If you’re a young person who aspires to financial success, there is a well-trod path to achieve it. I’m not talking about becoming a YouTube influencer or a football star. I’m talking about a lifelong process that can prove more far more satisfying than fleeting fame.
To learn how to build wealth, learn from those who have done it. There are a number of books (and probably YouTube videos) that reveal the secrets of well-off Americans. One of the classics is “The Millionaire Next Door” by Thomas J. Stanley.
Stanley interviewed wealthy people and discovered some startling facts. He began by demolishing the myth that most wealth is handed down: eight out of 10 millionaires are self-made, and most are self-employed business owners or professionals, Stanley revealed. As a Certified Financial Planner who has worked with numerous high-net-worth folks, I can attest to the truthfulness of these numbers.
Stanley then outlined a profile of the typical American millionaire that went against every Hollywood stereotype: Most drive ordinary cars, live in modest houses, and continue to watch their spending — people who might be your neighbors.
How does this help you attain financial independence and security? It will if you absorb the primary lesson from the book: To attain wealth, live below your means and be patient.
Most millionaires do not blow money on expensive, ego-feeding vehicles, homes or high-priced depreciating toys. In their personal lives they look for good value, and they tend to spend money in ways that will help them build their businesses and their net worth, slowly and steadily, such as on education. Here are some practical ways that many millionaires behave, even after making their first million:
Set goals. This does not mean “Be a millionaire by age 30.” This means “pay X amount every month toward debts” followed by “invest X amount every month.” Let your values guide your goals, be specific, and break down long-term aspirations into short-term goals.
Make saving your first priority. Millionaires commonly put aside at least 15-20 percent of their income every monthly, into savings and long-term investments.
Avoid debt. Owing money is a constant drag on your financial future: The principal amount you must pay off is not available to invest, the interest you pay lowers your income further, and the stress it causes is not worth it. One way to avoid debt is to avoid buying expensive cars and homes.
Let your values guide your spending. Think about what matters the most to you. Family? Career? Security? Write these items down, and then match your expenses up against your values. Then stop paying for things that don’t match up, because they don’t really matter.
If all of this sounds like a lifestyle with no enjoyment, you are missing the point. Let’s say you want to enjoy family vacations. The point is that people who take the time and effort to build up a solid net worth can take a vacation without the stress of worrying about how to pay for the trip. Having a healthy balance is key.
Eric Tashlein is a Certified Financial Planner professional and founding Principal of Connecticut Capital Management Group LLC, 2 Schooner Lane, Suite 1-12, in Milford. He can be reached at 203-877-1520 or through www.connecticutcapital.com. This is for informational purposes only and should not be construed as personalized investment advice or legal/tax advice. Please consult your advisor/attorney/tax advisor. Investment Advisor Representative, Connecticut Capital Management Group LLC, a Registered Investment Advisor. Connecticut Capital Management Group LLC and Connecticut Benefits Group LLC are not affiliated.