Wealth Is What You Save, Not What You Spend

Ran across this short article and thought it would be a good topic- one of my favorite subjects.

Unfortunately- few of my friends ever take my advise on how to build wealth.


Wealth Is What You Save, Not What You Spend

Want to be a millionaire? Don't overspend and use debt wisely.

We all may not be millionaires but there are plenty of financial and life-planning secrets we can learn from the well-heeled.

Most people know that wealth in the U.S. is in the hands of a small percentage of the total population. And, today, most of those folks with a net worth of $1 million or more have earned it themselves.

They're mostly entrepreneurs who create everything from high-speed networks to garbage haulers. They dig ditches and build houses and grow corn and make jewelry. They deal stamps or coins or artwork and control pests and cut lawns. They also cure people and give them new teeth. Others will defend their neighbors or even feed them.

And they're not big spenders. In fact, most of those with big bucks live well under their means -- think about Warren Buffett still living in that modest Omaha home -- and they put their money instead toward investments that help them stockpile more wealth.

"Wealth is what you accumulate, not what you spend," according to Thomas Stanley and William Danko, the authors of the seminal tome on America's wealthy "The Millionaire Next Door," first published in 1996.

"It is seldom luck or inheritance or advanced degrees or even intelligence that enables people to amass fortunes," the authors wrote. "Wealth is more often the result of a lifestyle of hard work, perseverance, planning, and, most of all, self discipline."

Read the whole article....
http://financiallyfit.yahoo.com/finance/article-112550-9317-5-what-millionaires-have-in-common?ywaad=ad0035

I like to say- the worker at McDonalds who saves $20 a week is wealthier than the guy who makes 100K and spends every dime.

And a lot of their wealth isn't very liquid, farmers are a classic example of this. They might have millions in assets, land & equipment but very hard to turn into cash unless you want to stop farming. I know some ranchers in Park County worth millions but still driving old pickups and they have patches on their jeans.

It's important not to get caught up in appearances. Buy a house you can afford, drive your car as long as possible and maintain it well, invest first. Most importantly keep your debt at a minimum. We use credit cards, but pay them off every month.

Most people don't really want to BE millionaires, they want to SPEND like millionaires. Just drive around in Douglas County and check out all the McMansions. Then check out the foreclosure notices.

When I left home - that was when I started to take my financial condition seriously. I was determined that I never wanted to have money problems to the extent that I could not afford my rent and food and other basics.

My first job after leaving my parents house did not pay a whole lot- 12 bucks an hour. I lived as simply as I could - went to work every day and saved as much of my paycheck as I could.

After the first year- I was no longer living paycheck to paycheck. During those years I took side jobs after work just for the extra money- I saved almost all of that money.

Since then, I have not had a need to use credit cards- or pay anyone for the use of money (other than my mortgage). Some months my expenses exceeded my income but I always had the money to cover it.

If you live this way- eventually you get beyond the need for credit- living on credit costs about 20% more per year. Thats the 20% that many people should be saving. As the savings grow, money becomes available to invest. Some of my investments lost money and some (most) grew my money.

I believe that living in debt is a choice people make. One poster had it right- people don't want to become wealthy- they want to appear wealthy to others, and once you get yourself into a jam it can take years to recover.

I have a hard time finding compassion for those who mis-managed their financial lives. Many of the people I know who are having hard times now are in that shape because of poor planning and bad financial choices.

Now that times are getting harder- I'm glad I took the road I did way back then.

Wealth Is What You Save, Not What You Spend.

BearMtnHIB wrote: When I left home - that was when I started to take my financial condition seriously. I was determined that I never wanted to have money problems to the extent that I could not afford my rent and food and other basics.

My first job after leaving my parents house did not pay a whole lot- 12 bucks an hour. I lived as simply as I could - went to work every day and saved as much of my paycheck as I could.

After the first year- I was no longer living paycheck to paycheck. During those years I took side jobs after work just for the extra money- I saved almost all of that money.

Since then, I have not had a need to use credit cards- or pay anyone for the use of money (other than my mortgage). Some months my expenses exceeded my income but I always had the money to cover it.

If you live this way- eventually you get beyond the need for credit- living on credit costs about 20% more per year. Thats the 20% that many people should be saving. As the savings grow, money becomes available to invest. Some of my investments lost money and some (most) grew my money.

I believe that living in debt is a choice people make. One poster had it right- people don't want to become wealthy- they want to appear wealthy to others, and once you get yourself into a jam it can take years to recover.

I have a hard time finding compassion for those who mis-managed their financial lives. Many of the people I know who are having hard times now are in that shape because of poor planning and bad financial choices.

Now that times are getting harder- I'm glad I took the road I did way back then.

Wealth Is What You Save, Not What You Spend.

Very good points. Couldn't agree with you more about once you get yourself into a jam it may take years to recover.

chickaree wrote: It's important not to get caught up in appearances. Buy a house you can afford, drive your car as long as possible and maintain it well, invest first. Most importantly keep your debt at a minimum. We use credit cards, but pay them off every month.

Very well said. I have not paid credit card interest since May of 1991. I just rack up the 3% cash back.

Those banks must hate me.

AspenValley wrote: Most people don't really want to BE millionaires, they want to SPEND like millionaires. Just drive around in Douglas County and check out all the McMansions. Then check out the foreclosure notices.

Technically we're millionaires. We sure don't look like it. We live in a small 1970's kit home, drive 20yr. old cars, buy our clothes in discount stores- most of our money is tied up in investments and land.

chickaree wrote: Technically we're millionaires. We sure don't look like it. We live in a small 1970's kit home, drive 20yr. old cars, buy our clothes in discount stores- most of our money is tied up in investments and land.

Congratulations, chickaree.

It's a shame there aren't more people that appreciate what they have and live within their means.

I agree with the living below your means, and saving instead of debt. It is way easier than most people realize. I am financially free enough to go without working when I have to. It just takes some discipline. Of course it is harder if you have dependents to support, but the same idea still applies, have some emergency savings, and minimal debt.

I believe it is passed down thru the generations. If you were raised in a frugal family, you are more likely to live that way. People I know who take on debt, buy everything with credit cards, finance new cars, home equity loans, etc. their parents did the same. It is the path most are likely to take unless they are educated differently. Personal finance education is non-existent in our screwools.

I also believe the tax code encourages debt over savings and this is wrong. Same with bankruptcy laws, they are too lenient on irresponsible borrowers.

A penny saved is a penny earned. -Ben Franklin