Yes, that’s right. I do. Do you?
I’ve started reading “The Millionaire Next Door: The surprising secrets of America’s wealthy” and am enjoying it a lot. When I asked my husband what he thought of me reading the book he asked, “Do they talk about being happy?” Yes, that’s right, spiritual perspective from my husband, no hesitation. That is why I married him. But … still hoping that rich and spiritual are not mutually exclusive, I expounded on reasons why, for me, being rich is a goal I would like to have. We wouldn’t have to worry about our survival if one of us were sick or injured. He could take time off to go back to school. We could help out family. We could travel, live in other places. And, importantly, we wouldn’t have to change our behaviour to act rich – we could stay the cheap, VV-shopping thrifties we are. He is now on board with rich :).
As for the book, it’s based on a series of studies over 20+ years that the two authors have conducted among millionaires in America. I love it because it’s research-based, and it identifies the real characteristics of the wealthy. A majority of the millionaires are self-made, which is also helpful as I don’t think I’ll be inheriting massive amounts (and that is okay with me). So far, some big take-aways for me are
- The path to being wealthy is slow and steady. Earning enough, spending as little as possible, investing wisely over time.
- Frugality: key! Step one is minimizing expenses. Rich people don’t buy expensive goods: they buy inexpensive, used, and make do with what they have. Frugality gets them rich and keeps them rich.
- Many of the rich people are entrepreneurs with service businesses: plumbing, janitorial, etc. Rich does not need to mean glamorous, it means being hard working and careful with what you have.
- Pay attention to your money. Rich people spend a lot of time learning about money and investing, and tracking and managing their money. They do monthly budgets, annual budgets; they know how much they spend over time on different items; they study and make careful investments
- Something I don’t understand about taxes and realized income … what I understood was that rich people don’t pay a lot of taxes. And yes, we can blame the corrupt tax system in the US, but it’s also a question of choosing investments that appreciate but don’t need to be cashed out. If all you have is a high salary, too much of your income goes to taxes. Need to learn more about this.
- They distinguish between UAWs (under accumulators of wealth) and PAWs (prodigious accumulators of wealth). They have calculations to figure out what your net worth “should” be based on your income. Someone might have a high income, and even some net worth, but still under-accumulate wealth relative to their ability (on paper, by the numbers) to build wealth. On the other hand, many millionaires have annual family incomes of $80K or less and yet manage it so that they can build up fortunes. Wealth is attainable: it depends on what you do with what you have.
Where this leaves us: I’ve been focusing attention for a number of years on debt reduction. There are lots of blogs about people paying off debts; Dave Ramsey’s financial program starts with a number of steps associated with debt reduction; and given my finances and student loans, this was most appealing to me. Now, I realize, I need to shift my (and our) mentality. Aside from the house, we have no debt. No loans, no lines of credit, no cards. Really, nothing. Oh wait, I’m going to have to pay some income tax this year. But: we have money for this. I have to say, it feels great.
We still have to deal with the house. We don’t know what that means at this point. Husband will continue to work on the renos so that, we hope, within a couple of months we’ll have a good-looking front yard, a new front and a completed main floor plus clean-up around the back. After that, there are numerous options. Maybe try and sell; maybe add in the loft; maybe rent out the main and live down or v/v; add a carriage house; move in with relatives and rent the whole thing. We really don’t know, but we are open to whatever option makes the most sense at that time.
Once we know where we stand with the house – which we plan will be in a position where we spend less than we do now each month for housing – we can refocus on building wealth. At this point I don’t know exactly what that means. I can say that we’ve both recommitted to minimal spending; only items that are needed; carefully watching what goes out. The next step will be taking the extra every month and putting it somewhere (where?? tbd) with an initial wealth accumulation goal in mind. Then learning more and talking more about what to do with money.
So, will this make us happy? Not wasting definitely makes me happy. Building a more secure for our family makes us happy. Having a goal and working towards it definitely makes us happy. Is it a waste of time, or unspiritual, or immoral in any way? Well, stressing about money and having to work too much because our money isn’t managed well would seem to me to be more of a waste of time. We live, we need money food shelter, we can take mature responsibility to manage these resources as effectively as possible. I do want to make sure that money doesn’t become the primary goal and that generosity and love of life still predominate. I do want to remember as well that truly nothing material is permanent. It can all vanish, and what we can really count on, always, is our connection with the spiritual world. We want to keep that as the most important thing in all we do.
As for morality, I do think about the global big-picture implications of trying to be wealthy. Are we getting wealthy on the backs of the global poor or at the expense of the environment? Why try to do this in the face of all the major issues facing the world? Well, I can assert that we intend to do the most honorable work we can, and to watch where we put our money, wanting to feel good about whatever we have and use. I really don’t know what that means in terms of investments but I expect we will talk more about it. And regarding the environment, a path of being frugal with our resources as a means to wealth (and maintaining that for our lives) seems to me to embrace a low-impact lifestyle. If anything, extra money would allow us more effectively to incorporate effective eco-design into our future home.
Or maybe I’m hopelessly naive and just falling for the idea of wealth. I’m okay with that too! For now, choosing to manage our resources carefully feels like a wise route to follow. I’m game.