don’t live as lavishly as how the MTV show has portrayed. When come to car, usually they don’t drive the latest models - many times the vehicles are more than 10 years olds. They hardly spend on branded clothes, instead they go for cheaper alternatives which are also quality and durable. Even more surprisingly, the author found a lot of these millionaires hold the membership card of JC Penney! (JC Penny is US based large chain store that usually sell generic brands and durable goods in discounted price). The 50 billions networth investor, miracle of Omaha - Warren Buffet once commented on a 20,000 dollar new car. He commented that if he saved the 20K from buying the new car, he could use the money saved and invest into stock market, then let it compound. After 10 years, the initial 20K invested will become a few hundred millions!
So if the real millionaires never spend those money in luxuries, expensive cars and branded clothes, who does? Certainly there are millionaires who spends lavishly in buying expensive items and nice clothes and shoes, these millionaires usually inherited their wealth! People with special talents like singing, acting, modelling, etc also multiply their wealth very rapid such as Michael Jackson, Bobby Brown, Paris Hilton and don’t forget sport game players like Mike Tyson, David Beckham, etc. These are the people who spend expensively and lavishly in luxuries and believe in instant gratification. Michael Jackson, thoughout his lifetime made over half billion of wealth but lost all of them in lawsuit and in the end had to declare bankruptcy because of few hundred millions loan in debt (R.I.P to Michael). People like professionals, and high position excutives are usually part of the top spender for luxury items, nice cars and other big ticket goods.
The Millionaire Next Door also categorises two different types of wealth accumulators. These are Prodigious Accumulator of Wealth (PAW) and Under Accumulator of Wealth (UAW). Most self made millionaires are being associated as PAW while inherited millionaires, celebrities, and high maintenance professional/executives personnels are usually being associated as UAW. How to determine if a person is belong to PAW or UAW? In accumulating wealth, it is not about how much you earn, instead it’s about how much you are able to save and invest for future value. PAW is expert saver and manager of money, they don’t have to earn a million a year to have 10 or 20 millions of networth, in contrast alot of PAW earn much lesser but still able to make millions mark in networth. While for UAW, even though they earn hundreds of thousand or millions per year, due to their spending habit, lifestyle and high upkeep, their networth are no where near a millionaire’s when they should have already worth more hundred millions.
There is a detailed formula to calculate one’s wealth in The Millionaire Next Door and the definition of PAW and UAW are described very clearly as well. The book gives very detail accounts and examples of real self-made millionaires. If you’re seriously in achieving financial security and freedom, this is a must read and must have book in your bookshelve. And finally, I believe for anyone to achieve financial freedom and security, the millionaire cash flow patterns must become part of our habit and way of life.
