At least one more thought on the books I finished by Thomas J. Stanley on millionaires. (They include: The Millionaire Next Door: The Surprising Secrets of America’s Wealthy, The Millionaire Mind, and Stop Acting Rich…And Start Living Like A Real Millionaire).
In all of Stanley’s research on the wealthy, he found that there’s an interesting relationship between someone’s income and the cost of their house. You might think higher income = more expensive house. And that’s true in a lot of cases.
Take one of the neighborhoods in your city and you’re likely to find a lot of the people that live there have big incomes (think hundreds of thousands dollars a year – maybe even a million dollars year).
Many people who want to seem wealthy, buy big houses. But there are problems with that. Bigger houses mean not just a larger purchase price, but they also mean more maintenance expenses. And you’re likely surrounded by neighbors that also spend as if they are wealthy. That means private schools, boats, cleaning services, fancy furnishings, faster cars.
It’s not that you’re required to do those things, it’s just that you’re in a pool of people who do those things and thus, you’re more tempted to think that’s normal. People expect it of you.
And doing all those things require money. So you make lots of money, but you spend lots of money too.
But if you step down a notch or two and go to less expensive (but quality built homes), and that’s where you’ll find the real millionaires. Some of them even live in the same neighborhoods that they did as children. Few people know that they’re wealthy and, so, there is no pressure to keep up. Public schools are good schools. No one else has a boat, so why would they? They can clean their own house, mow their own yards and why replace perfectly good couches and bedroom sets just because they aren’t new? If you buy a good car like a Toyota Camry, it’ll last at least a decade. It’s quite roomy too!
He found housing costs to be correlated with wealth. The more wealthy a person truly is, the less of their wealth they’ll spend on their housing. They know the value of quality and safety and, more importantly, good enough.
It made me appreciate the house that we have (even more). Conventional thinking out there says that we could buy a house 3 to 4 times the price of the house we have. When we were looking at houses (and as I continue to keep my eye on the market), that isn’t close to what we’re looking at. We aren’t even looking to double the cost of our house.
It just reminded me to value quality and to know what is good enough when it comes to housing. Right now, I have a house that’s not too big, not too small. It might not be in line with our income, but it’s just right!