Think all rich people drink fancy wine and drive luxury cars? How about the inverse – that everyone who lives in an expensive home or wears a Swiss watch is a millionaire? You’d be very surprised to learn that most “true millionaires” are nothing like this.
In his latest book “Stop Acting Rich: …And Start Living Like a Real Millionaire”, Dr. Thomas Stanley further explores the subject of what makes a millionaire. Similar to his previous books “The Millionaire Next Door” and “The Millionaire Mind”, he uses data from thousands of surveys from real people on various aspects of spending and saving habits. The results are presented throughout this book to demonstrate the true identity of millionaire habits.
Dr. Stanley begins the book by dividing our culture into three sociological categories based on their wealth and spending habits. These groups are as follows:
• The Glittering Rich – Anyone who is unbelievably and truly wealthy as a result of incredible success, family inheritance, or fame. Large purchases for you and I seem to not hinder their financial position at all. For most of us, becoming one of the glittering rich is out of the question. Unless you are a famous athlete, musician, movie-star, or marry someone from the Hamptons, your chances are pretty slim.
• The Aspirationals – Common people who try to live like the Glittering Rich by emulating their lifestyle. However, their appearance of wealth is false because they do not have nearly the amount of wealth or income that the Glittering Rich have. Therefore, they cannot sustain this lifestyle without debt or other financial trouble.
• The Real Millionaires – Anyone who has a net worth of more than $1 million dollars in assets (excluding their home). As it turns out, many real millionaires are simply everyday people with normal jobs such as engineers, teachers, laborers, etc. This subject is thoroughly examined in Dr. Stanley’s earlier book “The Millionaire Next Door”. The Real Millionaires have done a good job of using good sense, living reasonably, and accumulating wealth.
Furthermore, Dr. Stanley breaks down our methods of wealth generation by classifying them into two groups:
• “IA” or “Income Statement Affluent” – These are the people who use only their income to generate wealth. In general, this is a poor method for getting rich because it utilizes only one very violate income stream (your job). The Aspirationals are guilty of being IA.
• “BA” or “Balance Sheet Affluent” – These are the people who use their assets to generate wealth. They are usually frugal, good at saving, and have more income producing assets such as investments or properties. The Real Millionaires are BA.
After defining these groups, the remaining 90% of the book then methodically examines each of these groups using statistical data as well as independent testimonials. This is done by comparing and contrasting spending habits over several key categories often associated with wealth such as:
• Shoes / Clothes
• Hobbies / Activities
Although I won’t ruin the book for you, I’m sure you can guess the outcome. In almost every category, the Glittering Rich own the most expensive luxuries, the Aspirationals hyper-spend and do their best to copy them, and meanwhile the Real Millionaires spend their money on reasonable brands and purchases. However, what may surprise you is just how prominent the spending gap between the Aspirationals and the Real Millionaires. In general, you will not believe just how modest the data suggests most Real Millionaires truly are.
So why do people “Act Rich”? Dr. Stanley explains within each of the categories about how it is a combination of our bad habits mixed with aggressive and manipulative marketing tactics that prey upon our vanity to emulate the glittering rich. When you see an ad for Grey Goose vodka, do you really think all rich people drink it?
Although this book may not provide you with specific advice on 401ks or stock picking strategies, it will provide you with something just as valuable: Common sense.
If there is one reason I could recommend this book to you, it is this:
• To make you realize how things really and that you aren’t missing out by not having the luxuries that are advertised to you. Real millionaires don’t buy nearly half the things you think they do. Unfortunately, the only people that do are the Aspirationals, but the only people they are fooling are themselves.