So how can you tell if someone (or you, yourself) is likely to become rich? Is it the guy who is driving the Porsche at the mall? Is it the lady who is wearing all of the designer clothes and carrying the Gucci bag? Maybe it is the people living in the gated subdivision with all of the cookie-cutter houses and the lawn service? If these are the people you’re looking at, the real millionaires, or millionaires in training, are probably walking right past you.
Here are the real traits to look for when trying to find a millionaire, and the real traits you should try to replicate if you want to become wealthy yourself:
The Car: To find the car of a millionaire in training (MIT), walk past all of the expensive luxury cars and especially the sports cars. The MIT will be driving an older Camry or Civic. He chooses cars that will last a long time, are comfortable but not opulent, and that do not have a big maintenance cost. He wants cars that he can buy four-years old and know that they will last for at least ten more years. He knows that he can pay cash for the four-year-old car. This means that he won’t be making payments and losing money to interest. Better yet, he will be losing about half as much money each year to depreciation as he would if he bought new. All of this is money he can use to invest. If he does only this for a lifetime, he’ll easily retire a millionaire (see Would you Drive a Used Car for a Million Dollars?).
The Clothes: Is the MIT wearing Ralph Lauren clothes? Is she wearing a Vera Wang? No, he’s probably wearing a t-shirt he’s had since college and a pair of cut-offs. Clothes in retail stores are extremely overpriced. Don’t think so? Try buying something new and then immediately, with the tags still on it, selling it at a yard sale or in a consignment shop. You’ll find that the price people are willing to pay is drastically less than even the sale prices at the mall.
Retailers are experts at figuring out how to get you to buy. That great “sale” is really still a lot more than the underlying value of the item. MITs spend as little money as possible on things they know are just going to drop in value. They also are less concerned about the perceptions of others than they are about their financial future.
The Home: As with clothes, millionaires are interested in preserving their investment when buying a home. They therefore don’t buy in the flashy new subdivisions with the oversized homes. They tend to buy older homes that they know are well-built and won’t require a lot of maintenance. They also like to be able to look at the price history of the homes in the area and find neighborhoods that consistently grow in value. They also don’t buy the most expensive home in the subdivision, since they know at resale time it is better to be in the lowest priced-home in the subdivision than in the highest-priced home. They also buy what they need in terms of space because they know that larger homes mean more maintenance and more expensive maintenance.
In the home itself, they’re more likely to make investments in timeless things as well instead of things that waste away. They therefore would but a nice antique desk before they bought leather sofas. They would remodel their kitchens with granite and high quality appliances, but they would choose classic styles that will always remain rather than chasing the latest trend because they would not want to remodel every ten years.
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Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.