Have you ever wondered what are the common traits of millionaires? How millionaires become millionaires? Where do they live, and what do they drive? What are their values and beliefs? Where do they spend most of their money on?

Welcome to the third post of the millionaire mindset series, where I will answer all these questions and many others for you. 🙂

But, before you continue reading let me recall the two previous post of the series and what we’ve learnt so far:

  1. The Money Blueprint — What it is and why is so important to attract wealth?
  2. Wealth Principles — A comparison of how the rich VS the poor think.

Most, if not all, the information written on this third blog post has been taken from the “Millionaire Next Door”, a well-known personal finance book written by Thomas J. Stanley and William D. Danko. It describes millionaire’s common traits after studying and researching how people become wealthier, specifically having a close look at those who become self-made millionaires.

Having said that, the core principles of the book (or seven 7 traits) are a must understand, and most importantly, a must remember during the whole of my journey. 

1. Millionaires live below their means

Being frugal is the cornerstone of wealth-building, yet that’s not what society thinks being a millionaire is like. If you think about it, we live in an era of consumerism, and such is its power that some economists value stocks according to the consumer confidence index. No buyers = no company profits = no dividends.

The TV and popular press show the rich as being heavy spenders. Singers, artists or athletes are getting around with their private jets, assisting meetings wearing designer clothes, spending holidays on their own islands and so on. This is how it’s sold because this is what sells. People don’t want to watch TV shows or buy junk magazines to watch “boring” millionaires lifestyles playing chess with their kids, they want to watch reprehensible behaviour (take Prince Harry and Meghan as an example). 

Let’s give you some numbers. According to the surveys made by the millionaire next door research, the common self-made millionaire paid about $360 for a suit, while the common inheritor of wealth paid $600.

live below your means
I am sorry to tell you that this is not how millionaires are made


The research also shows that for every 100 millionaires who don’t budget, there are about 120 who do, and more than half of non-budgeters invest first and spend the balance of their income after, or i.e. they pay themselves first. This fact was mind-blowing to me, and since January 2020, besides applying the investing in myself strategy I am also tracking my expenses every month. It takes some time but if it’s a millionaire’s habit it’s worth to at least try it! 🙂


Another important fact is who you marry with. If you are a vivid saver but your partner isn’t, chances are you’ll never become wealthy in only one generation.

Furthermore, this fact can bring some potential issues in your relationship. Money arguments are the second leading cause of divorce, behind infidelity. It is a wealth destroyer, a stable and harmonic relationship will increase the chances of becoming a millionaire. 


Most millionaires are goal-oriented and have a clearly defined set of daily, weekly, monthly, annual and lifetime goals.

The research shows clearly that millionaires have a financial plan and a lifetime goal number. This creates on them financial security that makes them happier than those who aren’t.

On average, they spend more time planning their future investment decisions, as well as managing their current investments, than high-income nonmillionaires.

Their common goal is to become financially independent.

Related content: My Millionaire Plan Statement

Millionaires are goal-oriented
Millionaires are goal-oriented

They don’t work for the taxman

They work for themselves, their families or close friends but NOT for the taxman.

To build wealth, minimize your realized (taxable) income and maximize your unrealised income (wealth/capital appreciation without a cash flow).

The common millionaire has a total annual realised income of less than 7% of his wealth, which means that only 7% of his wealth is taxed.

Tax is a complicated subject (tell me about it as a foreigner!). I think it makes sense to pay a tax advisor for a fee in exchange for an improved allocation plan if unsure. That move could save you tons of money along your financial lifetime.

In a way, that’s another reason why I am reducing my P2P portfolio allocation, to avoid tax payments. For most countries, these investments produce taxable income only. Nevertheless, investing in assets that appreciate allows growing our net worth without having to pay tolls during the millionaire journey.

Related content: Hola Dividend Portfolio

High-status neighbourhoods?

A big part of living below our means is related to the price we are paying for our home.

The research shows that millionaires who live in high-status neighbourhoods can keep up with mortgage payments by realizing less than 7% of their net worth, which is a clear example of living below your means.

Buying a house above your means translates into having to maximise your annual taxable income. This leaves you with no money to invest, and as Rich Dad says, at this point your home becomes a liability. 

Living in less costly areas, allows you to spend less in your home (interest payments), pay less in property taxes, invest in other capital appreciating assets.

Book’s rule of thumb:

If you are not yet wealthy but want to be someday, never purchase a home that requires a mortgage that is more than twice your household’s total annual realized income.

2. Millionaires allocate their energy, time and money efficiently

Time is the most valuable asset and that’s why efficiency plays such an important role in accumulating wealth. As you can imagine millionaires spend their time, energy and money in ways to boost their net worth.

This is correlated with the first trait, living below your means. Budgeting, goal setting, planning, finding suitable investments or purchasing the right house at the right price requires energy, time and money.

They don’t mind spending time consulting with professional advisors, searching for quality accountants and lawyers, attending seminars, reading  books or taking courses. 

Another interesting fact is that they spend less time worrying, specifically about money.  A good plan backed by a robust knowledge base gives confidence, a state of being that gives trust to oneself, and that my friends, it is worth millions!

Finally, where do they put their money? 

Well, 95% of millionaires own stocks, and most have 20% of their net worth in publicly traded stocks. If I compare this with my net worth, at the time of writing my stocks make up the 7.6% of my wealth. This is due to our warehouse, but it’s a clear indication that I should increase my stock allocation over time.

