I’m a massive fan of the Paula Pant Afford Anything Podcast, like Paula says, ‘you can afford anything, but not everything’.
Recently I was glad to tune in and hear Paula’s two discussions with Chris Hogan about his book ‘Everyday Millionaires’. Chris is a motivational speaker who specialises in personal finances.
Click the links above to find out more about their writing & work, I promise you won’t be disappointed.
Chris interviewed over 10,000 millionaires to get an insight into how they made it to millionaire status.
Although everyone has a unique path to wealth based on their circumstances and life experiences there are some interesting common threads, a lot of which are not as difficult as you may think.
WHAT I THOUGHT MILLIONAIRES LOOK LIKE
I imagined a millionaire as someone with a few flashy cars, expensive watches, designer clothes & home furnishings all packed into their mansion home, with a second home in the sun. They would have a six figure salary and go on lots of luxurious holidays…..the ultimate champagne lifestyle. Likely their money would come from inheritance or a lottery win. A smug, lucky prat who landed on a cloud of bliss while the rest of us have to work through the daily grind of the rat race.
WHAT REAL MILLIONAIRES LOOK LIKE
In contrast to above, the people Chris described seem like everyday, run of the mill people, the type of person who lives next door or works with us. He spoke of them living in their average size homes, 66% of them paid off their mortgage within 11 years. 75% haven’t EVER had consumer debt (credit cards or loans). 62% went to normal public schools, 50% scored less than a B average while at school, however 90% went to university.
Half give to charity monthly. Their parents brought them up to save & invest some of their earnings, but not in all cases. They spend on average £26 on a pair of jeans, their net worth is split between their house & investments (33%/66%), a lot have never earned a six figure salary, and the average age they became millionaires is 49.
Interestingly they had on average 3 children, most of their children do not get financial help once they have left the family home. In other words, their kids are self-sufficient once they fly the nest, no more bank of mum & dad. I paid close attention to this part because our kid’s financial needs will play a big part on us being able to pull the trigger on our FI plan, we are still figuring this part of the puzzle ourselves.
There is a stark difference between real millionaires and my original idea of millionaires, in fact the ideal millionaire is a mirage, an optical illusion, a fantasy, that type of lifestyle is more likely to be funded by debt*. A house of cards that could come tumbling down, we’ve all heard of people filing for bankruptcy or getting in difficulties as a result of their spending getting ahead of their cash flow.
Real millionaires seem ‘boring’, they build wealth gradually over time and do not live extravagant lifestyles. The real millionaires seem to agree with the teaching & advice found on so many FI blogs. These are rules anyone can follow, and are:
- Spend less than you earn, invest the difference
- Live within your means
- Do not take on consumer debt, NOT EVER
- Pay down your mortgage as quickly as you can, or have the funds to fully pay if needed
- Spend less on consumer goods than the average person (see minimalism**)
- Raise your children to become self-sufficient
- Have a side hustle, an income outside your day job
NOT EVERYONE CAN BE A MILLIONAIRE
I’m not naive, not everyone can become a millionaire, there are real life circumstances holding some people back from even being able to manage day-to-day with their money. This guide is not for those people, if that is you then you need professional help before you can even think about saving or investing like these millionaires. This guide is for people who have escaped the debt trap* and are not living hand to mouth.
For someone living with debt this guide will mean nothing. I recommend Sara William’s website http://www.debtcamel.com. Debt Camel should be renamed Debt Angel, with Google full of debt vultures this website a safe haven filled with advice, built for the people who need money help, and more importantly no ads.
I was glad to hear the millionaires did not inherit or win the lottery, there is no doubt certain circumstances set them up for success, like their parents guiding them to save from an early age (the magic of compound interest) and never having any consumer debt (something not everyone has the privilege of avoiding).
Going to university was almost unanimous but I wonder how valid this trait is today given the escalating costs of student loans. They became millionaires on average at age 49 meaning they took their time with wealth building, it certainly wasn’t an overnight process.
I’m not confident our household will get to millionaire status by age 50, but I am confident there is hope to build a decent stash of wealth by following the rules above. The beauty of money is it does not discriminate, yes some people have circumstances out of their control, but we are all free to follow a few of these rules to build our own personal wealth, whether that is a mountain or a molehill, time + our habits will tell.
*see my debt story(http://eatsavelive.com/my-debt-story/)
**see my minimlaism story http://eatsavelive.com/my-minimalism-story-minimalistic-meaning/)
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