“The less affluent have fallen into the elite luxury brand trap that keeps them from acquiring wealth. To get out of it, you must emulating the working rich as opposed to the super elite “Thomas Stanley
Stop Acting Rich | Thomas J. Stanley
The third book in his ‘millionaire’ series, released in 2009 amidst the Global Financial Crisis and ‘Great Recession’, Stop Acting Rich addresses one of the fundamental mindset deficiencies that stops most people from becoming millionaires: They act rich.
Stanley is an accomplished author and respected authority on wealth mindset, and in Stop Acting Rich he explains the simple act of spending is what prevents the majority of people from becoming rich;
Stanley provides a basic formula for what your Net Worth should be; It should be equal or more to 10 percent of your age, multiplied by your annualised total household income. If your Net Worth is above this number, then he considers you are wealthy. He then further categorises the wealthy into three main categories;
- Glittering Rich (GR): Hyper wealthy, super consumers who can never out spend their portfolio income. “New York penthouse owners“
- Income Affluent (IA) – High income earners with low net worth. They idolise the Glittering Rich and try to copy them, in doing so they fail miserably financially. “Big hats, no Cattle”
- Balance Sheet Affluent (BA): High Net Worth individuals and families who planned, and continue to be, wealthy by disciplined saving and investing. “Quiet achievers”
Stanley provides some startling mathematical evidence regarding taxation too; he found on average that an Income Affluent (IA) wealthy individual paid nearly $7000 (or roughly 8%) more tax every year than a Balance Sheet Affluent (BA) individual. This is due to the IA individual being in the government income tax cross-hairs! He proposes that this disadvantage to IA’s will only worsen with time given the propensity for tax rate increases.
“The only way you will become rich is to play extraordinary defence like those millionaires at the other end of the continuum (Balance Sheet Affluent): by living well below your means, by planning, savings and investing. We need to stop acting rich, and you need to adopt the values and lifestyles of self-made millionaires.“Thomas Stanley
When discussing millionaire mindset against consumption, Stanley found that intrinsic motivation was by far the strongest driver and indicator of financial success;
“Most millionaires are motivated by their need to gain financial independence. For most, consumption is a nice side benefit to becoming wealthy. It is not the most compelling reason why these people become financially successful. When asked, they will tell you that given the choice, they would readily unload their consumer goodies before ever giving up their independence.“Thomas Stanley
Finally, I will leave you with one last powerful quote which Stanley makes when discussing the lifestyle habits of millionaires, particularly BA individuals;
“The bottom line is that your choice of house and neighbourhood will have the biggest impact on your balance sheet. Your choice of home, more than anything else, will have the greatest impact on your spending — either a lot or not so much.”Thomas Stanley