William D Danko: The Millionaire Next Door
EPISODE 153
In The Millionaire Next Door, William D. Danko skews the myths about how (and where) most millionaires live, and what it takes to become one. Their extensive research identified the sometimes surprising characteristics and habits shared by many millionaires. For instance, millionaires are often bargain shoppers (they buy used cars and off-the-rack clothing), pay only a small percentage of their wealth in income taxes, and shun the lavish lifestyles we often associate with being rich.
The book explains how to determine what your net worth should be, according to your age and income, and how you can build wealth over time and become a millionaire—if you have the discipline.
SHOW OUTLINE
INTRO
Wealthion interviews Dr William D Danko (co-author) about the science behind the book
Validated insights come from research (1m42)
HOW TO THINK ABOUT MONEY
MillionaireMastermind introduces us to the theme
The secrets of millionaires (1m57)
MillionaireMastermind and determining if you’re achieving your full financial potential
Stop comparing to others (1m09)
MANAGE YOUR CASH FLOW
MillionaireMastermind and how we should start saving as much as you can from the moment we start earning more than we need to live
Get disciplined (51s)
MillionaireMastermind and avoiding financial dependence on other people
Economic outpatient care (1m09)
OUTRO
Wealthion interviews Dr William D Danko (co-author) and how we need to live within our means
Don’t spend your way to wealth, build your way (2m16)
CLIP CREDITS
https://www.youtube.com/watch?v=RFcl9VMMFnk&t=159s&ab_channel=TheMillionaireMastermind
https://www.youtube.com/watch?v=9OrjmP-wWLU&ab_channel=Wealthion
TRANSCRIPT
Hello and welcome to the moonshots podcast. It's episode 153. I'm your co-host Mike Parsons. And as always, I'm joined by. The millionaire next door himself. Mr. Mark Pearson Freeland. Good morning Mark. Hey, good morning, Mike. I'm not sure if I can take that attribute quite yet. I'm hoping as we near the end of our financial and money series on the moonshot show, maybe I'm picking up the right tips, the right habits, the right practices, as well as the right mindsets in order to try and achieve that title.
So give me time, I'm getting there, right? Shall we say aspiring? And if you're an aspiring millionaire and let's just be clear about this, we believe that financial prosperity and wealth is the key to having choice in options in life. It ain't about the bullying and we're certainly going to hear about that today.
It's all [00:01:00] about giving yourself the best chance of success. And satisfaction fulfillment in life. That's what we're all about. And mark, we are going to study really, I think, the perfect book, if you want to achieve that. That's right. And just to set our sights on where we've been over the past couple of weeks, Mike, we started off with the think and grow rich story by Napoleon hill.
And this was for me, like a, almost like a self-help book, wasn't it? It was helping you and I, and our listeners rethink our expectations and our mindsets around money and finances. Then last week we dug into rich dad, poor dad by Robert Kiyosaki, which was a really good breakdown into, again, a kind of mindsets or practices around expectations on rich versus poor.
And then this week today, Mike, we are getting into. Once again, an absolutely bay myth of a book full of interesting insights and data, [00:02:00] the millionaire next door, the surprising secrets of America's wealthy by William D Danko and Thomas J. Stanley (buy on Amazon). And this one is an absolute cracker. It's very much getting down into sort of the habits of wealthy people.
It's getting into the things that they do. And I think importantly, mark, the things that they don't do. Yeah, that's right. And I think there's a lot of expectations that I certainly had when. But if I was asked if you and I sitting down and I was getting to imagine a millionaire, I think there are expectations and visualizations that come up in my mind.
And I think what's great about particularly this book today, the millionaire next door is going to help you and I, and our listeners reset the way that we imagine what a millionaire could and should look like in order to help you and I, and our listeners achieve that level a little bit of. [00:03:00] And I think what's so good is this is the perfect part of the series.
We've had very much mindset from Napoleon hill, from Robert Kiyosaki. It's really been about the understanding this concept of assets versus liabilities. And today we're gonna look at what people actually do, the hard work of building wealth, so that you have choice in life. So this show's going to be action packed in not only how you should think about money management, but also some of the practical things that you could do.
And I think what's really exciting. Mark is you can use this both professionally and personally. Yeah I totally agree. I think again, the expectations that probably some of us have with regards to finances is it's only reserved for those with experience in the financial services industry, those who have training in tax, those accountants, or those with advisors, and the truth is throughout this entire series.
