Oddly on the blog GetRichSlowly, J.D. had a post recently titled What’s The Difference Between High-Income Earners and Low-Income Earners. It appears the writer was not prepared for the response it generated. A number of people were angry because they felt the article implied that low income earners failed to meet several traits that “high income earners generally exhibit” including:
- They maintain a strong work ethic.
- They don’t watch the clock.
- They seek to improve their skills.
- They do quality work.
- They’re flexible and adaptable.
- They maintain a good social network.
- They possess self-confidence.
Personally I was impressed with the the response this post generated. You may be a high-income or low-income earner. Regardless whether you like it or not, agree with the perspective of the author or not the post caused people to think about the situation they face, and consider if these traits or other variables have played a role with their economic status.
Coincidentally, I was just finishing The Millionaire Next Door by Thomas J Stanley & William D. Danko.
This book also was focused on understanding the difference from those that have and those that have not. The difference however was that the blog post asked about the difference in people with different incomes while The Millionaire Next Door was focused on the difference between those that have wealth and those who do not.
What is the difference between high-income earners and people with wealth? Money! Not the money they “make” but the money they keep!
If you are serious about improving your financial well-being you should be following the Principles of Financial Management and the very 1st one is educating yourself. If you are serious about improving your financial well-being The Millionaire Next Door is a great book.
The most enlightening aspect of this book is learning that a large percentage of this nations millionaires are not necessarily high-income earners. While the average income of millionaires is a nose-bleeding $247,000/year the median (half of all millionaires make more, half make less) income is only $131,000. Half of all millionaires make less than $131,000 and the book shared testimonials of a number of millionaires that make well below $100,000/year.
You might be inclined to think these were the “lucky rich kids”. You would be wrong most of the time. Less than half of all millionaires ever received even $1 in inheritance.
According the The Millionaire Next Door the difference between those that accumulate wealth and those that do not can be boiled down to frugality.
They divided the hundreds of millionaires they have studied into two categories; Prodigious Accumulators of Wealth (PAW) and Under Accumulators of Wealth (UAW).
Put simply, PAW’s think about creating wealth (not necessarily simply earning a high income), they learn about money management and they spend more time managing their money and investments.
UAW’s are consumers. The more they earn the more they spend.
UAW’s are buying a new car every few years, PAW’s buy 2-3 year old low mileage vehicles. UAW”s buy $1000 suits, PAW’s buy $300 suits. UAW’s buy and live in McMansions, PAW’s live in modest homes next door to middle income America.
However, the most valuable lesson I took from this book is concepts to help parents raise their children with a healthy respect for money and financial management. I never expected a personal finance book to focus so much not on the readers wealth but the well-being of the readers children. This makes The Millionaire Next Door my new favorite book!
This is a must read!