Undercover Millionaires

What is a millionaire? Well, you might not know it, but they are all around you. Some of them you might know very well actually. A millionaire is someone that has a net worth over $1 million. Maybe I should back it up a bit.
Net worth is just a term used in the financial world that means a persons assets minus their liabilities. For example, let us assume that you have a paid off home worth $200,000, but on the side you have a truck worth $30,000, a corvette worth $60,000 and a total of other debts totaling $50,000. the truck, corvette and other debts are your liabilities. We are assuming that you still owe on the car and truck. That would mean that you have $200,000 in assets and $140,000 in liabilities or debts. When we subtract the liabilities from your assets you have your net worth of $60,000. Understand?
Now back to the our previous discussion of millionaires, particularly the millionaire you possibly live right by. This probably shocks you, unless you live in some uptown community. But let's make an analysis. What signs are associated with millionaires? Most will assume that a person driving a corvette, in a fancy black suit who lives uptown fits such a description. But as we discussed earlier, does that fit the description of such an individual. Probably not. Why not?
A millionaire has a net worth of $1 million. Remember what net worth means? A person's assets minus their liabilities. This person may look rich, but are they rich? Let us assume that this person does in fact make $150,000 a year, a modest salary. (nudge nudge, wink wink) I am going to make a very crude rough estimate of about $9,000 a month. Along with this estimate, I will make other assumptions. His home mortgage is $2300 a month, his car payments total $1200 a month, $600 for one car, and $600 for another. Along with that he has student loan debt of $100,000, and credit card debt of $50,000. On this modest income, does it necessarily mean that he is wealthy. Sure, according to society he has everything he could ever dream of, but overall, he possibly has negative net worth with all of that debt and nothing else to show for it.
This brings us to the possible millionaire among you in your life. For further understanding of net worth, and all of the ways that real millionaires make it to where they are, check out the book "The millionaire next door". It is a fascinating read. In this book they take data from 100s of millionaires throughout the nation, and compare the data. They find outrageous stuff. Millionaires are not who we believe them to be.
I won't go into much detail, but I would like to take a few examples. First, let's look at cars. Cars are wonderful pieces of machinery. No man in the world will detest my statement. The sound of a roaring sports car, or the massive lift and tires on a gorgeous truck make a man shiver with envy. But of course, with want, comes a price. These cars can be quite expensive, and lead often to large loans at high interest rates.

The value of these cars is also important to remember. Many of us do not realize or even think about the value of these vehicles until it is too late. How many of us have bought a vehicle, and later when we wanted to upgrade, found ourselves owing more than the sell value? I believe that most of us have been in that situation a time or two. The reason for this is depreciation. Depreciation is simple enough to understand. Over time, many things that we own lose value. A car is one of the worst things we can buy. Cars lose value quickly. Why? Because we drive them. A car only has so much life before major repairs are needed. Basic supply and demand dictate that an individual will only buy a vehicle if the pros exceed the cons. Why would an individual buy a 2005 Ferrari for $120,000, if they could buy a 2007 for the same price? The answer, they wouldn't at least most people.
As you drive your car, it loses value. As it sits, it loses value. In all, it loses value. That is why, when buying a vehicle, it is important to remember that cars go down in value. Some faster than others. One particular thing I would like to discuss is buy used vs new. Why would anyone buy used when they could buy new? Because of depreciation.
It is said that buying a new vehicle loses 3-4 thousand dollars, the minute it pulls off the lot. This is true. A new car gaining the used car status, even if it only has 1/2 mile on it, is detrimental on its value. Why do this, when you can get a steal of a deal on a perfectly good and sufficient 2 year old car?  You might as well carry $100 in your dashboard to throw out the window every time you drive it. So, in conclusion, statistically speaking, millionaires buy used and not new!
Millionaires also are not quite as fond to the idea of debt as much of America seems to be. They also did not get to where they were by the use of credit cards, nor loans. They used the common sense of saving to get what they want. Really? Yes really! This old fashion train of thought comes into play quite often with millionaires. Save to buy what you want. Budget your income. Save for a rainy day. All of these often times, old fashioned beliefs, are used by almost 90% of millionaires in today's society.
Many believe millionaires to be big spenders, but in reality, they are light spenders and heavy savers. Remember what we stated at the beginning. Net worth is your assets minus your liabilities. What does this mean? If you want to increase your net worth, you do so by minimizing your liabilities (paying off debts), and increasing your assets (saving). Wow, serious? That is it? I thought that the only way I could be a millionaire is by winning the lottery, or being a doctor or NBA star. No. Many of today's millionaires generally earn between $45,000 and $150,000. Can you believe that? Becoming a millionaire is more about behavior and less about income. Learn to control your money, and you will find yourself a millionaire in the long run. Notice I said the long run. This blog is not a quick and easy way of becoming rich. It is a simple, but long process that always has a good track record!
In conclusion, who is a millionaire? Not who you think. How do I become one? Simply save your money and reduce your debt. Bet that was the simplest way to become a millionaire you have ever heard.