And we'll really touch [00:04:00] upon it today with the millionaire. Next door is you can take ownership and control of your finances yourself. You can do it. And I think that's a really empowering message that similar to rich dad, poor dad last week encouraged me to really take time to pause and schedule in my day time for me to reflect on my finances and my money management in order to be a little bit more.
And we'll get into it today, disciplined with regards to how. And what is also really cool about this book is that the authors studied over 290 different millionaires. They went into the data, they did a Jim Collins style when he did good to great how he builds these massive research teams.
Both authors went super deep to really find the pattern that consistency to the story behind why. Some people build wealth and why most of us don't, there are some [00:05:00] amazing insights all sorts of things about how they live day to day, how they think about what they buy and what they don't buy how they have a whole series of habits.
I really like it because I think it challenges some of our assumptions about what it takes to create wealth. And I think what's so very special about this bookmark is it really shows that any of us can do it if we just take a very disciplined approach. So that feels like very moonshot.
And I feel like mark, we are ready to jump in. So where do you want to start our adventure into the millionaire next? I want to hear from Dr. William D Danko, the co-author of the millionaire next door, actually breaking down for you and I and our listeners, the science behind the book and how the validated recommendations and insights from the millionaire next door came from.
Did you [00:06:00] guys know going in when you wrote the first copy of the book that you were bringing in a highly differentiated approach here, or did you just stumble into it given your academic background? I stumble, but here's the thing and any kind of research project for example, I have an article that I'm very proud of with one of my other colleagues at the university in the consumer behavior area that took us 12 revisions and over a year to get it published.
And it's only 20 pages long, but it's all based on solid research procedures. It's our interviews, it's our hypothesis development. It's our data collection. It's our interpretation. And so what I'm suggesting is that this is the same kind of mentality that is needed to create. The millionaire next door, in this particular case, we had what is called convergent validity.
Validity means true, right? [00:07:00] And when we have the convergence of various sources of truth, we had IRS data. We had census bureau data, we had paper and pencil questionnaires. We had focus groups. We had all of these various data sets. All converged on the basic truths that we wrote about in the book.
It's so hard to replicate something like that because it took 20 years, 20 years of research to come up with the final idea of this is where it's all leading. So yeah it is different than most other books because it has that substantial research background, 20 years, 292 millionaires were studied.
And I tell you what mark. If we have any aspiring authors listening to the show, I think we're seeing a clear patent on what makes a great book for [00:08:00] the moonshots audience, which is they do the hard work. They do the data, they test and validate hypothesis. I think this is really sets us up for the show today, because there are so many sort of paradigms that we can embrace about accumulating wealth, but also there are some very practical things we can do and not do in order to manage our money more wisely.
Yeah. And I build on that by just saying it's also a, an interesting connection to actually accumulating wealth. Over time the 20 years, it was a huge research project, 292 millionaires, and the end result is something that's entirely validated. There's no guesswork. The proof is there. So I think the lesson that we can take from.
William Danko and Thomas Stanley is what [00:09:00] hard work pays off. I think the theme throughout the millionaire next door today is all around. It can take time. It's not a get rich quick scheme. You can cheat your way there. It's all about. Doing one day at a time. And the cumulative value of to that period will then add up.
And I think that is empowering because actually anybody can do that as long as you're very focused and disciplined as well. And hasn't that been this huge theme of the money series, how philosophical and how mindset driven your approach to money needs to be this isn't just about dollars and cents black and white.
There's this whole paradigm around self-discipline a wise choices, not falling for certain traps or the expectations of others. It has amazing intersections with so many of the other different areas of our investigation. Doesn't it [00:10:00] for far more than I was expecting actually.
We went into the money series, knowing that it's something that's an all of our minds. And although it's not necessarily on our lips and not a lot of people talk about money in something that touches all of us throughout our lives and our careers, our families, our home situations. And I think what's been really surprising for me as we've been digging into these three books and learning out loud together is how much consistent thread and theme actually does exist from this mindset perspective.
How you see your assets versus liabilities. As we found out in rich dad, poor dad, and the way that we see on money in think and grow rich. I think these have been quite surprising lessons for me because it reveals the perhaps the challenge that I've had personally with money and how I think about it in the [00:11:00] past, because.
