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The millionaire next door – True or False?

HOW will you determine the financial worth of your next door neighbour? Can you conclude that he/she is a rich or poor person by observing his lifestyle? Not really.

There is much more than what meets the eye. Let us explore further. Do you see any conflict between these two statements i.e. look rich or be rich? Someone would say that both of these positions or circumstances are one and the same.

It can be further argued that if someone is rich then quite naturally the said person would also look rich and not otherwise. Is it so? Not really. In reality there is a big difference in looking rich and being rich.

So let us try to clear this paradox by taking some real time examples. There are many instances you might have come across in your daily life when you got carried away by the lifestyle of your next door neighbour.

This person is staying in a bigger house than yours, driving a luxury car, and maintains a fleet of servants at his home. As per your perception, your next door neighbour is definitely rich as he seems to be demonstrating the same by his/her outlook.

But have you ever peeped into his financials? And if not, then how have you arrived at a conclusion that your next door neighbour is rich? You have done so by merely observing his lifestyle.

There are many day-today instances where someone known to you [who happens to be appearing rich in your eyes and thus carries a tag of a rich person], and then suddenly one day you may come across a public notice from a bank wherein he/she has defaulted in servicing a big ticket loan.

After reading such public notice in the newspaper, although the outlook of that person may continue to remain the same [as was practiced earlier], but will you still consider this person as “rich”. Probably not!

Why? Because the person had displayed his richness not out of his own wealth but out the loaned money solicited from a bank. Now let us reverse the situation by taking the example of another person who generally travels to his office in a public transport.

Every day you find this person standing at a particular bus stand waiting for the arrival of a bus. You have been observing this person since months together and did not find much change in his lifestyle.

And therefore you would easily conclude that this person is a middle class citizen like you.

Suddenly the bombshell falls when someone informs you that the same man whom you had been observing for a long time travelling by a public transport is in fact the owner of 4-5 buses.

Would you believe this? You may not but this is not going to change the reality. The person is ‘rich’ irrespective of the fact whether you believe it or not. This is the paradox I was referring to when in the beginning I mentioned the punch line i.e. “look rich or be rich”.

I hope with the above stated two examples you might have understood the underlying difference between these two contrasting statements.

Thomas Stanley and William Danko, in “The Millionaire Next Door”, explain that most wealthy people and self-made millionaires drive used cars, live in average neighborhoods, wear average priced clothes as well as watches and are very careful with their money.

In addition, very few of them buy boats, recreational vehicles, second homes, personal airplanes or invest in expensive vacations. Stanley and Danko point out that there are “those who look rich, and those who are rich.”

Your job is to be one of those people who are genuinely rich, rather than those who spend a lot of money but who have very little in their bank account. Truly wealthy people develop the habit of “getting rich slow” rather than “getting rich quick.”

To assure this, they have two rules with regard to money. Rule number one: “Don’t lose money.” Rule number two: If ever you feel tempted, refer back to rule number one which clearly states - “don’t lose money.”

Wealthy people spend much more time thinking about their finances than people who remain poor. The average adult spends 2-3 hours each month studying and thinking about their money, usually at bill paying time.

The average self-made millionaire, by contrast, spends 20-30 hours per month thinking, studying and planning his finances. This is what differentiates a rich person from the poor ones.

Majority from the current generation believe in displaying their fake richness rather than working towards becoming rich. Fast financial decisions are usually poor financial decisions.

Develop the habit of taking your time, of moving slowly, of finding out every detail of the business or investment before you ever think of writing a check. Never allow anyone to pressurize you into an investment decision.

Never allow yourself to feel that a financial investment decision is urgent and must be made immediately. Always remember - “Investments are like buses; there will always be another one coming along.”

Therefore my humble request to you, please stop living in the fool’s paradise by working overtime to look rich, instead work hard to become rich.

I am sure by now the paradox between the two statements is crystal clear; and thus I leave the choice squarely on you to decide whether to look rich or be rich.

Cheers!!!

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Author: Jagjit Singh

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