What Is Your Perceived Image of a Wealthy Individual?
Getting familiar with The Millionaire Next Door: The Surprising Secrets of America’s Wealthy by Thomas J. Stanley, Ph.D. and William D. Danko, Ph.D. ten years ago was the experience of a lifetime! So much so that I’ve striven to follow the guidelines found in this iconic, eye-opening work to the best of my ability ever since my very first exposure to it while still living in my first (multifamily) investment property.
Two weeks ago, during a visit to yet another patient in need for home care services, I found out that I’d been, well, successful in following the guidelines outlined in the book. The situation that occurred in the patient’s home was as amusing as it was educational. I had to remind myself that most people do, indeed, have an inaccurate idea of the ways many of the first-generation wealthy in this country live. The main reason for this inaccuracy is that the average person often confuses wealth with living high.
Here's what happened. As I was getting ready to leave the patient’s home, a close and supportive relative stopped by. He was the patient’s brother-in-law. Both the patient and this gentleman were well in their seventies. After the patient introduced us, the first question that came out of her brother-in-law’s mouth was, “Is this your car in front?” I confirmed that the 2008 Toyota Yaris parked next to the driveway was, indeed, my car. He then continued: “Man, don’t you nurses make decent money? I was wondering, how come a nurse is driving such an old car!” and he laughed. I nodded and smiled, replying: “Great question. We do make good money, no doubt. It’s just that not all of us necessarily prefer to spend our money on depreciating assets. You see, I purchased this vehicle brand-new with cash in 2008. I intend to drive it until it exceeds 300,000 miles. After all, you understand 100,000 or even 130,000 is a warm-up for this type of a car, and I am not even at 170,000 yet.” “Oh,” he said, “you’re actually smart, huh? And, what happens after 300,000 miles?” I smiled again. “I’ll drive it some more.” There was an awkward silence in the room. “But...what do you spend your money on, then?” “Houses, sir. Rental houses primarily, along with other appreciating assets.” “Damn,” he blurted, “now I feel like I should’ve kept my mouth shut!” “I really don’t mind questions of this kind,” I calmly assured him and continued: “After all, we all have different perceptions of what well-off vs. not-so-well-off looks like on the outside and, sometimes, what we find out can be somewhat surprising on either end.”
Some people are surprised to learn that many of the wealthy see no compelling need to make statements about their socioeconomic position in the form of explicit demonstrations of a wealthy status. They value privacy and maintain proper distance the best they can, and a great way to do so is by not attracting the wrong crowd’s attention through uncalled for displays of flashy possessions like mansions, cars, clothes, or exceptionally pricey tech gadgets. Oftentimes, life is much sweeter and more rewarding when kept as uncomplicated as possible while ensuring access to all the choices one needs to make independent decisions that serve their own best interest and the interest of their closest loved ones.
To succeed in wealth accumulation when starting from scratch, you must first understand the difference between appreciating and depreciating assets. For example, a real estate property that you rent out is not only an appreciating asset, but also a cash-flowing asset when managed properly. A car, on the other hand, loses a quarter of its value the second you drive it off the dealership’s parking lot. Or take a $500 worth of new clothes that don’t appreciate in value over time either. So, if you wish to become good at acquiring assets that actually put money into your pocket, think twice the next time a friend or relative suggests it would be an awesome idea to go to the mall or to get a new car when your current car is just five years old!
When my mentor told me back in 2012 that I could acquire cash-flowing assets and become financially independent within 5-10 years regardless of how much money I made as an RN, I thought he was absolutely insane. As I kept learning and started buying rental properties with different types of loans that would fit my specific financial situation, I quickly found out that my mentor was, in fact, absolutely right. Fast-forward six years to 2018 when the acquisition of yet another property finally placed me in a financially independent position by allowing me to pay all of my monthly expenses with the cashflow from my assets and have extra money to save for more assets. Today, I can work or not work and I have many more choices in life than I did at the time I thought that someone who started from nothing and ended up owning thousands of rental units was insane for telling me that I could do it, too, and that I didn’t even have to come close to his scale of asset acquisition to have the life I desired! All I needed was a good plan and even better financial discipline so I could follow my plan. You already know what comes next, right? It’s my favorite saying: if I could do this, so can you!
Don’t ever get deceived by appearances. That 20-year-old college kid with a Mercedes? Is he really wealthy or did he get a loan at 22% interest for it? We all know there’s a lot of this going on out there. Many companies would gladly get 22% from someone with weak financial discipline, poor credit history, and strong desire to impress. Don’t be that person either!