“Congratulations! You play a fantastic offense” This was said sarcastically by Thomas J. Stanley in his famous book, The millionaire next door. I have not read or listened to this book in over eight years, but I still remember this phrase. That one, and the millionaire who says, “I drink two kinds of beer. Budweiser and Free.”
The message of his book is that you should watch your spending more tenaciously than increasing your income. Obviously, it is a combination of income and expenses that creates wealth, but controlled spending is much more important. As long as you spend less than your income, you will keep going and constant progress will make you rich. The problem I often see is that people spend what they earn, or worse, they spend more than they earn. In any of these scenarios, at best, it will keep up, but will most likely regress. Many want to be investors and entrepreneurs, drink the Kool-Aid to get rich and focus all their energy on increasing income. That’s what sells training programs, tutorials, and advertising on television shows. With energy and focus comes success, many of these entrepreneurs and investors see results. And with the positive results of higher profits comes … higher spending!
I am lucky to live in a great neighborhood. Most of the people in the neighborhood are high-income people, but several of them live beyond their economic means. It is not uncommon for me to see neighbors moving out of the area because they can no longer afford to stay. They are the same with new cars and wacky parties. It’s a look at me attitude and peers feed off the pressure to keep up. This creates a small spiral of friends who live outside their means. But hey, at least they’re all backing down together.
Those who live below their means feel the pressure to spend or fall behind. And on the surface, many of them do. One challenge of living below your means is that it takes years before you realize the benefits. During those years it seems that you are missing something. I see it so clearly and I understand the pressure, but I also see a high percentage of our aging population that should be retiring, working hard. They are stressed, busy, and eager to get ahead.
If you haven’t already, you owe it to yourself to read The millionaire next door. This book really sank me into the power of financial advocacy. To limit expenses and protect your profits. I can live in my neighborhood, support my family, enjoy my time away from the office, and many other benefits due to the control I had over spending as my income increased. As you invest your earnings in income, rather than spending it, you will witness exponential growth in income.
If I remember correctly, the quote from the book “Congratulations! You play a fantastic offense” was referring to a person who was winning big. He earned more than his peers, but he wouldn’t make a mortgage payment if his income stopped. That’s not a comfortable life, but I was proud of it. If I could help you digest some financial advice, it would be to focus on defense rather than offense.
Travis and I read the book recently, Set for lifeby Scott Trench. This is another fantastic book that focuses on the right way to build wealth and retire early. It is a simple formula. Spend less than you earn and invest the difference.
