Millionaire Spending Habits

Millionaire spending habits are a real surprise for many: most millionaires don't spend like millionaires - instead, they tend to be very frugal! Surprised? Don't be - it all makes perfect sense. As we already know, most millionaires don't start off rich, but they come from families of average - or even below average - income and wealth. They learn to work hard to make a living, but they also - and maybe more importantly - learn to live below their means and be outright frugal. This is what makes them able to accumulate savings continually, and continuing to invest these savings is what eventually makes them millionaires.

Millionaires tend to develop their millionaire spending habits early in their lives but make their first million only by the time they are in their forties or fifties. This is why most of them also stay rather frugal - especially relative to their wealth - which again contributes to their ability to continue to accumulate wealth. It really is a virtuous cycle: the wealthier they become, the more they are able to save and then invest, which again makes them more wealthy. For many outsiders, though, this frugality seems to make no sense: why would you be so careful with your money, when you have so much of it? Yet, for these millionaires it's really part of their way of life, and it's the habit that keeps making them wealthier and wealthier.

Despite their overall frugality, many millionaires are selectively spend-thrift as well. They have favorite hobbies and causes for which they are happy to spend away - very uncharacteristic to their spending habits otherwise. To me, this just shows that most millionaires view their wealth as something that enables them to do things that are important for them and make them happy, rather than a value in itself. While they don't get much pleasure from spending money to buy expensive things, they do enjoy using part of their wealth to advance causes that are important to them, whether these are their own children or grand children, charities, educational or health care institutions, hobbies, or anything else.

Various kinds of charities are certainly major beneficiaries of these "weaknesses" in millionaire spending habits. Not only do these people use some of their wealth to support causes that are important to them, but many of them - especially later on in their lives - use considerable amounts of their time, skills, and effort for the benefit of these charities. For most, this is just something they probably would have don in any case, but their wealth just gives them the financial freedom as well as the increased freedom to choose how to use their time, which enable them to do more of this than would have been possible otherwise.

Children - both millionaires' own children and older millionaires' grand children - are another big beneficiary of "soft spots" in millionaire spending habits. Here, however, the story is more mixed and comes with a in-built controversy. On one hand, millionaires want to use their wealth to give their children and grandchildren opportunities that would not be possible otherwise - weather related to education, professional activities, hobbies, or other things. At the same time, many have a concern - and for a good reason - for not spoiling the children in the process. Many find a good solution in the old adage of not giving the person fish but rather teaching him or her how to fish. Contributing to their kids' or grand kids' education is one of the most common ways for millionaires to try use their wealth to support their children financially without spoiling them.

Obviously, millionaire spending habits are not uniform throughout the millionaire population. While the overwhelming majority is frugal, there are certainly enough of those who spend "like millionaires" - the expression didn't come from nowhere. There is a relatively small but very visible set of millionaires who want everyone to notice how well they've done and how much money they have. Besides looking for the limelight, these people will spend all they can in order to impress themselves and others. While for most this is the reason why they will eventually lose their wealth once their income dries up, some of course will be able to maintain it for a very long time. Don't be fooled by this, though: most of these apparently wealthy people aren't really that wealthy, but instead they are just benefiting from - often temporary - high income. The vast majority of millionaires - and these are typically the ones you never even knew to be millionaires - are not like this, even if this visible group of attention-searching high-income folks would easily trick you to believe the opposite.

For a richer picture and more details on millionaire spending habits, I warmly recommend Thomas Stanley's and William Danko's "The Millionaire Next Door". This book is a result of an extensive study and data gathering on millionaires, and a big part of it focuses on analyzing and explaining millionaire spending habits. There is also a recent sequel to this - Thomas Stanley's "Stop Acting Rich... And Start Living Like a Millionaire" - which is another great read on the same topics. While it's up to you to decide whether you want to be like most other millionaires or whether you have your special own way to do it, these books help you to understand what millionaires typically are like, and why they are what they are.

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