In a rare solo episode, Kyrk reflects on the personal finance book that changed his life and lays out six surprising traits that so many millionaires have in common.
Kyrk Davis is a Registered Representative offering Securities through The O.N. Equity Sales Company, Member FINRA/SIPC, One Financial Way Cincinnati, Ohio 45242 (513) 794-6794. Kyrk Davis is an Investment Advisor Representative offering Investment Advisory services through O.N. Investment Management Company. Estate planning services provided in conjunction with your licensed legal professional.
In a rare solo episode, Kyrk reflects on the personal finance book that changed his life and lays out six surprising traits that so many millionaires have in common.
Kyrk Davis is a Registered Representative offering Securities through The O.N. Equity Sales Company, Member FINRA/SIPC, One Financial Way Cincinnati, Ohio 45242 (513) 794-6794. Kyrk Davis is an Investment Advisor Representative offering Investment Advisory services through O.N. Investment Management Company. Estate planning services provided in conjunction with your licensed legal professional.
Welcome back to the How to Win podcast. My name is Kyrk Davis, and today, this is going to be a solo episode. Rick is actually out of the office right now. He's been sick for a little bit, but he's making a good recovery. And we're going to really enjoy having him back on the next episode here. What I wanted to talk about today was right when I first got out of college. You know, I was working at a bank and I... Stumbled across Dave Ramsey on the radio and I kept hearing him talk about a book called The Millionaire Next Door and eventually I picked up that book and read it and ultimately it really changed the way that I look at money going forward and helped me build a passion for personal finance that ultimately led me into this career field being a financial advisor. So I owe a lot to this book. I thought it would be fun to To look back at some of the lessons that I took from the book there. Also to look at some lessons and see how they kind of overlapped with similar books that have been published since and see how those compare to things I've just learned in the business here working with you know, all my client families. So if you're not familiar with The Millionaire Next Door, It was a book written by Dr. Thomas Stanley. It was a study that was done in the early to mid nineties where it interviewed tons of millionaires and it was really just seeking to find what kind of commonalities that they that they had or if there was a way that we could basically build a formula to becoming a millionaire. So in my opinion it was a really interesting book. Some people don't like it because there's a lot of facts and figures and tables in there, but if you're a nerd like me you, you may find may find it interesting as well. So, just want to kind of go through, I got about six or so lessons that I thought would be interesting to, to look at. So, let's just kind of jump into it. The first lesson wealthy people tend to avoid status symbols and they don't drive their wealth away. So, if I ask most people to paint a picture of the typical millionaire or, or wealthy person, they're going to tell me that they're somebody that drives a, you know, a luxurious car, maybe a BMW or a Mercedes, they have a Rolex, they go on, you know, super fancy vacations and really nice dinners all the time and wear designer clothes and have a really, you know, Instagram perfect. But the fact is that you know, the typical wealthy person, that's not them. The book really highlights the importance of avoiding status symbols and living very frugally. So that common wealthy person, they're not driving the really nice car. They're going to drive something that is reliable and of good value. So, I think it mentioned in there that the two biggest brands that the millionaires are attracted to were Toyotas and Fords. And I think they've done similar studies in more recent times that show that that data is pretty much the same today. They're not all wearing Rolexes. Very few of them actually are. They're buying a reasonably priced watch and wearing it for a long time. And they typically shop at places like Kohl's or JCPenney and buy quality clothes at again, a reasonable price. They're not out buying all the designer, flashy looking high end clothes. All the money that they're able to actually save by avoiding some of those status symbols or those really luxury items, that's money that can actually go back into their savings and investments. And that's truly what builds wealth buying assets and holding assets over a long time. That's where you build your wealth from. So I would say that's lesson one. Lesson number two is that, most millionaires or wealthy people have some kind of budget or at least some way that they track their expenses. So. I personally, I hate budgets, but I love tracking where my money goes. And if you ask the typical wealthy person how much they spend on, you know, their home, how much they spend on gas, how much they spend on food and entertainment, those sorts of things, they can probably tell you within a small margin of what that number actually is. Why this is important is because, especially in today's day and age where we have, you know, auto pay and we have credit cards linked to our Amazon accounts and that sort of thing, it's really easy for our spending to get out of control if we're not tracking where that money is going or we don't have a budget to tell us where that money needs to go. So having all of those, those things in place allows us to spend within our means and actually spend below our means. Again, so we have that margin in our life that we can save and invest and continue to to grow real wealth. Moving on and this one may be a little bit controversial to some people but millionaires or wealthy people tend to stay in the same home for a long time. Why I think this is. is a couple of