In spite of being “good income” earners, too many people live from paycheck to paycheck ---that is, from hand to mouth. No doubt, they may live in nice houses. Some of them may drive foreign-made cars. They may wear a different high-quality brand name to work each day. These people try to display a high-consumption lifestyle to maintain their “rich status.” But, in reality, they live above their means.
Most people have it all wrong about wealth. Wealth is not the same as income. If you make a good income each year and spend it all, you are not getting wealthier. You are just living high. Wealth is not what you spend. Rather, wealth is what you save or accumulate.
In the United States, there are a total of 4.1 million millionaires. And that’s more than twice the population of Nagaland. But often these wealthy people don’t look like rich at all. According to one of the most comprehensive studies conducted over a period of 25 years on the millionaire class in America, Thomas J. Stanley and William D. Danko surprisingly discovered that these people “don’t look like millionaires, they don’t dress like millionaires, they don’t eat like millionaires, they don’t act like millionaires---they don’t even have millionaire names.”
Eighty percent of America’s millionaires, according to Stanley and Danko, are first-generation rich---that is, they came from modest backgrounds to become millionaires in one generation. More than half of those they surveyed never received as much as $1 in inheritance. Nearly half never received any college tuition from their parents or relatives. None of them believe that one must be born wealthy. Similarly, this was true even a hundred years ago in America. In a study conducted in 1892 on 4,047 American millionaires, Stanley Lebergott found that 84 percent of them reached the top without the benefit of inherited wealth.
How do Americans become millionaires in one generation? Without exception, all these people have confidence in their own abilities. They live well below their means. Most of them (97%, to be exact) don’t live in expensive homes or even drive luxury cars. About two-thirds of them work between 45 and 55 hours per week and they do so as self-employed workers. Also, three out of four people in this group consider themselves as entrepreneurs who could be classified as welding contractors, auctioneers, owners of mobile-home parks, farmers, pest-controllers, and paving contractors. Most of the others are self-employed professionals, such as doctors and accountants. These people are compulsive savers and investors. On average, they invest nearly 20 percent of their household income each year in publicly traded stocks and mutual funds.
In their book,
The Millionaire Next Door, both Stanley and Danko identify seven common traits that show up again and again among those who have accumulated wealth. They are as follows:
1. They live well below their means. They translate frugality into wealth.
2. They allocate their time, energy, and money efficiently, in ways conducive to building wealth. They spend a lot of time planning their own financial future.
3. They believe that financial independence is more important than displaying high social status. And as financially independent people, they are happier than those in their same income/age group who are not financially secure.
4. They don’t spoil their children by giving them money without a real need. They believe that providing economic support for their children often weakens the latter’s resolve to take initiative or to assume responsibility for themselves.
5. Their adult children are economically self-sufficient because they (children) have learned to be disciplined and frugal, too.
6. They are proficient in targeting market opportunities. Often they become affluent themselves by targeting their businesses toward the affluent, the children of the affluent, and the widows and widowers of the affluent.
7. They chose the right occupations. For a businessman, for example, this could be owning a small factory, a chain of stores, or a service company.
These above mentioned traits are true of American millionaires who live in a land of opportunity, where the nation’s legal and governmental systems are conducive toward wealth building. But as for those of us who live in India or Nagaland, can we also hope that we can bemillionaires? (Note: 1 million US dollar = around Rs.68.4 lakhs).
So, can you be a millionaire in one generation? Yes, you can. In fact, your job doesn’t have to pay you a lot of money. If you have a job, all you have to do may be to follow at least two simple steps: (1) Keep your expenses well below your income level in order to have money to invest, and (2) begin a consistent savings and investment program.
