The practical, unsexy steps it takes to actually become a millionaire

Save some.
Save some.
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You think the title’s a bit much, huh? Don’t blame me—blame Thomas J. Stanley.

Who’s that you ask? Thomas was a writer who spent 20 years studying American millionaires and patterns in their habits. The result of all his research was the bestselling book, The Millionaire Next Door.

If you don’t have time to read the whole thing, you’re in luck! This post is for you. I tried to condense the book’s ideas into five rules.

Rule #1: Think long term

If you study Warren Buffett you’ll find out he’s someone who’s in it for the loooong term. Harnessing the power of compound interest and picking amazing businesses, Warren is today the third richest man in the world.

But none of it was overnight. Here’s a basic overview of his net-worth over the years:

  • $20,000 by age 20
  • $1 million by age 30
  • $25 million by age 40
  • $35o million by age 50
  • $3.8 billion by age 60
  • $36 billion by age 70
  • $55 billion by age 80
  • Today’s he’s 86 years old and worth $73 billion

Now, it takes a lot of factors aligning perfectly to get anywhere near that level. And even if you nor I don’t have access to all of them, we do most certainly have access to some of them! In this case, I’m talking about patience and thinking long-term.

Most experts on wealth agree that the earlier one starts investing one’s income, the greater the opportunity to accumulate wealth.

— Thomas J. Stanley

By the way, long-term thinking doesn’t apply only to your savings. It also applies to your expenses. You shouldn’t think of your $100 phone plan as “just $100 a month.” Instead, you see it as stealing $1,200 from you every year and $17,300 from you every decade.

This is an outrage! As we learned before, having $17,300 extra dollars can remove years from your working life.

From now on, to calculate any expense long-term, use these two formulas (borrowed from this post):

  • To calculate a weekly expense compounded over ten years, multiply the price by 752.
  • For a monthly expense, multiply by 173.

This will help you with silly spending. Think your daily $5 Frappuccino is harmless? Well if you drink it five days a week, that’s $25/week. Which means you’re stealing $18,800 from your future self and giving it all to Starbucks! 

So from now on, you won’t think about savings or expenses just in terms of this week or this month, but in terms of the next 10 years.

Your goal is to sacrifice high consumption today for financial independence tomorrow. Think long-term.

Rule #2: Live well below your means

Twenty years ago we began studying how people became wealthy. Initially, we did it just as you might imagine, by surveying people in so-called upscale neighborhoods across the country. In time, we discovered something odd. Many people who live in expensive homes and drive luxury cars do not actually have much wealth. Then we discovered something even odder: Many people who have a great deal of wealth do not even live in upscale neighborhoods.

— Thomas J. Stanley

This might be the most important rule of all.

Frugality is probably the number one thing most wealthy people have in common. Especially before they became rich.

One thing Thomas noticed is that a lot of millionaires live on something like 10% of their income.

Everything they own, their house, their cars, even boat, doesn’t surpass 10%.

You can apply this thinking too! It’s all relative to your income at any given moment. Doing any differently means you care too much about how you look—which brings us to our next point.

Rule #3: Know that financial independence is more important than displaying status

If Instagram is any indication, this is probably where most people struggle.

Did you know that people spend money they don’t have just to look good in front of other people? One of my biggest pet peeves is the concept of credit, but that’s for another day.

For now, let’s take the insane concept of leasing. If you lease a car, this clearly means you cannot afford it. The silliest statistic is that 45% of people with fancy cars are leasing. Most people you see driving unnecessarily fancy cars cannot even afford them!

But the lavish lifestyle sells TV time and newspapers. All too often young people are indoctrinated with the belief that “those who have money spend lavishly” and “if you don’t show it, you don’t have it.”

— Thomas J. Stanley

Firstly, you now know that really wealthy people are frugal. Especially before they become rich.

Secondly, know that advertisers spend millions of dollars hiring psychology experts just to make you think you want to buy something you don’t need.

And it works!

I’ll try to break this spell. From now on, whenever you think about buying something you don’t really need, I want you to think of Kanye West.

Why Kanye West? Here’s why:

Kanye in 2012:

Break records at Louis, ate breakfast at Gucci


You know, white people get money, don’t spend it
Or maybe they get money, buy a business
I’d rather buy 80 gold chains and go ign’ant!

Kanye four years later:

Stop trying to appear wealthy. It’s much better to become wealthy instead.

Rule #4: Allocate your time, energy, and money toward building wealth

On average, millionaires spend significantly more hours per month studying and planning their future investment decisions, as well as managing their current investments, than high-income nonmillionaires.

— Thomas J. Stanley

This is pretty self-explanatory: Building wealth is the result of studying wealth and applying those principles.

This reminds me when Lewis Howes asked Daymond John (from Shark Tank) what three things Daymond’s billionaire friends have in common. Out of his three answers, my favorite was:

They [Billionaires] write down everything. […] They physically write down everything. I remember one of them said to me “the dullest pencil will always remember more than the sharpest mind.”

[…] Usually what do they write? I noticed that they write how to save the most on taxes. They usually write that because tax codes change often and investments have certain tax benefits (or not).

They look at it like this, “Well I could put in my pocket $200 million a year. I could either go and start a new business, […] or how do I save 30–40% on taxes that I’m gonna have to pay away? I already have the money, why lose it?”

— Daymond John

Study. Study. Study. Invest your time in learning and studying how to save or make more money. You’re already off to a good start reading this series.

Rule #5: Have more than one source of income

This is the hardest one for most people so I left it for last.

It all comes down to reducing risk. If you’re only living off of your salary, you’re being risky.

What is risk? Having one source of income. Employees are at risk. They have a single source of income. What about the entrepreneur who sells janitorial services to your employers? He has hundreds and hundreds of customers… hundreds and hundreds of sources of income.

— Thomas J. Stanley

James Altucher has calculated the average millionaire has seven sources of income. I can see how that might make sense for the average successful business owner. Off of my head, here are seven sources of income she might have:

  1. Earned income (salary)
  2. Profit income (business profit)
  3. Rental income (real estate)
  4. Royalty/patents income (depending on your business)
  5. Capital gains income (if you sell an asset for more than you bought it for)
  6. Dividend (4% every year on average in index funds)
  7. Interest (lending money to someone else)

However, I want to be clear. Business is not for everyone.

If a business is not for you, remember that anyone can become financially independent by saving money and investing it for a long time. However, since the book was about millionaires, I had to mention this part: The best way to become a millionaire is by being self-employed. After all, 62% of American billionaires are self-made (the rest had some inheritance).

It makes sense—a salary won’t make anyone rich. Financially independent, yes. Rich, no. I talk about financial independence, the book talks about rich people.

Relax, it all depends on your personality. Which is why I left this part for last.


One final detail I noticed from the book was the effect your partner will have on your finances.

I’ve seen several cases of someone starting with a lot of money and losing it a few years later because their partner was a hyperconsumer. Can you think of one?

Most people will never become wealthy in one generation if they are married to people who are wasteful. A couple cannot accumulate wealth if one of its members is a hyperconsumer. This is especially true when one or both are trying to build a successful business.

— Thomas J. Stanley

Remember Jim Rohn’s words: You are the average of the five people you spend the most time with.

Well dear, you’ve officially acquired new knowledge! This covers today’s lesson.

This post originally appeared at Medium. You can find more at