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Nice shiny stuff - usually very expensive....

Exposing the ways of the financially Independent Wealthy

SPEND.A.LOT: "I'm off shopping it's Saturday after my pay check. I've worked hard this month and deserve a new pair of shiny flashing light beep beep sneakers"
THE.CONTENDER: "Aren't the beep beep sneakers way expensive? Can you buy them out of your pay check after paying all the bills?"

 SPEND.A.LOT "Well I just received this card through the post it has $2,000 of credit to spend now on it and no payments for 6 whole months - result! I want a new car as well there is a nice sports car in the local dealership with 10%. We can use the other car for the kids and I get to look the business"


 Card issuer (AKA THE.FUTURE) - what a sucker! They never read the small print, interest rate of 2000% he will be my little slave before he knows it.

 THE.CONTENDER: Would you hold off your purchases a minute, mate? I would like you to read a little book before you buy the sneakers and new car. It is called "The Millionaire Next Door"

Millionaire Next Door on Amazon

"The Millionaire Next Door" by Thomas Stanley and William Danko  exposes the truth that great defense (that is "controlled spending on necessities" compared to consumerism is the road to wealth. 1 Million + copies sold in the US alone speak for itself. This post has:
  1. A short review of the book 
  2. THE.CONTENDER concerns for the kids
  3. A look at putting some of the recommendations of the book into practice

"The Millionaire Next Door" written in 1996 investigates the lives of the wealthy. Their spending habits and investing traits versus high income low net worth individuals. Again the same result as the one THE.CONTENDER believes in:

Frugality + Budgeting + Investing + Planning + Hard Work 
= Financial Independence

The Book
 
Simple enough isn't it? What was more fascinating about the book for daddy CONTENDER is the impact of your own consumption and traits rub off on the kids. In the book some very concerning points are made.

Spendthrift high income families generally:
  1. Care about status and keeping up with the Jones
  2. Spend a lot on expensive consumer goods (Cars, boats, clothes, blenders, cappucino makers and the like)
  3. Do not have a household annual budget
  4. Do not dedicate enough time to financial planning and investing
  5. Some rely on sustaining their lifestyle on "gifts" from rich parents.
Compare this to millionaires
  1. They save at least 15% of their income
  2. Their income is a very small part of their total wealth
  3. A significant amount own their own business, leverage their contacts to get good deals and business passed onto them.
  4. Are humble in front of their employes and neighbors showing no signs of their real wealth
  5. The are fully satisfied with their humble living and have no intention to change and turn into a consumer. They have clearly defined life goals.
It is a fascinating look into the lives of the wealthy with loads of case studies. What is even better is that as it has sold over a million copies, you can pick up a second hand copy for a very modest price so I cannot recommend the book highly enough.

Please read on for the  impact on the kids, FI state of mind what would the Millionaire Next Door ask himself?

The Kids

Spendthrift parents who do not save have children who usually
  1. Expect to be supported by the parents - even up to the age of 50!
  2. Do not reach the same level of income of the parents because it is too much hard work!
  3. Tend to be less independent and return to the nest
  4. Tend to live beyond their means (because they are used to it) and hence get into debt
  5. Debt is accrued through an expensive, long education in a glamor profession
  6. Covert expensive consumer goods and do not accumulate income generating assets
Daddy CONTENDER is concerned! Fortunately we are fond of budgets, planning and frugality. We personally don't overly pamper the children although the grandparents sometimes do ;) It is our responsibility to set the kids up for success.