Their investing behaviour is important to highlight. Are they active traders? You’ve probably guessed it. No, they aren’t! Most don’t follow the ups and downs of the market day by day and they hold their investments for the long haul to avoid capital gains taxes. They spend time to make a plan and stick to it. I must admit that this is my weakest point of all, but I am working on it! 🙂

millionaires spend time efficiently
Millionaires spend time efficiently for the purpose of increasing wealth

3. Financial independence > High social status

Choose one over another but most people will unlikely get both. Let me put it differently, choose between your money or your life. 

Do you rather buy depreciable assets over appreciating ones? Would you prefer to buy the latest Tesla car to impress your neighbours or colleagues after a promotion, or buy Tesla shares instead?

Millionaires preference needs no answer, but what about their purchasing behaviours? According to the “millionaire next door” research, the most amount ever spent on a car for 50% of  surveyed millionaires is $29,000. This data was taken 20 years ago, but it’s still shocking. Some of my friends with negative net worth values drive cars of similar value!

In December 2019 I created a Twitter poll and asked the following questions to my followers.

Some people commented that they don’t buy cars from dealers but private owners instead. I wanted it comparable with “the millionaire next door’s” research.

The results in the book are 28.6%, 34.8%, 17.1% and 19.5% respectively. There is a clear divergence, most tweeps are vehicle-prone shoppers while the original survey shows a preference on buying new cars from the cheapest dealer.

However, vehicle-prone shoppers are the most illuminating of all groups. Its members have the highest ratio of net worth dollars for each dollar of income. They have the lowest average income of all the groups, yet, on average they have been able to accumulate more than $3 million!

I think that lines up pretty much with the FIRE community values (vivid savers), don’t you think?

It’s staggering to find out how much a high saving ratio can contribute to building long term wealth thanks to the power of compounding.

Choose, your bl**ody Tesla or your life.

4. Millionaires parents didn’t provide economic outpatient care

Economic outpatient care or EOC refers to the substantial economic gifts some parents give to their adult children and grandchildren. Albeit most of these gifts are “acts of kindness”, the reality is that it is not as kind as it may look.

Me, being an only child, I am first hand aware of the negative consequences of providing EOC. Cash gifts, especially those earmarked for consumption, dampen one’s initiative and productivity.

The biggest issue comes when cash gifts become a habit and you use them to finance your spending lifestyle. Giving precipitates more consumption and less investing and creates long term dependency.

The key is to financially educate your children in a way that they become self-reliant, not gift dependants, but what can you give to your children to enhance the probability that they will become economically productive adults?

In addition to education, create an environment that honours independent thoughts and deeds, cherishes individual achievements, and rewards responsibility and leadership. Teach your own to live on their own. It’s much less costly financially, and, in the long run, it is in the best interest of both, the children and their parents.

The millionaire next door – page 165.
My future kid telling me he is self-sufficient. Hopefully, he will have a hairier look though!

5. Millionaires adult children are economically self-sufficient

This point goes hand in hand with the previous one, parents who don’t provide economic outpatient care (EOC) will likely raise economically self-sufficient adults.

When I visualize our journey towards financial independence, our biggest thread is kids. If we do a bad job of financially educating our future children, our long term financial independence goal is in danger, as they can become a never-ending in liability drag.

Children may be lovely and all of that but they are the biggest risk to accumulating wealth. At least that’s the way I see it, and it’s quite possibly the reason why at the age of 34 I am still not a father. Tough!

Anyway, a lot of people centralises the content of the whole book in this section. I am not surprised as it is a point of major significance. The book provides with 10 rules to help us become affluent parents and raise productive children. I found an old random blog post describing the rules, have a look if you want to know more, but I’d encourage anyone to buy “the millionaire next door” and keep it on the bookshelf. It’s a must-own.

I truly loved this piece of writing:

You can’t hide from adversity. You can’t hide your children from life’s ups and downs. The ones who achieve do so by experiencing obstacles,… even from their childhood days. These are the ones who were never denied their right to face some struggle, some adversity. Others were, in reality, cheated. Those who attempted to shelter their children from every conceivable germ in our society… never really inoculated them for fear, worry, and the feeling of dependency. Not at all.

The millionaire next door – page 209

6. Millionaires are proficient in targeting market opportunities

A big part of becoming a millionaire is by increasing your income resources. Having a great deal of finding your niche and pursuing opportunities in the marketplace is a millionaire’s ability.

The book recommends targeting affluent people, their children and the widows and widowers of the affluent. This may be still a good piece of advice but I think a lot has changed since the publishing year 1996. The Internet has arisen massively over the last 2 decades and great market opportunities can be found online nowadays.

It’s worth noting that the affluent are frugal concerning consumer product and services, but they don’t mind spending money on investment advice, educational products, tax advice, medical and dental care, accounting and legal services as well as buying products and services for their children and grandchildren (providing education).

7. Millionaires chose the right occupation

The majority of the affluent are self-employed, business owners and managers. Statistically self-employed people are four times more likely to be millionaires than those who work for others.

There is not a clear result on what type of business the wealthy own the most, but the researchers concluded that the character of the business owner is what influences the most on predicting their level of wealth and that they all have one characteristic in common: They all enjoy what they do.

By choosing the right occupation you ensure a consistent stream of cash flowing in. In most case careers changes are costly in all terms — energy, time and money — and that’s exactly what we want to avoid, at least as grown adults.