Made In Central PA: The Millionaire Next Door

In the mid-1990’s, Thomas Stanley released his New York Times bestselling book, “The Millionaire Next Door.” In his book, Stanley profiles successful Americans and their rise to affluence, a process I often refer to as “Un-Assumptive Wealth.” Let’s look at the behaviors and tendencies of the Central Pennsylvania “millionaire next door.”

Live on Less Than You Make: Pay Yourself First

The first millionaire I met as a financial advisor was a long-haul truck driver. I often ask clients how they achieved their success and was very interested to hear what he had to share. He explained that his mentor told him to set up a savings target and pay himself first. He prioritized saving the agreed upon figure in the financial plan by establishing an automatic fund transfer every two weeks to coincide with his paycheck. In fact, he developed his monthly budget after he outlined his savings goal. Anytime he received a raise, 50% of the raise went to a financial goal such as increasing savings or debt reduction. He paid himself first.

Debt is a Powerful Tool: If Managed Correctly…

You’ve probably also heard Robert Kiyosaki, author of “Rich Dad Poor Dad,” proclaim that he loves debt. Or you’ve heard Grant Cardone, self-proclaimed Real Estate mogul, proudly outline how much debt he currently owes. While these individuals are highly successful, they are the outliers. In most cases, the everyday millionaire understands that debt can be a powerful financial tool, but it’s a slippery slope.

A financial advisor will tell you that there is good debt and there is bad debt. In my experience, self-made millionaires use debt sparingly and do not use debt for depreciating assets. For example, I consider a mortgage a good debt because it allows you to purchase a home and start building equity. Often a house is an appreciating asset. On the other hand, money owed on a credit card is what I would consider bad debt. Don’t get me wrong, I use credit cards to purchase things on Amazon due to the fraud protections afforded by Visa and Mastercard. There can also be a nice cash back feature associated with credit cards as well. Whether I purchase a 10 lb slide hammer to remove the axle on my truck or new water bowls for my beagles, I pay the credit card’s balance in full each month because I cannot justify paying interest on a depreciating asset.

Play the Long Game: Un-Assumptive Wealth

Most of my clients are self-made millionaires, and very few have inherited their wealth. This isn’t limited to a specific career or income range. In fact, we have a very diverse client base ranging from professional services such as dentists and lawyers to skilled trades such as concrete services and plumbers. The most common mindset for these successful individuals was knowing that they’re playing the “long game.” Becoming wealthy isn’t a get rich quick scheme. Our most successful clients had a long-term vision. Often, a financial plan was used so that they could start attacking their goals, slowly over time.

Another common theme among unassumptive wealth is that those who do well are not trying to keep up with the Joneses. While there are many examples, I often see un-assumptive wealth in the form of used vehicles with low mileage, rather than paying for a new vehicle. The cost savings can then be allocated to additional savings. Remember, compounding interest is the 8th World Wonder. Use time to your advantage and save early whenever possible to work towards becoming the Millionaire Next Door. 7

Bryson Roof, CFP, is a Financial Advisor at Fort Pitt Capital Group in Harrisburg, and has been quoted nationally in various finance publications including CNBC, U.S. News & World Report, and Barron’s.