This is one of the main reasons we are giving up our high income lifestyle in the BIG city to move to a quieter simper life in rural France.
  1. Space for the family to live and the kids to grow up - fields to run in, tree houses to build, bugs and butterflies to catch and investigate
  2. Peace and quiet - no street lighting pollution, planes overhead, noisy neighbours and cars all hours of the day
  3. Pollution - The city has so many people hence cars and excessive consumption it is has a higher level of man made pollution. Man I have to vacuum the house endlessly!
  4. Less distractions - Advertising is around every corner, junk mail fills the letter box, TV, electronic devices, plastic toys we even have advertising TV screens in the bins!
  5. Keeping up with the Jones - We do not care for this. Unfortunately it is part of life - competition in the city is more intense - higher income - more money spent on clothing, clubs, ballet, painting, piano classes etc.
  6. We do not want to reveal our wealth to the children and any inheritance they receive will be after they have learnt to look after themselves. 
  7. We do not intend to lavish consumerist items on the children or ourselves as they grow up. We need to set an example that consumerism does not equal happiness.  
THE.CONTENDER was brought up with a football and rugby ball with his mates getting muddy in a field, camping under the stars and making base camps in the forest. Mrs CONTENDER was content with books from the library and riding her bicycle in the country lanes. What skills did this help?
  • Being outside all day, running, climbing etc. gives the body time to stretch, grow and strengthen whilst breathing in fresh air (compare that to the tragic case of the young hyper gamer who died at his PC)
  • Building camps fostered creativity, independence and confidence
  • Chatting with friends face to face helps build real social skills
  • Keeping distractions to a minimum allows time to read, write and listen (music and nature)
  • With both parents able to spend significant time as a family meals can be taken together, the family can discuss topics together. Play board games and cards. Work in the garden and grow plants together.
  • A smaller community means people generally know and interact with each other.
Financial Independence is a State of Mind?

The millionaire next door book lists out the state of mind and habits you need to have to become wealthy. Its proves that a large percentage of millionaires really do live next door. They have made their fortune but do not flaunt it in public. They understand the value of hard work and saving. They are happy with their lifestyles and see no reason to change them. Living within their means and not wasting money has been a stead fast habit down the years

Why not have a look at your past few months spending in detail. How much do you spend that you really do not need? What about: cinema card, eating out, cigarettes, alcohol, magazines and newspapers, driving too fast and too often, branded products and clothes.

Do you have any major expenditures coming such as a new car, wedding or the purchase of a property? What is really affordable to you to meet your needs?

Millionaire Next Door Question Time
  • Do you really want to be financially independent? 
  • Can you control your family spending and be frugal?
  • Is your spouse on board with financial independence?
  • Can you allocate enough time to investing or starting your own business?
  • Do you need to find a financial independence financial adviser?
  • Do you need to trade in multiple cars for one practical car?
  • Do you have too much stuff and is your house too big for yours real needs?
  • Is an expensive lifestyle of consumerism conclusive to being happy?
  • What would you do with the free time? 
  • Do you want to have or already have children what would the pursuit of Financial Independence have on them?
  • What will you do with any excess savings?
  • Will the children get significant money from you to start them off in life and at what age?
Consumer to Citizen

In the THE.FUTURE will we finally shrug off the contrived consumer tag and become citizens again? Will the children not pursue material but intellectual wealth and happiness? Will citizens make the west a happier, cleaner, more prosperous society? Will inequality be reduced and the instances of crime disappear?

SPEND.A.LOT "Mental overload CONTENDER! It can't be possible, can it? a millionaire from our family income of only $60K per year? Wow! Now I have a meeting with a spreadsheet on my computer and a pile of receipts and bills that need to be made into a budget."

Isn't life great? You can change direction any time you want. All it needs is something little that sparks a fire to do something new inside. What is your spark?

Why not try out the new financial independence and happiness planning tool kit called PERL available here FREE on this blog.

Peace and prosperity

THE.CONTENDER

Welcome New Contender Readers! Take a look around. Find out who THE.CONTENDER is or Start at the first article, browse the all posts or just go for a Random Post. Please feel free to play with the FREE planning tools and checklists.

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  1. Anonymous6 October 2013 at 02:24

    That's the theory This is like saying that the US dollar was a
    receipt that represented real gold stored in a government vault.

    67% Among asset classes, such as the low yielding and poor performance funds from the stock markets turn into turmoil and there are gold certificates as
    well. If you observe the market indicators, you will lose
    ANY amount of money investing in gold mining stocks.


