The millionaire next door does a lot to get ahead, but you can be pretty sure the list excludes the following 20 points.
The millionaire next door does NOT:
- Pay for Lawn Service – You could save $150 a month, get some healthy exercise and maybe even a bit of a tan just by mowing your own yard.
- Go to a Hair Stylist – Even the cheapest barber shops charge men $15 – $20 for a haircut these days. If you’re a woman, it may cost well over $50 a visit. Dying your hair? You’re broke!
- Use Time as a Measurement for Success – The millionaire next door measures success based on output quality, the results. The amount of time spent on something means nothing if the results do not meet the expectations.
- Buy Brand New Cars – Why would anyone pay the full retail price worth half a year’s salary for the fastest depreciating assent on Earth? We are brainwashed!
- Carry a Monthly Credit Card Balance – Carrying a monthly credit card balance only makes sense if you enjoy poverty. Monthly interest payments can add up to hundreds of dollars over the course of a year. Do not buy “stuff” right now that you cannot afford to pay for in cash right now!
- Eat Out on a Regular Basis – With the recent price increases in corn, wheat and dairy products, preparing your own food is already expensive enough. If you eat out you will pay triple the price. If done on a regular basis you will waste a few thousand dollars a year.
- Think He Knows It All – People who think they know it all stop learning and thus become unaware of new opportunities. Once you lose awareness, you lose.
- Socialize with People Who Waste Money – The people you socialize with influence your habits. It is impossible to save money if you constantly hang around people who blow it all.
- Desire Instant Gratification – You have to think long-term to attain long-term success. The millionaire next door desires long-term deferred compensation over instant gratification.
- Pay Retail for Name Brand Clothing – You can easily save hundreds of dollars a year on clothing purchases by waiting for sales or shopping at discount retailers like Marshalls. Better yet, avoid name brand clothing all together.
- Keep His Money in a Checking Account – If you want to increase your wealth you have to set your money up to make more money. Most checking accounts yield little to nothing in interest. Think long-term (5 years +). Invest in quality stocks, bonds and mutual funds, especially those with high yield dividends and interest. Or buy some land in an area with growth potential.
- Replace What is Not Broken – The millionaire next door fixes things. Fixing something is usually significantly cheaper than buying a brand new replacement, especially if you fix it yourself.
- Visit the Tanning Bed – $25 a month for skin cancer? Where do I sign up? If you want a tan, move to Florida. For those that live in Florida and still go to the tanning bed… WOW!
- Impulse Buy – Impulse buying wastes money and leads to a cluttered house full of “stuff” you don’t need or use. If you see something you like at the mall, walk away. Think on it for a day or two. If it still holds value in your mind, maybe it’s worth buying. Never buy something the first time you see it.
- Waste Time on Senseless Activities – They say time is money. In actuality, time is far more important than money. Time is your life. If you waste it, you will fail.
- Focus His Attention on Negative Obstacles – If you focus all your attention on negative obstacles, you will lose sight of the finish line. You can’t get there if you can’t see it.
- Bet The Farm – The millionaire next door takes evenly weighted, calculated risks on long term investments. If you go “all in”, you’re gambling, not investing.
- Fly First-class – Would you pay $400 to sit in a leather chair for a couple of hours? That’s exactly what you do when you fly first class. Huge waste of money!
- Rent – The millionaire next door has a long-term mindset. In the long-term, owning something is always more cost effective than renting it. The key is to purchase quality products for long-standing use.
- Earn Every Dollar He Makes at His Day Job – Two words: Passive Income. You can be sure the millionaire next door invests his money wisely. These investments create a solid passive income stream that grows over time. If your money isn’t making you more money, you’ll never be wealthy.
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Sau Cubillo says
Wonderful points altogether, you simply gained a new reader.
Having just come from my financial adviser after an annual review of my portfolio, I decided to look up “millionaire next door” since this is the first year I’m one of them.
The two that really are spot on are #’s 5 (I haven’t carried a credit card balance in 15 years) and 11 (Checking surplus goes into savings, which when it triggers a point goes into a laddered CD. When I get to a level there, I start rolling over and investing the matured CD’s in mutual funds and bonds.)
I’ll add the top 2 things I have done that have helped me amass wealth fairly painlessly (besides of course, finding a good paying job)…
1. Don’t have kids (not an option for some people, but it’s a choice I’m more glad than ever I made)
2. Put savings first – I put over half my net income into my 401k and savings every month and live on about 40% of my net. My spouse does the same. Actually she saves way more aggressively than I do.
This is a great post, and love the one about mowing your own lawn, although if you were to buy a robotic mower you would save money, time and also put your time free for cycling or going for a nice walk down the beach.
If we were to be 100% honest with ourselves we would see that we all waste time. I have kept a diary of what I have been doing over the past few weeks and it has shocked me when I look from the outside in.
Great article. But i did not understand the rent part. Do they rent a house instead of buying?