I just finished reading The Next Millionaire Next Door: Enduring Strategies for Building Wealth, coauthored by Sarah Stanley Fallaw, director of reseach for the Affluent Market Institute. In the book she surveyed more than 600 millionaires in America.
She found that six key drivers, which she referred to as “wealth factors”, are related to net worth potential, regardless of age or income:
- Frugality, or a commitment to saving, spending less and sticking to a budget
- Confidence in financial management, investing and household leadership
- Responsibility, which involves accepting your role in financial outcomes and believing that luck plays little role
- Planning, or setting goals for your financial future
- Focus on seeing tasks through to their completion without being distracted
- Social indifference, or not succumbing to social pressure to buy the latest thing or the constant need to go on holiday
Frugality came up several times during Stanley Fallaw’s research – many of the millionaires she interviewed stressed the freedom that comes with spending below their means. Being frugal was one of three key ways they achieved financial independence.
Not only does frugality improve wealth, it improves your chances of securing your home loan approval.