Title Image by Sharon McCutcheon on Unsplash

Did you know that most millionaires sustain a rather frugal lifestyle and live below their means? Statistics prove that they do not live in the fanciest house, do not wear designer clothes, and do not drive expensive cars. They practice social indifference in terms of consumption, i.e., no keeping up with the Joneses. In the following, I would like to share some of my main takeaways from the book The Millionaire Mind in order to start a discussion on their relevance to each of us.

The book is considered as the first academically conducted characterization of the upper class in the United States. It counts 416 pages and was published in 2000 by Thomas J. Stanley who was an American business theorist (1944–2015). Stanley’s portrait of the affluent in America is backed by standardized questionnaires with 733 millionaires as well as qualitative research approaches—case studies (p. 12 f.).

What I personally found valuable in this book is that it not only provides basic financial education but it also elaborates broadly on the general lifestyle that wealthy people conduct. Being an extensive portrait, this book thematizes how they choose their spouse, how they spend their leisure time, their consumption behavior, and so on.

Mr. Meat and His Proposal

p. 211 f.

In one of the presented life stories, Stanley talks about a young man called John who was about to graduate from a major state university. By that time, John was in a steady relationship with his fellow student Becky. In contradiction to John, Becky’s family was affluent because her father founded and managed a successful company in the meat industry. When the couple’s relationship began turning towards engagement and marriage, and they spent the Christmas holidays with Becky’s parents, John was offered an attractive proposal by Becky’s father. Mr. Meat offered John to marry his daughter Becky, a high-wage position in his meat-processing company, a home nearby Becky’s parents, and free holidays at Mr. Meat’s luxury beach house.

John truly had feelings for Becky and his acquaintance with Becky’s parents was highly pleasant and warming. Following this, one might assume that John must have grabbed the opportunity for such a privileged lifestyle both private- and career-wise. Yet, John turned this offer down consciously. What is more, he broke up with Becky because he discovered that despite their love, Becky was not ready to step out of the lifestyle arranged by her parents. This stood in stark contrast to John’s aspired ambitions and independence in life.

John realized that in this constellation, everything, including the lucrative job offer, would make him completely dependent on the goodwill of Mr. Meat. By doing this, John would have lost his autonomy and, for this reason, he decided to build his own wealth instead. By the time he shared this story with Thomas Stanley, John was a self-made millionaire himself.

From my point of view, this story epitomizes the risk of underestimating the role of money in the context of relationships. Whether we like it or not, we must admit that one’s financial background determines one’s influence in many regards. If the financial abilities of the two partners are widely differing, this might cause difficulties in their relationship. Unless they find a sincere arrangement to compensate for this indifference, sooner or later, this significant imbalance will become toxic for the relationship.

Optimistic Mindset

p. 131 f.

To be quite frank, it was not a surprise to find out that millionaires consider positive thinking and self-esteem as two of their core values. As many millionaires are self-employed, they find themselves confronted with constant decision-making whose consequences impact their economic situation.

Even though the power of positive thinking and believing in oneself is widely recognized, I found the specific wording remarkable. The author refers to a conversation with David J. Schwartz, his ex-colleague at the Georgia State University and best-selling author of the book The Magic of Thinking Big. In this conversation, Schwartz told the author that one can only think one thought at a time and it is everybody’s decision to choose the positive or the negative one. Schwartz also cites an ancient quote to highlight the importance of the ability to control one’s thoughts.

Net Worth vs. Income

p.109-113

Thomas Stanley stresses the difference between a high income and a high net worth. The former means a high figure on the paycheck but this does not necessarily result in a remarkable possession of assets like stocks, real estate, and cash after subtracting the debts. The author illustrates this significant difference with the help of Mr. Benjamin’s story who, himself, made his fortune as a private investor on the stock market while working as a bus driver in his day job.

His main motivation was to enable his children to thrive as he discovered their intellectual abilities early on. Despite his low-paying day job, he wanted to provide them with top education programs. Thus, Mr. Benjamin started to educate himself on investment issues and to work on his emotional ability to handle risks. This is an important ability for maintaining one’s long-term investment strategy because of the ups and downs that are frequent in the stock market.

Over time, he was dedicating his leisure time to study investment opportunities and, ultimately, afforded to pay the six-figure tuition bills for his children who are presently working as doctors. Mr. Benjamin retired from his bus driver job with a net worth of three million dollars. From the book and Mr. Benjamin’s story, in particular, I drew the following conclusion:

When it comes to wealth building a high paycheck is one of the variables at most. It is also crucial to combine it with discipline, continuity, and self-education. I also think that the last-mentioned is becoming increasingly easier in our information age.

The Art of Win-Win Deals

p. 249 f.

Another essential insight that I learned from the book was that despite their financial successes, wealthy people do not break down everything to the financial variable only. Instead, they add emotional and fairness factors to the equation of their long-term success. Stanley illustrates this with the help of an experience report of a successful attorney.

This attorney took notice of his client’s plans to build a house. During the conversation, the attorney found that his client will be charged an additional fee of 15 % to the original price of $ 1.1 million. The homebuilder also requested the attorney’s client to pay a sales commission on the lot that in reality, the home builder owned already. Eventually, the attorney proposed to take over the negotiation process on his client’s behalf. Due to the character of his occupation, the attorney himself was an extremely skilled negotiator and he dropped the initial price by about $ 70,000. For instance, he brought up arguments like cost estimation that he requested from home builders from his client network.

However, after organizing this tremendous discount for his client, the attorney did not ask him for any fee. He branded it as part of his service as an accountant and tax planner and only asked his satisfied client for word-of-mouth recommendation. The attorney also stressed the fact that even though he could have negotiated the price lower (“to the bone” as he expressed himself), he resisted this enticement. In the end, such a one-sided deal would cause the home builder offense and he would not provide any after-sale services to the buyer.

How Millionaires Spend Their Leisure Time

p. 282 f.

When it comes to leisure time, the author outlines that most millionaires appreciate their time spending When it comes to leisure time, Stanley outlines that most millionaires appreciate their time-spending with family and friends as well as engaging in sporting activities as opposed to the practice of luxurious hobbies. In contrast to the lifestyle that is being portrayed by the high life narrative, the experience of joy during their leisure time does not correlate with their spending on consumer goods. As their quality time is not bound to the consumption of goods, their life satisfaction is much more rooted in socio-emotional interaction and physical exercise. To put it bluntly, it is less about owning a yacht but rather about finding time to coach one’s child on soccer from time to time.

A total of 733 millionaires were asked to keep a thirty-day diary on their engaged activities, which resulted in the aforementioned figures (extract). In addition to the above-mentioned aspects, the results highlight that financial success correlates with rising responsibilities and interest to dedicate one’s leisure time to financial education. This finding appears to be particularly insightful because it demonstrates that it is always best to educate oneself on wealth-building strategies and not to outsource this task wholly.

Outlook

In essence, it seems obvious that high net worth does not necessarily increase a person’s happiness, at least not directly. Yet, in a world in which the allocation of resources is organized through money, a high net worth embodies one of the core instruments to lead a self-determined life. Financial freedom offers the option to choose the people, sites, and activities of one’s life more independently which, in the long run, ensures a life with more emotional content and happiness.

I strongly believe that it is vital to find a compromise between the hard work that is required to build one’s wealth and the importance of enjoying the present in one’s life. To my mind, a quote that is being attributed to Voltaire brings the necessity of this balancing act to the point.

Ultimately, I highly encourage every young person to study this book. In case you got hooked on it, let me know what you think about it.