Editor’s Note – this article is part of our series “Best financial advice I’ve ever received.” People frequently ask bankers the best piece of advice they have ever gotten. So for this series, we’re asking MidWestOne employees to share the best money management tips they’ve ever gotten.
The best piece of financial advice I’ve ever received came from a book my husband and I read when we were first married 20 years ago, and have revisited many times since. The book, called The Millionaire Next Door by Thomas Stanley and William Danko, has a guiding principle that says:
The vast majority of people who are millionaires have accumulated wealth just by living below their means.
It’s been amazing in our 20 year marriage how many times we’ve talked about the book, or gone back to it. There are a lot of different perspectives out there about how to save money and become wealthy. There are exceptions to it, but the vast majority of people who have accumulated substantial wealth haven’t achieved it by making it big in their business, through the stock market, or through inheritance – the vast majority of millionaires have accumulated wealth just by living below their means.
The book provides other excellent advice about how to build wealth throughout a lifetime:
Become your own financial planner.
Create a solid financial plan for yourself and stick to it. Some people are so overwhelmed by the thought of creating a financial plan that they never get started. But it doesn’t have to be difficult. It’s just a matter of figuring out what you want, building your financial plan and being disciplined in your financial habits. Along the way you might have to reach out to trusted professionals to help you move in the right direction, and that’s ok.
One of my favorite sayings is, “slow and steady wins the race.” Be able to define where you want to be and then set up a financial plan that will help you get there.
Keep a budget and take an active and leading role in your finances.
If you don’t take an active role in your own finances, financial planning and budgeting, no one else will. Define what your short, immediate and long-term goals are, and have the discipline to reach those goals and stick to your budget.
Be careful with your money.
The millionaires next door know where their money is coming from and where it’s going. Most importantly, they are careful about spending it. Contrary to what a lot of people think, people with substantial wealth are not the people with the fancy cars or fancy clothes. Most of the time, the people who are wealthy are also the most unassuming. That’s because they are just more careful with their money.
The statement “income does not equal wealth” is a perfect illustration of this. There are many people with big salaries who are barely paying their monthly bills, let alone saving. Be careful with how you are spending versus saving your money.
No matter how large or small your income is, what really matters is how your income is invested and spent. Make saving a priority, live within your means, and be careful with your money.