One of the most influential books on managing your finances is The Millionaire Next Door by Thomas J. Stanley Ph.D.
You can find the book on Amazon / Audible, or look for it at your favorite bookstore.
Although written in 1996, its lessons are still relevant and valid today.
When you think of millionaires, you might imagine expensive cars, houses, vacations, or private jets & yachts (although for these last ones, you’re probably looking for the word “billionaire”).
However, the author found in his extensive research that you would have a tough time spotting these millionaires, and they might even live “next door.”
- They don’t buy expensive cars, but rather an average priced one which they tend to keep for many years
- They go on vacations but don’t spend more than non-millionaires would
- They are frugal and focus on savings
- Over 90% of them track their expenses and know exactly how much they spend on each category of expenses
The book divides people into two categories based on how much they earn per year and how much they have in savings: under-accumulators of wealth and prodigious accumulators of wealth.
Under-accumulators of wealth might be doctors and lawyers who earn a significant yearly income but learn to spend it fast on luxury cars they change every other year, expensive restaurants, vacations, and always rely on future incomes to start saving for retirement.
Prodigious accumulators of wealth, on the other hand, might have a smaller yearly income than under-accumulators, but they prioritize savings for retirement and rainy days. They start saving early in their career, which compounds the interest they make and ultimately results in millions in savings.
So, if you want to become a millionaire, track your expenses and prioritize savings instead of relying on future increases in income. You don’t have to be frugal about everything, but pick the things that bring you the most joy and only spend on them.
To track your expenses, you can use a spreadsheet, or we recommend our product, which you can sign up for using the button in the header; the best thing about it is that we have a free account that you can use for your simple needs.