A Tale of Two "Millionaires"

How can you tell if somebody is a millionaire? Do they drive expensive cars? Have large homes in exclusive communities? Work in lucrative career fields?

Some do...obviously. Yet the typical American millionaire does not, according to the book The Millionaire Next Door by Thomas J. Stanley, PhD, and William D. Danko, PhD (ISBN: 0-671-01520-6).

Allow me to tell you a story...actually two stories of two very different "millionaires".

Story #1

Once upon a time there was a beautiful girl who was attending high school. She was smart, funny, athletic, charming...just all-around amazing! Okay enough about me...the point is I had this guy friend who lived in a very expensive part of town. His house, by most standards, was HUGE! His parents drove expensive cars, and their home was nicely furnished. In my mind, they were RICH.

My family, on the other hand, was struggling. My dad had been out of work for two years and wouldn't find a full-time job for another year. As soon as I turned 16, I started working part-time after school just so I wouldn't have to ask my parents for anything. My older siblings, now adults, were all working and living at home so they could help pay the rent. My mother worked full-time to provide some income and health insurance, but since she didn't have a college degree and only limited work experience, she wasn't qualified for any high-paying jobs. We lived on whatever income we could muster up, a variety of loans, and charity. Needless to say, it was stressful for everyone. So when I saw my friend's family, I knew they were rich. I assumed that nobody would buy things like that unless they had the money to pay for it.

One day my friend and I were talking about buying something, and I told him half-jokingly, "Oh you can afford it! You're rich!"

In a serious tone, he replied, "Actually...I'm not."

I said, "Please...I've seen your house and everything. I know what cars your parents drive. You guys ARE rich!"

He was quiet for a moment, looked down, and then sighed like he was just caught in some sort of lie. When he looked up, he told me that the truth was his family was practically broke. His parents couldn't afford their house, cars, or lifestyle, and he didn't know what they were going to do because they owed so much money. He called their life a "sham".

My jaw dropped. I learned at that moment that just because somebody "looks" rich, it doesn't mean that they are. Debt allows us to pretend that we can afford things we actually can't. We are borrowing money to buy something because we don't have the cash to pay for it.

Story #2

Sometime later, I was driving home from my grandpa's house with my mother. During our visit, my grandfather told us about a trip he was planning for him and his wife. They were going someplace exotic for two months, and ever since I could remember, they had taken trips like this 2-3 times every year.

My grandfather lived in a very modest, paid for, three-bedroom house in a blue-collar neighborhood. It was your typical "grandma" house that probably hadn't been re-decorated in 30 years. There was an older, well-cared for Jeep Cherokee parked in the driveway, and I remember riding in the back of their 1970's station wagon as a little girl. Every time we stopped by, grandpa's wife would tell my mom about the great deals she found at the local discount store on things like Tupperware and shoes. They did have a very nice RV parked in the driveway, but besides that, the word that came to mind when I thought of my grandparents was frugal.

Anyway, as we drove home that day, it finally occurred to me that grandpa must spend a lot of money on trips every year. I asked my mom how much she thought they cost. She guessed $20-30k for the two of them.

"What?!" I exclaimed, "How is that possible? How can they afford that?"

Slightly confused, my mother looked at me for a moment before responding, "Uhhh honey...grandpa's a millionaire."

"How can he be a millionaire?" I asked incredulously, "Have you seen where they live? They clip coupons for crying out loud!"

She didn't answer immediately so I thought about this unexpected revelation for a minute before asking, "Well, how did he become a millionaire? He certainly didn't inherit it. He came from a family who worked in the local mine for decades. He came from practically nothing." My mother said that when he came home from WWII, he went to college on the GI Bill, worked hard as an accountant, and managed his money well so when he retired, he had a lot of it.

Later when I read the The Millionaire Next Door, I thought about these two experiences. My grandfather was the typical millionaire next door. His money habits of saving and investing made him wealthy, not living an extravagant lifestyle like my friend's family.

I've learned that looking rich and being rich are two different things. Often when we look rich, we are not. As soon as a job is lost, a medical emergency occurs, or something else throws us off-balance, the financial house of cards comes crashing down. I believe the real test of wealth involves asking myself an important question: if something like that happens, will I be worried about how I'm going to pay for things? If the honest answer is "no", then I'm probably doing alright. If the answer is "yes", then maybe I need to re-evaluate my money habits.

The truth is our habits are ultimately just a reflection of our values. Am I more concerned about my financial well-being or what I think my family or friends think of me? When we live to impress others, we only end up dissatisfied with ourselves. It's a no-win situation. The flip-side is that no matter what our current situation is, we can choose to be wealthy today by realigning our financial values to match those of a "typical" millionaire next door.

I mean...come on...if my grandfather could do it, what's stopping the rest of us?