Today’s guest post comes from Jillian Simpson at Parenting on Pennies. This is a really interesting case study that contrasts the wealth creation habits people with a millionaire mindset to “keeping up with the “Joneses.”
According to Jillian, wealth creation can be even more difficult to achieve in a society where we’re constantly bombarded with social media images of success.
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5 Wealth Creation Habits Of People With A Millionaire Mindset
You wake up. It’s time to start the day. What do you do first? You pick up your phone, open your favorite social media app and get your scroll on. All the people you follow seem to go out way more than you, or at least have fancier things than you do. And you know what? You start to think, “I should go out more. I should have fancier things like a new car or a bigger house.” The comparison game begins.
The Financial Habits of Your Average Social Media Friend
- They utilize revolving debt.
You want to know how all those gadgets, dinners and even trips were purchased? With credit. And not the kind of credit that gets paid off monthly either. The kind that has the average American paying over $1,000 in interest for 2018 alone. We all know how credit works. You open up the shiny new card, probably tell yourself it’s for emergencies only or better yet – this card will for sure get paid off every month. In reality, many American consumers don’t do this. According to Nerd Wallet, the average American household has almost $7,000 in revolving credit card debt.
- They have car payments and purchase brand new cars.
Ah yes, the shiny brand new cars. Guess how the average American pays for these? With car payments and financing. The average monthly auto loan debt is around $28,000! This carries a car payment for a new car of over $500 each month.
- They are still paying off student loans.
On average, the American household has over $40,000 in student debt alone. That brings more monthly payments of around $300 – $500 dollars.
- They don’t invest enough for retirement.
With all the payments required for revolving debt, car payments and student loans, it isn’t any real wonder that there isn’t a ton of wiggle room left to make substantial investments for retirement. Sure, the present looks great to the average American on social media, but what about their overall financial futures?
- They don’t have a plan.
The majority of American households don’t create or stick to a budget every month. Because there is no plan in place to control overspending, it’s pretty simple to guess why revolving lines of credit, car payments, student loans and lack of retirement are so prevalent today.
The Financial Habits of Your Average Millionaire
The highlight reels of others on social media can be so alluring. The best restaurants, newest cars, neat vacation spots and cool gadgets can make anyone wishing for more. However, what typically isn’t featured on social media is the slow, steady, and even boring actions of people who have significant and steady wealth. These are not overnight, get-rich-quick successes. These are individuals who have utilized and practiced habits to help them be successful for the long haul.
For this article, I even interviewed a self-made millionaire to compare his habits to those of other millionaires used for studies like those featured in books such as The Millionaire Next Door. Here’s what millionaires typically do:
- They avoid debt.
Millionaires actively avoid debt. If credit cards are utilized at all, they are actually paid off each and every month. In fact, when I spoke with Mr. B, the self-made millionaire (who asked to remain nameless), he stated that the only time he ever utilizes debt is in the form of real estate. In this circumstance, he said to make sure that it is a 15-year fixed mortgage and to pay it off as soon as possible.
- They purchase used automobiles.
Many millionaires out there will purchase slightly used automobiles because of their rapid depreciation. Mr. B was no different. He said, “In my whole life, I have never purchased a brand-new automobile. I buy them after two or three years when they’ve taken their biggest financial losses. When I buy them, I always pay in full. I don’t do payments.” This statement rings very true with the habits of average millionaires.
- They play the “long game”.
There seems to be a misconception that millionaires are only made this way because of huge incomes. However, millionaires are steady investors. Again, Mr. B was no different here. He said, “I don’t day trade or try to time the market. I invest in mutual funds consistently. When the market is down, I invest more money.”
Mr. B also plays the long game in other areas like purchasing antique furniture. He advised that it is worth it to buy well-made furniture that can be passed down instead of mass-produced furniture made now. It is more expensive in the beginning, but it will last generations.
- They have a plan.
Millionaires, on average, make (and stick to) and monthly written budget. They account for all expenses such as food, dining out, and utilities, but more than that, they think ahead to saving money for things like car repairs that will occur down the road. Yet again, Mr. B was no different here. He said they have a monthly budget for their home and business as well as a loose annual budget that accounts for their property and income taxes as well as tithing.
- They don’t act “rich”.
One of the many remarkable things about millionaires is that you would never guess they were millionaires. They aren’t flashy which probably doesn’t make them very exciting social media members. Again, Mr. B is a great example of your everyday, average, run of the millionaire (See what I did there?). Mr. B doesn’t act rich. He said he has some nice heirlooms that he’s inherited but that all in all, he was just a moderate man. “I never smoked or drank much. I’ve given a lot of money to my church. I don’t gamble with money at casinos.”
So, why do we compare ourselves to the people we see in our social media feeds? Do we know for sure who is a millionaire versus who is living paycheck to paycheck? Which set of habits are we using in our own lives? Instead of wasting time on comparisons, maybe we could all benefit from practicing the slow, steady habits of the average millionaire.
About the Author:
Jillian Simpson is the personal finance blogger behind Parenting on Pennies, a lifestyle blog on how to raise children, get out of debt and save money along the way. She is a wife, stay at home mom and former public education teacher. Her family has been living debt free since September of 2016. Check out Parenting on Pennies at parentingonpennies.blogspot.com.
Stanley, Thomas J., and William D. Danko. The Millionaire Next Door: The Surprising Secrets of America’s Wealthy. 1st Taylor Trade Pub. ed. Lanham, Md.: Taylor Trade Pub., 2010.
Tsosie , Claire, and Erin El Issa . “NerdWallet’s 2018 Household Debt Study.” NerdWallet, NerdWallet, 10 Dec. 2018, www.nerdwallet.com/blog/average-credit-card-debt-household/.
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