Most popular perceptions of millionaires aren’t true, according to a decades-long study of millionaires. While many people picture an expensive lifestyle and high-cost cars and homes, that’s not always the reality for many millionaires.
Author and researcher Thomas J. Stanley, and later his daughter Sarah Stanley Fallaw, who continued his research, spent years studying and interviewing millionaires to learn their habits. In their research, they found that many people who have achieved millionaire status don’t follow the popular perceptions.
In Fallaw’s follow-up to her father’s book, “The Next Millionaire Next Door,” she reports on several myths about wealth-building that keep others from achieving millionaire status themselves. Here are three misconceptions she outlines in her book.
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1. You can’t overcome certain obstacles
Most of the people Fallaw and Stanley interviewed weren’t born into wealth. Most had to work, earn, and invest to reach their status. They had to maintain that status through careful planning, frugality, and work.
There are certain things that someone can’t control. This decade, rising healthcare costs coupled with stagnant wages have held people back, and the coronavirus pandemic and its economic impact is a more recent example. Gender and racial wealth gaps also create significant barriers to wealth.
However, excluding external factors, some parts of wealth-building are within our control. “We cannot control costs or governmental policies or the financial markets. We can control what we spend, how we invest, the opportunities we seek, and other aspects of our financial lives,” Fallaw writes.
In her research, Fallaw found that mindset was a big predictor of wealth. “People who believe that they will never become wealthy generally fulfill this prophecy,” she writes.
2. Income is the same thing as wealth
High-earning people aren’t all millionaires. And all millionaires aren’t high-earning, either. Many people think that income determines wealth, but based on Fallaw and Stanley’s research, that’s not the case.
While interviewing for “The Millionaire Next Door,” Stanley talked with many high-earning individuals who hadn’t built much wealth — they’d spent their high incomes on expensive cars, homes, jewelry, and other material items. Oftentimes, people who chose spending over saving and investing fell into a cycle of overspending.
The research they did is clear: income isn’t wealth. Instead, it’s the way income is used that makes someone wealthy.
Choosing to invest and save instead of spending is how many millionaires achieved that status in the first place, their research found. Only income put to work efficiently can truly turn into wealth.
3. Material possessions define wealth