    Here is my web site: Lear Capital

    ReplyDelete
    Replies
    1. Contender6 October 2013 at 08:17

      Some thoughts below ;)

      Marc Faber recently commented that "everything" is now a bubble.

      Benjamin Graham and Warren Buffet are real value investors. Unfortunately is becoming harder to do because the markets are distorted by the central banks mass printing of fiat money.

      One minute the money flows to Gold, then real estate then the stock market etc. There is so much liquidity due to a cornered bond market it is just jumping from bubble to bubble negating the real world underlining value of the item.

      To your point what is the value of a gold mine? What is the value of gold. The majority is not and has never been consumed but dug up and buried in a vault again. Perhaps the value of gold is just the value of the energy it costs to mine it and the total amount in regards to global population. Choose a number. Gold mines deplete, are generally in less stable countries and are ransom to the gold price. Investing in them is chasing a bubble. Buying physical gold takes out a lot of the 3rd party risk and instead turns into a waiting game.....

      Alternatively lets look at water. Most people get water from a utility. Is the cost they are providing the water at representative of their business. What if people harvested water themselves or threw the water company out of the country altogether. The water companies value would have been destroyed from its original starting point.

      My point is that choosing your own 'poison' buy investing yourself than through a fund at least lets you target something you know about. industries that provide real goods that people really need. The companies may be boring but at least a lot of them will have a long history of not going bust.

      A fund on the other hand follows the bubbles and the busts. How this is managed is up to the quality of the fund manager.

      Alternatively other financial independence websites have championed the Vanguard low cost tracker approach that has been very rewarding in the last 4-5 years.

      I would like to finish with two key commodities that are being used up:

      Silver - the USGS (US geological society) has stated there is between 15-18 years of supply of this commodity based on current known reserves. On top of that it is being used up at a faster pace due to its 'new' uses in solar, medical and consumer gadgets.

      Oil - Used in most consumer goods and road transport its consumption is going up - alternatives need to be introduced or this commodity will continue to rise in price to reflect the eventual supply / demand imbalance.

      As always please do your own research / seek professional advice.

      All the best

      C

      Delete

Are you planning for financial independence and wondering what to do with it. If so is any of the content on this blog of use to you? I would appreciate any comments you have. All the best C

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Welcome to FISH !
You have come here looking for answers. How to get out of debt? How to save and invest? How to retire early and how you want to live in retirement.

Well this is the right place for you as out tribe has been through all of these steps. We no longer work for a corporate employer and have saved enough to retire early. How we did this is shared here on this site for you.

Our little tribe found out these secrets to financial independence in our late 20’s. Since then we have taken early retirement, in our late 30's, in just 7 years. We now live in the South West of France with our two young children.

Along the way I decided to share everything I learnt. My articles and tips on aggressive saving and compound investing are there to help you meet your financial goals fast. I discuss ways to help you decide what you want by building a life plan. This helps to work out how to get where you want to be whilst avoiding the pitfalls along the way.

My expertise was built up working in blue chip corporate jobs, extensive reading and putting it into practice. I have condensed this knowledge into simple strategies to help you meet your goals and not those of the bank or the place you work.

There are free planning tools on this site that help you make a life plan. A plan for your future. The tools calculate how to reach your financial goals in a timeline that suits you. The tools help set out your life goals, make them happen and how to exceed them.

There are tips on how to simplifying your life to remove day to day headaches. These include ways to pay off debt fast buy eliminating wasteful spending habits. How to reduce your monthly bills through choices that actually improve your health and wellbeing. Identifying things you don’t need that sap your time and wallet.

There are little sustainability projects to reduce your dependence on shops and utilities whilst saving money to spend on things you want.

All of these little steps will show you how save 50%+ of your salary so you can meet your goal whatever it is. This huge saving rate can be compounded for very early retirement. I am sure you will find something here for you.

Darren Lee (A.K.A the Contender as in my blog)

 
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