If you’ve been reading personal finance blogs for any length of time, you’ve probably heard about The Millionaire Next Door. It’s an interesting book with some good insights, but what people often take away from reviews of it goes something like this:
“If I want to be a millionaire I have to live like a broke college student until I’m really old and then maybe if I’m lucky I’ll still be around to enjoy the money.”
Blog posts about the miracle of investments compounding over time and the value of saving money on the little things (you know, being frugal) often add to this perception. The perceived takeaway is often “Scrimp and save now, deprive yourself, and you’ll be better off later.”
Now it happens to be true that investments compounding steadily over time will add up to a whole heck of a lot more than you started with, and it’s also true that not wasting money on a bunch of little stuff does leave you with more money and/or greater resources.
But it does NOT follow from those things that the only routes to millionaire-hood are either extreme deprivation or winning the luck/brains/talent lottery.
No, there is a happy medium between driving a flash car that you lease for $1200 a month and driving a car that’s worth $1200 total while your coworkers laugh at you and you think “oh just wait til I’m old and doddering, I’ll show you!”.
It’s called being reasonable and setting priorities. What’s most important to you? What don’t you care about at all? How soon do you want to be a millionaire? How much time is there between now and then? What financial mistakes can you avoid? (Debt is expensive.) What can you do to maximize your income in your field of interest?
You don’t have to be a miser to be wealthy. You can travel the world, live in a nice house, drive a fun car, etc., and still have a nice big nest egg. You just can’t do those things on credit and expect to become a millionaire. You also can’t do everything, all the time, the second an impulse strikes you.
You have to plan things out. And it’s ok to plan fun things too. In fact, it’s a lot easier to make fun things happen when you have money. And you can have money before you’re old.Posted in Make Money on 01.27.10 with 8 comments.