This article is an excerpt from the Shortform book guide to "The Millionaire Next Door" by Thomas J. Stanley and William D. Danko. Shortform has the world's best summaries and analyses of books you should be reading.
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What are the wealth-building habits you need to master? Can good financial habits make you rich?
Master wealth-building habits like budgeting, financial planning, and goal setting to build wealth and secure your financial future. Good money habits can make you rich if you are willing to consume less, control your spending, and focus on steadily building your wealth.
Read more on the wealth-building habits that can get you a better future.
What Are the Wealth-Building Habits You Need to Become Rich?
The experience of the self-made millionaires shows that to become wealthy and stay wealthy you must adopt good money habits like the following:
1) Create and live by monthly and annual budgets. Budgeting is one of the important good financial habits you must master. More than half of all millionaires budget their expenses. They’re motivated by visualizing the long-term rewards of achieving financial independence and being able to retire.
2) Know what your family spends annually for basic needs (food, clothing, and shelter). Fully 62% of the millionaires surveyed knew their monthly expenses, compared to 35% of high-income non-millionaires.
3) Set specific daily, monthly, yearly, and life goals. Most millionaires are goal-oriented and take a long-term view. Their goals are not spending and acquiring material possessions, but being able to retire, be financially secure, and enjoy life. People who are financially secure are happier than those in their age/income category who aren’t. Unlike those living paycheck to paycheck, they don’t worry about the next economic slump.
4) Spend time planning your financial future. The number of millionaires who spend time planning investments is more than double the number who don’t plan. Many of those who don’t plan are high-income under-accumulators.
5) Beware of giving ongoing subsidies to adult children and grandchildren, who may become dependent on them instead of self-reliant. Millionaire parents who provide ongoing gifts and subsidies have significantly less wealth than others in their category whose children are independent.
The bottom line is that many more Americans can become millionaires if they’re willing to consume less, control their spending, and focus on steadily building their wealth. The trade-off for spending less of your income today is financial independence tomorrow. That’s the core of wealth-building habits.
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- How and where most millionaires live
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