Prior to writing The Millionaire Next Door I published a series of articles that dealt with the topic of wealth in America.  I recently reviewed one of these, Why You’re Not as Wealthy as You Should Be.  It was originally published in Medical Economics and then republished by Reader’s Digest. 

Are people with high realized incomes today better at accumulating wealth than those say twenty years ago?  Not really is the clear answer.  Most of what I wrote two decades ago still applies today.  Yes, “even today” high income producing physicians, attorneys, and corporate middle managers are still below the norm when it comes to transforming income into wealth.  And most high income producing couples in general are more of the income statement affluent types than the balance sheet affluent types.

Today (Part I) I will focus upon the key concepts revealed in my original Medical Economics article.  In Part II I will introduce you to Mr. Archer.  He is well versed in the financial ways and means of both physicians and the millionaire next door types.

Many people who live in expensive homes and drive luxury cars don’t really have much wealth.  . . . even odder: Many who do have a great deal of wealth don’t live in posh neighborhoods.  If you make wealth your goal, and not just income, the luxury house you’ve been dreaming about won’t seem so alluring.  You’ll have the [accumulators]attitude.

Wealth isn’t the same as income.  If you make $1 million a year and spend $1 million, you’re not getting wealthier, you’re just living high.  Wealth is what you accumulate, not what you spend.

How do you become wealthy?  It’s seldom luck or inheritance or education or even intelligence that builds fortunes.  Wealth is more often the result of hard work, perseverance, and, most of all, self-discipline.

. . . 80 percent of America’s millionaires are first-generation rich.

. . . the average person with a net worth of $1 million or more is a businessman who’s lived all his or her adult life in the same town.  He owns a small factory, a chain of stores or a service company.  He has married once and remains married.  He lives in a middle-class neighborhood, next door to people with a fraction of his wealth.  He’s a compulsive saver and investor. 

The typical doctor has the income to be a good wealth-builder, but not the mind-set.  Attitude is the greatest difference between the millionaires I’ve studied and the rest of us.

The most successful accumulators of wealth, I’ve found, spend far less than they can afford on houses, cars, vacations, and entertainment.  Because there’s little or no return from these things.  They’d rather put their money into investment or their businesses.  It’s an attitude.

Millionaires also understand that when you buy a luxury house, you’re also buying a luxury lifestyle-with pressures to redecorate frequently, join the country club, and send your children to private schools.  Your property taxes skyrocket, along with the cost of utilities and insurance, and the prices of nearby services tend to be higher, from grocery stores to dry cleaners.

Most millionaires measure success by their net worth, not their income.  In fact, the best accumulators do everything they canto minimize their [realized] income as they build worth. . . . they plow as much as they can into their businesses, stock portfolios, and other assets.  Why? Because, as they frequently remind me, the government doesn’t tax wealth; it taxes income.  And the more you bring home for consumption, the more the government takes.

. . . for purposes of building wealth, income doesn’t matter that much.  Once you’re in a high-income bracket it matters less how much more you make than what you do with what you already have.

. . . some people [the balance sheet affluent] build wealth much more quickly than others.  The top 25 percent put every dollar they can into investments, not consumption.  The typical BA lives on [the equivalent of] less than 6 percent of his net worth.  All the while, of course, he’s reinvesting his additional income and watching his net worth spiral.  That’s the attitude as well.

The best wealth builders pay careful attention to their money.  BAs spend an average of 100 hours a year planning and monitoring their investments.  . . . the slowest savers spend about 55 hours a year-barely more than an hour a week.

It’s a startling irony that there’s an inverse relationship between the willingness to pay for luxury items and the willingness to buy investment advice.  Those who spend heavily on cars, boats, and houses tend to skimp on investment advice. 

. . . the best accumulators are always looking for new investment possibilities like, for example, Dr. M.  He was renowned for buying a parcel of land just before a shopping mall located across the street, and stock in a new bank just as it was taking off.  Where did he get his information?  From his patients.  While rendering care, he learned of investment opportunities before they were common knowledge.  And he was shrewd enough to separate the good tips from the bad.