reasons. One, I very rarely have met somebody unless they're a retiree that's just looking to downsize that has bought a new house and it be smaller or not as nice or cheaper than their, their old house. So, every time that we, we move, typically we're moving into that bigger house, that nicer house, and a better neighborhood. And there's a lot of costs that are associated with that. Just from the, just to name a couple realtor fees that go into selling our, our current house. Higher insurance premiums, higher property taxes that are, that are associated with the, the new house there. The need to, you know, buy new furniture or decorations or paint that new house to make sure it matches our, our likes and what we want to see. Those are, those are all things that go to taking money out of our pocket and make it actually harder to, to build wealth. So, in the book The Millionaire Next Door, I think it said the, the average amount of time that a millionaire was living in their house was about 20 years or so. And that makes sense to, that makes sense to me. So, if we can stay in our house longer, it is going to reduce all of those. Extra expenses that were naturally going to occur by moving. And again, that's more money that can be saved and invested to grow wealth. And in theory, over time our income should grow too. So the ratio of our housing cost to our income should actually shrink over time. Which is always a good thing. So, stay in your house for a long time. Lesson number four is that millionaires or wealthy people are very rational. Millionaires stay objective and don't let their emotions get in the way of their financial plan. Especially when things are not going great. So last year, 2022, is probably a really good example of this. Markets were not going very well for very many people. This was a great time for the true wealthy people to kind of sit back, take a breath, understand that those things actually happen. And they're normal and eventually things will recover. Accounts will probably go back up. It's just a normal market cycle. And it doesn't mean that you have to really change anything. In your investment strategy, as long as it was built properly from the start. This is a kind of in contrast with the, the average person out there who sees a market like 2022. And decides they need to jump ship. They need to try some new strategy that may or may not be appropriate for, for them. And this constant back and forth. Kyrk is just kind of a leak in the boat, if you will, and doesn't add up to long term success. So being very rational is key. Moving on, millionaires or wealthy people tend to work towards lifetime goals. So why I think this is important is that setting goals is very important because it allows us to stay on a desired path for a long period of time. So having that far out, you know, maybe it's retirement goal, maybe it's, you know, paying off a house goal, maybe it's paying for kids college goals. Having those kind of clearly in our sights. And clearly working towards those allows us to stay on track by making good financial decisions versus when we don't have those types of goals in front of us our spending can quickly get off track and we can make decisions that just frankly don't go to to building our wealth in a in an efficient way. Kind of moving on Lesson number six I think we're on now and we'll end with this one, is that millionaires and wealthy people understand that being financially independent tends to make you a little bit happier. Now, don't read that as me saying that money buys happiness because I don't necessarily think that it does. But what I mean from this and kind of what I took from, from this lesson was that When we have plenty of cash sitting in the bank as an emergency fund, when we have money in our 401ks, in our IRAs, or maybe brokerage accounts that is designed to be growing for us and working for us it gives us a lot of stability in our life. And when we have that extra stability, it allows us to just breathe a little bit easier, and ultimately, that's less stress. And tends to, tends to lead towards a, a little bit happier life as opposed to the person that is kinda living on the, the razor's edge has no savings, has some extra debt, and is one bad day or one missed paycheck away from financial ruin. That's just a tough place to, that's just a tough place to, to live from and it's really probably a tough place to be truly happy in. So, Financially independent people, you know, tend to be a bit happier. So, that's just six lessons that I learned from The Millionaire Next Door. There's been a whole bunch of other studies that are similar and have been done in more recent times. Dave Ramsey did one a few years back along with along with Chris Hogan. It's called Everyday Millionaires. But it's essentially a more modern look at this same study. And they found pretty much the same results. Not not a lot of differences. And then, just working in this field for the past seven years or so, I've seen that my most successful clients tend to kind of live by these lessons. Whether they were ones that I taught them, or ones they just... Picked up along the way before meeting me but it's funny that some of these things are just so time tested. So, there, it's not necessarily the recipe to take you from zero to millionaire in the course of ten years, by any means, but it is something that if we start putting some of these things into our lives I do believe that they will help you out in the long run and are definitely another tool to have on your tool belt as we progress through our careers and ultimately try to obtain financial independence. So thank you for listening to this episode. If you enjoyed this content definitely let us know if you have any feedback or if there's any topic that you would like Rick and I to... Please send that to us as well. So, hope you enjoyed the How to Win podcast. And again, my name was Kyrk Davis and we will see you guys next time.