10 Surprising Facts About Wealth
Dear Rich Lifer,
Born in the Bronx in 1944, his father was a subway driver. His mother was a secretary and homemaker…
From these humble beginnings, Thomas J. Stanley went on to change the way millions around the world understand wealth.
His books — including two New York Times best sellers — dispelled many common myths about the rich… including some many people still believe today.
Through surveying thousands of millionaires across America, Stanley learned valuable lessons about their habits, lifestyle, and career choices.
Although the data — along with the status associated with the dollar amount “one million” — is somewhat outdated now, Stanley’s message is timeless.
The best part of what he learned? Stanley’s work proves that it’s possible to become wealthy on an average salary. Today, we share 10 of the most valuable lessons learned from TJS’s work…
Some People Have “Big Hat, No Cattle”
There are those who are truly rich and others who pretend to be rich. This lesson came up countless times as Stanley interviewed more self-made millionaires. One self-made multimillionaire Stanely interviewed lived in the same three-bedroom house in the same middle-class neighborhood for almost forty years.
That millionaire explained to Stanley, “If your goal is to become financially secure, you’ll likely attain it… But if your motive is to make money to spend money on the good life… you’re never gonna make it.”
The people around you driving expensive cars, living in McMansions, and wearing fancy clothes are not usually wealthy, but rather chasing status symbols indicative of wealth.
Doctors and Lawyers Are Typically Poor
Another fascinating observation Stanely had while researching was that the highest-salaried occupations don’t necessarily lead to the accumulation of wealth. Doctors and lawyers are notoriously terrible at saving, says Stanley.
The problem lies in the fact that these well-paid professions often attract people with lavish lifestyles who consume more than they are making. High-power lawyers, for example, are constantly having to impress clients and thus living beyond their means.
Whereas, high-salary earners who work in more dull occupations, i.e. jobs in trades, don’t have these economic pressures and can easily maintain an average lifestyle.
Self-made Millionaires Were NOT the Best Students
Stanley even found evidence of a possible inverse relationship between high academic achievers and their ability to generate wealth. The theory behind this relationship is that if you performed well in school, you likely excelled at working within an established system.
In many cases, self-made millionaires became wealthy after overcoming adversity and hardships in life, which led to them becoming self-reliant, tenacious, and willing to take financial risks outside the normal system.
Stanley says high-income individuals who are proficient at accumulating wealth are less likely to have graduate degrees, law degrees, and medical degrees.
Millionaires Are Frugal, Not Cheap
Stanley made a point to distinguish between millionaires who were frugal versus those who were cheap. In most cases, self-made millionaires were frugal or in Stanley’s words, “not wasteful.”
Stanley defines “wasteful” as a lifestyle consisting of lavish spending and hyper-consumption. In his research, he discovered that most millionaires live in average homes in inconspicuous middle-income neighborhoods, with unremarkable cars in the driveway.
The Rich Have More Modest Tastes
In Stanley’s research, he found that the average millionaire pays $16 (including tip) for a haircut at a regular barbershop. He also found that only 6% of millionaires he surveyed nationally paid over $1,000 for their latest suit.
This research was cited in his 1998 book, so if we adjust for inflation that works out to about $1,650 today.
Rich People Drive Toyotas Not Lamborghinis
Another interesting finding was that wealthy individuals look for practicality and functionality over luxury and prestige. This was apparent in the cars self-made millionaires drive. Stanley found that Toyotas were the number one brand among millionaires.
And no, these millionaires weren’t driving around Lexus’ calling them Toyotas. The most popular model was the Camry. The lesson here again is frugality over luxury.
Self-Made Millionaires Live in Middle-Class Neighborhoods
It doesn’t matter if you’re rich or poor, housing and transportation are most likely your two biggest monthly expenses. The problem with living in a high-status neighborhood is it makes accumulating wealth nearly impossible.
Sure you might make over $100,000 a year in salary, but your mortgage and domestic upkeep on a 4 bedroom house in a gated community will leave you with nothing in savings. The other issue is living in a lavish neighborhood puts you around more social pressures.
You see your neighbor’s expensive lifestyles and you feel like you have to keep up. Contrast this with living in a more reasonable area and it’s easy to see how average earners can invest more and grow their wealth over time.
Self-Made Millionaires Take Calculated Risks
To get rich, Stanley found that wealthy individuals had to take some kind of calculated financial risk. Whether that be investing in the stock market or starting their own business, these millionaires had to stick their necks out at some point.
Too many people are afraid of failure. This fear scares them away from investing their money. What if the stock market crashes? What if my business fails? These people are paralyzed with What If scenarios.
Stanley found that self-made millionaires learn how to control their fears and minimize their losses by taking calculated risks.
The Rich Choose Their Partner’s Wisely
Who does the wealthy choose to marry? Stanley tells a story about a couple who married poor and maintained a frugal lifestyle. The husband had tried for years to get his business off the ground. On one unremarkable weekend, the husband approached his wife, his company suddenly becoming worth millions of dollars. He told her that he was so grateful for her and that he was officially giving her a 50% stake in the business.
How did she respond?
Without looking up, she said, “Thanks honey, I really appreciate that, I really do,” and went back to cutting a coupon out from a grocery flyer.
Despite their newfound wealth, their lifestyle remained the same. Stanley concluded that most self-made millionaires reported that their spouses were more frugal than them.
Millionaires Value Time Over Money
The final lesson we learned from Thomas J. Stanley is that millionaires spend their time on things that matter.
For example, when they need to buy a new car, they don’t research the best deal for hours and then negotiate it to death. Millionaires understand that cars are a depreciating asset so they buy used. They also would rather make a decisive purchase at a fair price than spend hours haggling to save a hundred bucks.
Most millionaires devote their time to other more important things like learning and practicing new skills. These tend to offer a better return on their time invested.
Stanley says, why study something that will cost you money when you can focus your efforts on things that will make you money?
These are just a few of the many timeless lessons Thomas J. Stanley has left us with. If you’re interested in learning more about how the rich actually behave, we suggest picking up one of Stanley’s books.
To a Richer Life,
The Rich Life Roadmap Team