Let me introduce two of my favourite books - The Millionaire Next Door and Stop Acting Rich, both written by the late Dr. Thomas J. Stanley. The main theme of the books is that you can’t judge a book by its cover when it comes to personal wealth. The author has spent many years researching the typical life of a millionaire, which goes against many misconceptions that people still have today. In Stop Acting Rich, Thomas defines a group of people he calls "aspirationals" as people who choose to act rich, but don’t have the financial resources to back it up. They are typically high income earners but aren’t wealthy, and are low net worth individuals with little savings. Aspirationals often spend exorbitantly beyond their means (think luxury homes, country clubs, BMWs, Rolex watches, and the like) just to appear rich, leaving them vulnerable to losing everything should their financial positions turned for the worse.
I was catching up with one of my property agents over coffee one day. He spoke to me casually about his friend, a businessman in Singapore, who runs a business distributing personal care products. According to my agent, his friend has been living a lavish lifestyle - living in a landed house in a prime district, driving expensive cars, owning country clubs, dining in high-end restaurants frequently, and owning another luxurious pool bungalow up north as his family weekend holiday home. A couple of weeks later, this property agent of mine called me and told me that his friend's business has gotten worse in recent years, and that he needed to sell off his assets urgently to raise funds. To cut the story short, I ended up acquiring the bungalow at a greatly discounted price well below the bank's valuation of the property. I've since leased out the bungalow to an expatriate, providing me with good rental returns. While this is just one story of an aspirational, there are many people out there who fit perfectly into the "aspirationals" category.
The solution to financial success is simple - stop being an aspirational! Creating and accumulating wealth isn't that complicated. You just need to work for your income, spend less than you earn, and invest your savings wisely to grow your money. As time goes by, your investments should be able to provide passive income for you without your active participation. The ability to enjoy all that life has to offer, without the need to spend exorbitantly, is key to whether one is able to accumulate wealth.
I find that many people are sacrificing every cent they own to have rich appearances, potentially pushing themselves into financial ruins. Rather than keeping up with the Joneses, my wife and I choose to maintain our frugal lifestyle, with our expenses much lower than our income. Our simple living would ensure that we will continue to be rich... and remain rich.
All that glitters isn't gold, and certainly all that glitters isn't the millionaire’s goal!
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