Stanley also expected most wealthy people to be descendants of old-money families, like the Rockefellers and Vanderbilts. But that wasn\u2019t the case. Instead, he found ordinary people who built their wealth by themselves, in one generation.<\/p>\n\n\n\n
His insights led him to write the bestselling book, The Millionaire Next Door<\/em><\/a>. The book\u2019s findings were simple but powerful:<\/p>\n\n\n\n \u201cWe discovered who the wealthy really are and who they are not. And, most important, we have determined how ordinary people can become wealthy.\u201d<\/p><\/blockquote>\n\n\n\n A lot of people confuse wealth with income. Wealth is not income. Even if you have a high income, spending it all means you won\u2019t get wealthy. It\u2019s all about living a fulfilling lifestyle you want below your means.<\/p>\n\n\n\n I used to have goals like, \u201cI\u2019d like to make a million dollars a year!\u201d But that\u2019s too dependent on outcomes. It gets you trapped in a cycle of chasing after more and more. And more money doesn\u2019t lead to financial independence<\/a>.<\/p>\n\n\n\n Here are the 5 steps you can take to build wealth and eventually become a \u201cmillionaire next door.\u201d<\/p>\n\n\n\n Stanley identifies several professions in his book that would potentially earn well in the long term. But the most important aspect of a \u201cright\u201d career is a job that won\u2019t become extinct in the future.<\/p>\n\n\n\n That aside, choosing a career path simply because it won\u2019t go extinct isn\u2019t enough. I used to ask myself these three questions when I was trying to figure out my dream career<\/a>:<\/p>\n\n\n\n What are my strengths?<\/strong> \u2014 As Peter Drucker said, \u201cPut yourself where your strengths can produce results.\u201d The best product\/service providers get the best deals and income. So figure out your strengths and focus on improving them.<\/p>\n\n\n\n How do I perform?<\/strong> \u2014 How do you get things done? How do you learn? Do you perform well under stress? Do you work well in large teams? Do you work better at a small company or a big one? How do you focus?<\/p>\n\n\n\n What are my values?<\/strong> \u2014 Know your non-negotiables. That\u2019s how you can perform your best. Try to avoid doing something you don\u2019t believe in, or working for a company whose values contrast yours.<\/p>\n\n\n\n The pandemic has shown us that having a single income stream is too unstable. Just ask those restaurant owners who closed for months during the lockdowns. Or those employees who were let go.<\/p>\n\n\n\n Multiple income streams give us options. And options provide us with freedom and peace of mind. That doesn\u2019t mean you need to own many businesses or work 5 side hustles.<\/p>\n\n\n\n Especially when you\u2019re just starting, having income-generating skills is more important. Wealth isn\u2019t about having a high income<\/a>. Here\u2019s the most common definition of wealth:<\/p>\n\n\n\n \u201cWealth is a plentiful supply of a particular desirable thing.\u201d<\/p><\/blockquote>\n\n\n\n We gain wealth by providing value to others. When I talk about providing value, I\u2019m talking about helping people professionally. When you can give a product or service that others find \u201cdesirable,\u201d you don\u2019t have to fear losing money.<\/p>\n\n\n\n Try not to be over-dependent on a single income source. That\u2019s how you have more control over your income.<\/p>\n\n\n\n If you\u2019ve been following my blog for a while, you\u2019ll notice I\u2019m not a fan of social media. That\u2019s because most content there is entertainment. And not the best place to learn things. But people sometimes confuse that.<\/p>\n\n\n\n Take those social media finance gurus, for example. You see these people talk about investing or starting your own business while sipping mojitos in the Caribbean. But making money doesn\u2019t need to be instagrammable<\/a>.<\/p>\n\n\n\n That\u2019s why I avoid inflated numbers when I talk about wealth. Things like:<\/p>\n\n\n\n Having specific goals is fine. But try not to get too attached to outcomes.<\/p>\n\n\n\n For example, whether or not your business or job will earn you six figures in a few years is not entirely within your control. You can only control what you do and how you react to things.<\/p>\n\n\n\n As of May 2022, Gallup found that around 38% of Americans who earn between $40,000 to $99,000 a year \u2014 while 75% of households that earn less<\/em>than $40K \u2014 don\u2019t have stock market investments.1<\/a><\/sup><\/p>\n\n\n\n I assume the ratio of people who don\u2019t have money in the stock market is even higher in other countries. After all, over 45% of adults around the globe aren\u2019t capable of paying out of pocket for an emergency.2<\/a><\/sup><\/p>\n\n\n\n That means most people are not benefiting from the power of compounding. And they\u2019re not leveraging the long-term growth of the market.<\/p>\n\n\n\n For people living paycheck-to-paycheck, the first priority is to build an emergency fund<\/a>. Even just enough to cover a whole month\u2019s expense. It\u2019s best to start small, then aim for 6-months\u2019 worth of expenses.<\/p>\n\n\n\n When you have half a year of expenses safely tucked in a savings account, then you can slowly dip your toes into investing. And the key to investing is this: Avoid investments you don\u2019t understand. That\u2019s how you prevent losing all your money.<\/p>\n\n\n\n Instead, keep a simple investing<\/a> strategy that will help you build sustainable wealth in the long term.<\/p>\n\n\n\n One of Warren Buffett\u2019s pieces of advice on becoming wealthy has nothing to do with money. In a conversation with Bill Gates at Columbia University, about building wealth, Buffett said:3<\/a><\/sup><\/p>\n\n\n\n \u201cIt\u2019s important to associate with people that are better than yourself and actually the most important decision many of you will make, not all of you, will be the spouse you choose. And you really want to associate with people who are the kind of person you\u2019d like to be.<\/p> You\u2019ll move in that direction. And the most important person by far in that respect is your spouse. I can\u2019t overemphasize how important that is.\u201d<\/p><\/blockquote>\n\n\n\n It\u2019s no surprise The Millionaire Next Door<\/em> data reports that most frugal millionaires have married spouses who are also frugal themselves. This avoids two things.<\/p>\n\n\n\n First, one doesn\u2019t get stuck with a spouse who wastes all the money. Because it doesn\u2019t matter how frugal or wealthy a person is if their spouse spends it all.<\/p>\n\n\n\n1. Pick the right profession<\/h2>\n\n\n\n
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2. Control your income by having options<\/h2>\n\n\n\n
3. Don\u2019t let outcomes dictate your desires<\/h2>\n\n\n\n
4. Invest after you save<\/h2>\n\n\n\n
5. Have a partner with the same values<\/h2>\n\n\n\n