One of the authors that has deeply affected my understanding of financial matters and wealth is Thomas Stanley. His book The Millionaire Next Door helped me understand that financial success has little to do with how much you make and everything to do with how much you keep vs. what you spend.
Sadly, Dr. Stanley was killed in a car accident a few weeks ago. In honor of his life I decided to pull one of his books off the shelf that I had purchased a while back but had not had time to read.
How do millionaires think?
The Millionaire Mind was the sequel to the The Millionaire Next Door. In the first book Dr. Stanley looked at the actions of millionaires and found that most millionaires don’t live the stereotypical life that we see on Lifestyles of the Rich and Famous. In fact, many millionaires live quiet, modest lives so much so that they might be your next door neighbor and you wouldn’t even know it.
In The Millionaire Mind, Stanley delved into the thought processes behind those millionaires. How do they think? What is important to them? How do they view common everyday parts of life?
The millionaires surveyed
Stanley surveyed 733 millionaires as a part of gathering data for this book. On average these millionaires had a net worth of just a little short of 10 million dollars.
Contrary to what you might expect most of these millionaires did not arrive with a silver spoon. Less than 2 percent inherited their homes or any significant part of their property. Only 8 percent inherited more than half their wealth. 61% never received any inheritance at all.
So these are people who for the most part started with little to nothing and built substantial fortunes. Understanding how these millionaires think would clearly be helpful in understanding how we can be successful too.
The key success factors
Stanley surveyed these millionaires on a wide range of factors to discover what they felt was most important in enabling them to build wealth. You might think that high degrees of intelligence or education or a specialized knowledge were keys to building wealth. In fact these traits ranked fairly low. So what were the top factors?
- Being honest with all people
- Being well-disciplined
- Getting along with people
- Having a supportive spouse
- Working harder than most people
So the keys to becoming a multi-millionaire according to those surveyed? Integrity, quality relationships and discipline and hard work.
While most of the millionaires surveyed were college graduates, few graduated at the top of their class. On average these millionaires graduated from college with a 2.92 grade point average and had an SAT score of 1190.
It was interesting that many millionaires noted that because they had never been the best students in their class, some had been told by teachers or other mentors at some point in their education that they were unlikely ever to be successful. Those comments became motivating factors that pushed them toward where they were.
Because they had to work harder for their academic degree than their counterparts for whom everything came easy, they learned the discipline of hard work and how to press on through discouraging circumstances. Those lessons paid off later in business when they suffered setbacks. They had the perseverance to press on. Their counterparts that had been at the head of their class were more inclined to give up when faced with similar obstacles.
Courage was another key for these millionaires. While they were not gamblers, they were willing to take a calculated risk when they saw an opportunity.
Because of this attitude many of those surveyed were self-employed. While some may see self employment as risky, they viewed relying on their abilities as less of a risk then working for a larger company where they had less control.
The also were much more likely to focus on the positives that could come from success as opposed to the negatives of failure.
Many of the millionaires surveyed sited a strong religious faith as a significant factor in helping them to have the courage to prevail in hard times.
This is not to say that the risks they took always came out to their benefit. Many had suffered financial setbacks. But they had an uncommon belief in their abilities to handle any situation.
The millionaires in the survey understood well their strengths and weaknesses and credited choosing work that enabled them to maximize their ability.
It is very hard to succeed over the course of a lifetime in a vocation that is not well suited to our particular talents. These millionaires understood this and sought out work that they enjoyed, that invigorated them, and that matched the unique skills they had been born with.
92 percent of the millionaires surveyed were married and only 2 percent had been divorced. On average these millionaires had been married 28 years. One of the highest rated factors in their success these millionaires cited was having a supportive spouse. How did these millionaires choose so well when they were looking for a person to spend their life with?
While physical attractiveness was not an insignificant factor, it was not a high-ranking deciding factor that led these millionaires to choose their mate. The top 5 factors that they indicated were most important were:
Finding a spouse with these qualities played a major role in their success.
Economically productive households
These millionaires were frugal but that doesn’t necessarily mean buying things cheap. They understood quality and took good care of their possessions. For example they did not buy the cheapest shoes they could find. 70% of them indicated that they had purchased high quality shoes and had them resoled on a regular basis. While they paid good money for their shoes initially, in the long run they actually saved money by taking care of them.
These millionaires were also very careful with their time. For example most regularly grocery shop with a specific list. They didn’t spend an hour or more aimlessly browsing the grocery store. They went in with a list and purchased what they needed. This was partly due to a desire not to spend wastefully, but even more so it was about saving time. They understood the value of time and took every effort to maximize it when they had the opportunity.
One of the striking characteristics of these millionaires when it came to purchasing their homes was their patience. They looked for homes in well established neighborhoods that were likely to appreciate in value. They resisted the temptation to succumb to house fever. They were tough negotiators and were willing to wait until they found the deal that they were looking for.
Few of these millionaires ever built their own home. Once again they understood the value of their time. Building a home requires a great deal of planning and follow-up. They prefer to use their time in ways that bring them value as opposed to babysitting contractors.
Much of their lifestyles were based around relationships more than possessions. For example, golf was the most common sport played, in large part because of the relational nature of golf.
Charity was an important part of their lives but interestingly, not just after they acquired wealth. For many of these millionaires volunteering and giving had been a large part of their lives from the time they were young.
They chose to build friendships with other affluent people who would help push them to accomplish the things they did. They also made it a practice to surround themselves with high quality advisers to help them in important areas.
Pursue The Millionaire Mind
I believe that one of the keys to success in any area is studying what successful people do and then trying to incorporate those practices into your own life. Certainly that is true in financial matters and that is one of the things I appreciate about the work Dr. Stanley did, first in The Millionaire Next Door and then in The Millionaire Mind
If you want to understand how millionaires think, reading The Millionaire Mind
is a great place to start.