There are thousands of good books written on the subject of personal finance. One of the very best published on how to build wealth is The Millionaire Next Door by Thomas Stanley. If you want to be good with money you should emulate those who have it, Stanley can help you learn how to do that. We aren’t going to do a book review today but rather distill down the core of Stanley’s message:

Stop pretending to be rich and learn from people who are already wealthy.

Starting in 1973 Stanley studied self made millionaires trying to determine what they had in common with one another. 20 years later he published his findings. One of the key characteristics he noticed was that people who made their own wealth didn’t pretend like they were rich before they had actually gotten there. They didn’t compare themselves to others, didn’t spend money frivolously, and didn’t care about outward symbols of their wealth.

The Truth About Cars

American’s have a love affair with our cars. Auto loans reached a recent high at the end of 2016, $1.2 trillion. The average auto loan per capita is just over $4,000. For an asset that depreciates and can’t be easily sold those numbers are staggering. Unfortunately in many circumstances we are financing cars that are well beyond what we can afford.

If you can go into a BMW dealership and drop $80,000 cash for a 2017 Audi A8 and drive that sweet ride away without breaking a sweat you are clearly rich and this is the wrong post for you. Don’t waste your time reading our blog, this isn’t the right place for you. You need to be off on some European adventure enjoying champagne and caviar. For the rest of us we need to wake up and realize that people who are building wealth drive cars they can afford. Stop pretending to be rich, trade in your overpriced car and pick up something you can afford.

It doesn’t mean you can’t buy new however your payment should be no more than 10% of your monthly income. Cars are not a status symbol, they are a means of transportation. Self made millionaires aren’t insecure enough to worry about what their car says about them, they are too busy saving money for their financial goals.

I can’t afford this but who cares? I look good driving it!

The Truth About Houses

We’ve been writing about buying a home for several weeks here on our blog and whether or not it is a “right” to own a home. If it is your dream to own a home, we are here to support you. We also want to relieve the pressure that says “you must own a home!” If the sub-prime mortgage crisis should have taught us one thing,  it is that we overvalue the idea of owning our own place. Owning a home, and comparing that home to other’s can be like one big contest. Look at the amounts of money people spend on updates and improvements to their houses, trying to keep up with the latest trends. Secretly don’t we all take pride in comparing what we have to somebody else, on being able to turn our nose up at what they have or don’t have?

Don’t feel the need to compare yourselves to anybody and don’t find your sense of value from where you live. Don’t fall for the trap that says “your home reflects your value.” That isn’t true at all. Remember this, your house is where you live it isn’t something that defines your value.

The Bottom Line

Build wealth in ways that cannot be seen. Nobody but you is going to see what is in your retirement plan or your savings account. Yet those things are a much greater indicator of wealth than any possession you could ever own. Stop pretending to be rich, put your money towards things of actual value, and laugh all the way to the bank as you build your net worth. 

What other ways are we sometimes tempted to pretend to be rich? How are you focusing on building real wealth?