14 Lessons I Learned From Thomas J. Stanley About Wealth and Mindset

By now, I’ve read three books authored by Thomas J. Stanley, The Millionaire Next Door, The Millionaire Mind and Stop Acting Rich…And Start Living Like a Real Millionaire.

Without exaggeration, his financial philosophy turned my perception of wealth upside down. Through surveying hundreds, if not thousands, millionaires, Stanley learned their consumption habits, lifestyle and career choices. Although the data is now a little old, his message is timeless.

That is, if you can’t just suddenly get a high-paying job, you must focus on your lifestyle. It is possible to become a millionaire on an average salary.

Here are the most valuable lessons I learned from Thomas J. Stanley about wealth and mindset.

1. Some People Have “Big Hat, No Cattle”

There are those who are truly rich and others who pretend they are rich. People who drive expensive cars, wear fancy clothes and live in big houses aren’t usually wealthy, but rather chase the dream that these status symbols are indicative of wealth. Stanley interviewed a self-made multimillionaire who lived in the same three-bedroom house in the same middle-class neighbourhood for almost forty years. That millionaire explained to Stanley, “If your goal is to become financially secure, you’ll likely attain it…But if your motive is to make money to spend money on the good life… you’re never gonna make it.”

2. Glamorous High-Salary Occupations Are an Impediment to Accumulating Wealth

Doctors and lawyers are notoriously terrible for accumulating wealth. While they are often amongst the highest paid in society, they often fail at actually achieving a high net worth, relative to their income.

A major factor is that doctors and lawyers often maintain a high-consumption lifestyle. High-power lawyers, for example, have to impress their clients. On the other hand, high-salary earners who work in “dull-normal” occupations, i.e. jobs in trades, don’t have these economic pressures and can easily maintain an average lifestyle.

3. Self-made Millionaires Often Performed Poorly In School

There’s even some evidence of an inverse relationship between high academic achievers and ability to generate money. If you performed well in school, you excelled at working within an established system. Self-made millionaires who were terrible in school often had to overcome adversity, which led to them becoming tenacious, self-reliant, and willing to take financial risks. Stanley asserts that high-income individuals who are proficient at accumulating wealth are less likely to have graduate degrees, law degrees and medical degrees.

4. Successful People Don’t Follow The Crowd

Three out of four millionaires reported that learning to think differently from others in their formative years influenced their ability to become productive adults. Being different led them to economic success, as well as drew criticism for standing out.

5. Frugality is the Cornerstone of Wealth-Building

Millionaires are frugal, not cheap. They are not wasteful. Stanley defines “wasteful” as a lifestyle consisting of lavish spending and hyper-consumption. In his extensive research, he discovered that most millionaires live in average homes in inconspicuous middle-income neighbourhoods, with unremarkable cars in the driveway.

6. Wealthy People Don’t Have Expensive Tastes

To add to the above-mentioned point, Stanley points out that the average millionaire pays $16 (including tip) for a haircut at a regular barbershop, and only 5.7% millionaires surveyed nationally paid over $1,000 on their latest suit (this research was cited in his 1998 book, so adjust for inflation).

7. Also, They Drive Toyotas

Wealthy individuals look for practicality and functionalist over luxury and prestige. There is no significant correlation between the model of car you drive and your level of happiness. Toyotas are found to be number one in market share among millionaires. The most popular model is the Camry.

8. Don’t Live In An Expensive Neighbourhood

It’s difficult to accumulate wealth if you live in a high-status neighbourhood. You might make $100,000+ a year, but your domestic overhead will be all the more costly. You’ll also undoubtedly face pressure from your neighbours to keep up with their expensive lifestyle. Instead, move to a reasonably inexpensive area, which will enable you to invest more of your earnings. You will not only have lower domestic overhead, but you’ll also have cheaper property taxes.

9. Embrace Entrepeneurialism

The population of entrepreneurs is relatively small in the U.S., but they’re overrepresented in terms of the occupation of millionaires. Not all entrepreneurs are millionaires, but many millionaires are entrepreneurs.

10. Develop Courage And Take Financial Risks

Further to the previous point, achieving wealth takes strategic economic risks. So many people fear investing in the stock market or starting their own business. What if the stock market crashes? What if my business fails? What if I can’t support my family? What if my friends and family think I’m foolish? What if. What if. What if. Everyone is afraid of failure, but self-made millionaires learn how to control their fears and minimize their losses by taking strategic risks. They also know how to persevere when times are tough.

“Countless numbers of my MBA students once thought that they avoided taking much risk. Many never even considered being self-employed business owners — it was just too risky. Accepting positions with major corporations was the way to all but eliminate the risk of being unemployed someday. And why spend countless numbers studying investment opportunities? “The company” will always take care of its middle-level executives. For many of my former students, their creed was simply to earn, spend, and let “the company” take care of them for life. That was the ideal, low-risk method. But they misjudged the odds, and at one time or another most have had their middle-level positions eliminated.”

— Stanley, Millionaire Next Door (page 238)

Fear of failure forces people into a state of mediocrity and complacency — like taking a “secure” job working for someone else. What’s riskier is actually relying on one source of income. Don’t put your financial fate in someone else’s hands.

11. Your Choice of Spouse Matters

Stanley describes a story about a couple who married poor and maintained a frugal lifestyle. The husband had tried for years to get his business off the ground. On one unremarkable weekend, the husband approached his wife, his company suddenly becoming worth millions of dollars. He told her that he was so grateful for her and that he was officially giving her a 50% stake in the business.

How did she respond?

Without looking up, she said, “Thanks honey, I really appreciate that, I really do,” and went back to cutting a coupon out from a grocery flyer.

Despite their newfound wealth, their lifestyle remained the same. In Stanley’s research, most self-made millionaires reported that their spouses were more frugal than them.

12. Time Is A Precious Commodity

Millionaires spend their time on things that matter.

For example, when they need to purchase a new car, they don’t research for hours upon hours on what’s the best deal and then negotiate it to death. Millionaires know cars are a depreciating asset (a significant portion of them even buy used cars). They would much rather be decisive and purchase a car at a fair price and move on.

Most of them prefer instead to devote their time to learning about things that will appreciate in value, like investing their money in the stock market. Why study something that will cost you money when you can focus your efforts on things that will make you money?

13. Balance Is Important

They maintain a balanced lifestyle. For them, spending time with loved ones matter. In the words of Stanley:

“It’s important for America’s youth to discover that millionaires… don’t depend on consumer goods to enjoy life. Their pleasures and self-satisfaction have more to do with their families, friends, religion, financial independence, physical fitness, and perhaps a bit of golf. Look at it another way: There is nothing more pitiful than a person who has no close friends, no loving family, yet owns millions of dollars of consumer goods.”

14. Do What You Love

An overwhelmingly amount of the millionaires surveyed had indicated that loving their jobs was essential to their economic success. Working in something that you enjoy develops your strengths and makes it easier to persevere. If you don’t love it — move on.

If you want to read more about the habits of millionaires, I INSIST you to pick up one of Thomas Stanley’s books. I’m certain his writing will teach you as much as it has taught me.

Thanks for reading!

This article was originally published on www.jenonmoney.com. If you enjoy my writing, check that out for more content. — Jen



Productivity, craftsmanship, and the pursuit of excellence at work. Writing now at jennifertchan.substack.com.

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Jennifer Chan

Productivity, craftsmanship, and the pursuit of excellence at work. Writing now at jennifertchan.substack.com.