One of my favorite books is The Millionaire Next Door, which popularized the idea that you can build significant wealth on even a modest income through fiscal discipline, including careful spending.
America could stand to hear that message again. Three-quarters of us are living paycheck-to-paycheck. Nearly a third of us have nothing saved for retirement. Part of the problem, as The Simple Dollar recently noted, is that Americans too often confuse the appearance of wealth with real wealth – and chose the appearance of wealth.
Instead of engaging in wealth-building activities, including saving for the future, these misguided people accumulate debt to make status purchases they (incorrectly) believe make them appear wealthy. I see this all the time with families we try to help on the Spike TV show, Life or Debt. Host Victor Antonio is constantly reminding these struggling people that things like a $100,000 car are not a sign of wealth, but an anchor around their fiscal neck.
What does true wealth look like? Financially successful people, from your neighbors, who teach school and have a net worth of $2 million, to billionaire investor Warren Buffett share several common traits, including:
Spending less than they earn. This is the cornerstone to building wealth.
Investing intentionally. They invest regularly as part of a strategy to achieve set goals.
Avoiding status purchases. Wealthy people don’t overspend to impress the neighbors. In fact, they quite often fly under the status radar, living in relatively modest homes, driving “pre-owned” cars and sporting no designer labels on their cars.
Working long and hard. There is no such thing as get-rich-quick. These folks earn it with years of effort, regardless of what they do for a living.
These behaviors aren’t flash, sexy or exotic, but they are a wealthy person’s most valuable possessions.