As a prelude to writing The Millionaire Next Door, I published an article in Medical Economics entitled “Why You’re Not as Wealthy as You Should Be.”
Simply put doctors could and should accumulate much more and at a much younger age.
In the same article, I pointed out that for every one high income producing doctor who is in the balance sheet affluent category, there are two in the income statement affluent category. It’s just the opposite for self employed business owners. Similar results were detailed most recently in Stop Acting Rich.
Attitude is the greatest difference between millionaires and the rest of us. I’ve also learned that the rich follow certain rules.
And one of these rules is especially important given the current political climate surrounding income tax issues.
Rule #2: Emphasize net worth; de-emphasize income. Most millionaires measure success by net worth, not income. Instead of taking their money home, they plow as much as they can into their businesses, stock portfolios and other assets. Why? Because the government doesn’t tax wealth; it taxes income. And the more income you bring home for consumption, the more the government takes.
The typical millionaire next door has a total annual realized income that is only about 8% [median] of his total net worth; the average is less than 7%. This is a rather consistent finding across all the nationwide surveys that I have conducted except for those in The Millionaire Mind. Actually these people are living on significantly less than 8% of their wealth because they save over 15% of their income plus they pay more than their fair share of income tax.