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ANALYSIS: I’ve mentioned many times that one of my favourite books is The Millionaire Next Door by Dr. Thomas Stanley who says two of the most important identified themes in his research when it came to wealth creation were: the importance of living below one’s means and the efficient allocation of time, energy and money.
The Millionaire Next Door was the unassuming person who could afford to drive a BMW but instead elected to drive a less flashy car, often seen wearing a Timex over a Rolex and designer duds simply never worn.
I have seen this behavior in the past. When I was with TD Wealth Management and speaking to a group of very high net worth individuals, one person said it took him 45 minutes to get to the event in London, Ontario. Why? Because he chose to take public transit over owning a car. There are countless examples like this.
I met an individual recently who proudly said his sweater was 15 years old and in mint condition. He also shopped around for introductory credit card offerings to the same extent he shopped around for the best gas prices. He had a net worth in excess of $50 million. The millionaire next door believes that financial independence is more important than displaying social status. They walk the talk.
According to research conducted by DataPoints, however, today’s social media environment is making it even harder to resist the temptation to spend. People are spending money trying to keep up with the latest fashion trends, exotic travel and unique experiences. All of this conspires to compromise your financial independence in an effort to look good on social media. This puts a whole new spin on 'Keeping up with the Joneses' or the Kardashians, in this case.
Rather than focusing on your “social status,” focus on your “financial status.” Look at where you are spending your money. Small yield, huge results. We have all heard this before – no one will remember the car you drove, the home you lived in, the clothes you wore. But they will always remember how you made them feel.
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As the Chief Financial Commentator for CTV News, Pattie Lovett-Reid gives viewers an informed opinion of the Canadian financial climate. Follow her on Twitter @PattieCTV