Many people have this misconception that in order to be rich or wealthy you need to drive the priciest cars, fly first class and wear expensive clothes – in short, you need to live an extravagant lifestyle.
But reality proves that millionaires don’t live a flashy lifestyle and instead are very frugal/economical. Research presented in the best selling book, The Millionaire Next Door, shows that the most wealthy people are actually quite frugal. They do not live in big mansions or have the latest cars. This is a distorted image that has been created by televisions. Wealthy people are in fact very thrifty and only spend money when there is a need to.
Millionaires are, by definition, millionaires because they spend their time focusing on prudently spending less than they earn, generating new sources of income, and earning a good return on their investments. As a group, they would rather own an extra 30 shares of Tesco common stock, giving them a bigger share of the retailer’s profits and cash dividends, than a case of Dom Perignon. That is why they continue to earn money as they sleep or spend time with friends and family, while most people have to wake up each morning and drag themselves to a job about which they have very little passion for.
This economical millionaire mindset can further be seen through a story from Adam Khoo, Singapore’s youngest millionaire at 26 years.
Adam Khoo regularly travels the South East Asian region for business purposes. He is at an airport almost every other week and gets bumped into many people who know him as Singapore’s youngest self-made millionaire.
On one such occasion he was travelling by plane, someone came up to him and looked rather shocked. The stranger asked, ‘How come a millionaire like you is travelling economy?’ Adam Khoo replied, ‘That’s why I am a millionaire.’ The stranger looked pretty confused.
This again confirms that greatest lie ever told about wealth (which I wrote about in my latest book. Many people have been brainwashed to think that millionaires have to wear Gucci, Hugo Boss, Rolex, and sit on first class in air travel. Not every millionaire flies in a private jet and not everyone who flies in a jet is a millionaire. This is why so many people never become rich because the moment they earn more money, they think that it is only natural that they spend more, putting them back to square one.
The truth is that most self-made millionaires are frugal and only spend on what is necessary and of value. That is why they are able to accumulate and multiply their wealth so much faster.
Adam Khoo has stated at the time of this story that over the last 7 years, he has saved about 80% of his income and today he still saves about 60% of income (because I have my wife, mother in law, 2 maids, 2 kids, etc. to support). Still, this is way above most people who save 10% of their income (if they are lucky).
Adam Khoo refuses to buy a first-class ticket or to buy a $300 shirt because he thinks that it is a complete waste of money. However, he states that he happily pay $1,300 to send my 2-year old daughter to Julia Gabriel Speech and Drama without thinking twice.
When Adam joined the YEO (Young Entrepreneur’s Organisation) a few years back (YEO is an exclusive club open to those who are under 40 and make over $1m a year in their own business), he discovered that those who were self-made thought like him. Many people with net worth well over $5 m, travelled economy class and some even drove Toyotas and Nissans, not Audis, Mercs, BMWs…
Adam has stated that he noticed that it was only those who never had to work hard to build their own wealth (there were also a few ministers’ and tycoons’ sons in the club) who spent like there was no tomorrow. Somehow, when you did not have to build everything from scratch, you do not really value money. This is precisely the reason why a family’s wealth (no matter how much) rarely lasts past the third generation.
Thank God my rich dad foresaw this terrible possibility and refused to give me a cent to start my business.
Some People have asked Adam, ‘what is the point in making so much money if you don’t enjoy it?’, to which he replied ‘The thing is that I don’t really find happiness in buying branded clothes, jewellery or sitting first class. Even if buying something makes me happy it is only for a while, it does not last.’
Material happiness never lasts, it just gives you a quick fix. After a while, you feel lousy again and have to buy the next thing which you think will make you happy. I always think that if you need material things to make you happy, then you live a pretty sad and unfulfilled life…
Adam states that what makes him happy is to see his children laughing and playing and learning so fast. What makes him happy is when he sees his companies and trainers reaching more and more people every year in so many more countries. What makes him really happy is when he reads all the emails about how his books and seminars have touched and inspired someone’s life. This type of happiness makes him feel really good for a long time, much much more than what a Rolex would do for me.
The point Adam makes is that happiness must come from doing your life’s work (be it teaching, building homes, designing, trading, winning tournaments etc.) and the money that comes is only a by-product.
The story from Adam Khoo above just shows that many people have misconceptions about the rich. The flashy playboy lifestyle congruent with what you see in movies only applies to a very minute proportion of millionaires. These “flashy” millions are liquid millionaires that have inherited all their wealth
It is also interesting to note that buying luxury items does not make you a success. The success comes from having lots of cash coming in, little debt, and the ability to be financially free so you can take control of your own life and spend time how you want with your family and friends. You are not a success because you wear Gucci glasses. They actually get you further away from your goal.
You are a success if you have the cash to pay for the Gucci glasses using dividends, interest income, and profits from your investment holdings.
Pedro is passionate about finance, marketing, and technology. He is a growth manager at several online projects and a former digital marketer for a fintech company.
