The Millionaire Next Door

Building Wealth & Minding Your Own Business

One of my students gave a presentation on how to use goal-setting theory to reach financial freedom and at the end he said, “but you’ll never save money if you don’t MIND YOUR OWN BUSINESS,” and this really stuck with me. 

In the Twitterverse yesterday, one of my fellow industrial-organizational psychology friends retweeted this quote from another. Perhaps the quoted student has a future in the field of financial planning! It was a perfect reminder for this time of the year: ignoring the frenzy of shopping and consuming to ensure financial goals are met.

It was also great timing as I was preparing for an interview with the Financial Residency Podcast, talking about the trends we see in physicians and other medical professionals related to how they transform income into wealth. Physicians and surgeons earn more than four times as much as the average American each year ($210,170 compared to $49,630…note these are averages and not the median). There are approximately 650,00 physicians and surgeons in the United States, and they have typically fallen into a (somewhat justified) stereotype of high-income earners that are challenged in building wealth. We see this in our trend research at DataPoints. The majority of physicians fall into the 33rd percentile or below on our assessment of frugality. They also tend to score low on financial acumen, a measure of knowledge and expertise in investing and financial management. Likewise, their median net worth is negative, due in most part to their student loans and age. How will these young physicians be able to transform that high income into wealth?

The facts reminded me of this blog post my father wrote in 2013 discussing trends over time related to physicians.

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.

Those In High-Income Careers Must Ignore Their Peers

If I can take an inferential leap for a moment, I’m assuming the wise student quoted above was referring to ignoring (minding our business) what others drive, wear, and buy. If we can ignore the consumer behavior of others, and focus on our own financial goals, we will not spend like those around us. This is one of the main tenets of my father’s lifetime of research, and we’ve found this empirically through our research at DataPoints, demonstrating the relationship between being indifferent to what others are doing and the ability to transform income into wealth.

What’s incredibly challenging is when our neighbors, friends, friends of friends through social media, and coworkers are hyper-consumers. And, it may be even harder when you’re in a well-defined, professional occupation (i.e., physicians, lawyers, executives). There’s a stereotype that many buy into about what doctors should be driving or where they should be living. Consider this: the most ever spent by millionaires in our latest nationwide study on a watch was $300. Physicians in our study paid $700.

Careers Can Keep You From Building Wealth?

Another reason very well-educated people tend to lag behind on the wealth scale has to do with the status ascribed to them by society. Doctors, as well as others with advanced degrees, are expected to play their part.
The Millionaire Next Door, p. 75

To build wealth, be a contrarian. Don’t play the part. Let’s reconsider the quote from the wise student mentioned earlier. To build wealth, we need to mind our own business and focus on what it takes to transform that high, physician salary into wealth. Ignoring what Dr. Jones is driving, where she is living, and that fancy watch she just bought is critical to building wealth.

3 thoughts on “Building Wealth & Minding Your Own Business”

  1. I have bought everyone of your fathers books, and I love them all, his research is so insightful, and helped me tremendously as a Millionaire. I found your post interesting but I want let you know, I am sure your student borrowed that saying “mind your own business” from Robert Kiyosaki. Kiyosaki was talking about build your own business by learning and educating yourself and not just build your employers business. He has it in his books and articles.

  2. I’m a strong advocate of Dr. Stanley’s and now Sarah’s work. I find my success is just to look for every opportunity as a chance to invest in the US markets.

    Just be content with your daily chores and efforts; seeking opportunity to translate effort into liqudity; and to put appropriate time into selecting growth ETFs, funds and stocks over your career.

    Keep your nose to the grindstone and you will have multiple millions and peace of mind, giving generously as well and living the American dream.

    Sam, 58, Pittsburgh

  3. Most of these financial failures, or underachievements, as it were, are the result of personal insecurity and a “lemming” philosophy of life. To care to such an extent what another has or is doing is immature at worst and childish at best. There is always someone better looking, has a “hotter” wife, is in better physical shape, makes more money, has a bigger house and a more expensive car. How about we grow up and get past it. If one doesn’t then they, god willing have a long life, will surely suffer the consequences in later years and become a burden to family and society.

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