I've been intimidated by it, yeah. I think we all have that and that invariably comes from just, we don't talk about money. We don't get taught in the classroom. It becomes some dark art, but mark, let me to what is not a darker and that is our members. Isn't it exciting to see that since we've started.
Creating our membership platform that so many people have jumped in and I'm so grateful for the support of our members that helps us pay all our hosting bills. We desperately want to build this mobile app. So we need a lot more members. If we're going to produce a moonshots app map, as we always do, let's do a quick roll call and a shout out to all our Patrion.
Yep. A big roll call drum roll, please. Everybody reporting for duty. Hello, our Patrion members, including magia and Yanni, [00:12:00] Halena and mark Byron, Tom DMR, and Ken Merlin, Sandy nail and Brady Terry, John Nils, and Bob welcome listeners and members. We're so pleased to have you with us, not only every week, but every day.
And every part of the moonshots family we'd love delivering all of our listeners and members that lunar power dose of learning out loud together. And Mike we've had a pretty busy time on the moonshot master series. We've covered a lot of different times. Yeah. So if you become a member, you actually get full access to our other podcasts, which is dementia master series.
So make sure you jump over to moonshots.io. We have another one about to drop. It's going to be, it's going to be a good one. They're 90 minute master classes on the big themes where we bring clips from all sorts of different experts from our 150 plus shows and beyond. So head over to [00:13:00] dementia, it's become a member because frankly, our conversion rate could be a little bit better, mark.
We have 40,000 plus listeners a month and we have 16 members. It's a slow story right now. Isn't it. But we know we can get this job done. So listeners. If you're enjoying the show, come on, become a member, sign up, get access to our main shop master series and know that we're exchanging value together.
We produced this podcast for you every single week. We never miss a beat. And we only ask that if you have the means, come in and support us. If you're enjoying the show, it's like a dollar a week it's been at. So get in and support us@moonshots.io. And I think that is a brilliant point for us to talk about some of the really important ways to think about money and mark.
We managed to find a great breakdown [00:14:00] by millionaire mastermind, which is a channel on YouTube, and they've done it like a really good job of breaking down the core ideas in the book, the millionaire next door. Where do you want to start? When we ask ourselves, how should we think about. Before we get into the lessons and the practical tips that you and I and our listeners can start putting into practice today.
I think it makes a lot of sense for the millionaire mastermind guys, to introduce you and I, to the theme of the book, as well as the secrets of millionaires within the millionaire next door, let's be honest, we're all interested in the wealthy, but what do you think of when you think of a millionaire, fast cars, expensive suits and cloths, huge mansions in the Hills?
I think again, very familiar in ours. We'll ever spend a lot of money on luxury items and Supercars. They usually live in modest neighborhoods where the cost of living and social pressures of consumerism are lower. This book essentially splits [00:15:00] everyone into two categories under accumulators of wealth, UAWs, and prodigious, accumulators of wealth.
Pawz you AWS have a low net worth relative to. And the opposite is true for paw use. PDWS grow wealthy by living well below. Their means. These are people who do not fit into the stereotype of millionaires. They live in modest neighborhoods, drive practical sedans and have blue collar jobs, as opposed to the expensive lifestyle associated with the idea of a millionaire.
On the other end, UAWs are typically well-educated professionals with high paying and high profile jobs, such as doctors, attorneys, et cetera, who feel the societal pressure to keep up with and reflect their social standing. These people will typically squander their money, driving luxury cars and living in luxury neighborhoods.
It is this lifestyle which causes them to have a low net worth because they spend most of their income. So how do the rich get rich [00:16:00] what's their secret and what do they do with their money? We all want to know how we can achieve even just a tiny sliver of. The millionaire next door shows you the simple spending and saving habits that lead to more cash in the bank than most people earn in their lifetimes.
This book is essential to help you avoid critical mistakes on your way to financial independence. So as it turns out becoming a millionaire, isn't the hardest thing in the world. It's simply requires planning well, living below your means and avoiding a few stupid mistakes. Two concepts there, mark the UAW and the P a w I feel like this does really go to the heart of the book.
It doesn't it. So should we break down each of these two acronyms? What do you think? Yeah, I think they helped me as well as our listeners really understand what the perception that a lot of us have with regards to millionaires. Once we understand that we can then break down how we might be able [00:17:00] to address.
Yeah. So you a w the book, the millionaire next door prescribes as being someone who is an under accumulator of wealth. This is the person that spends money on things that are not essential, but they are discretionary and they are often liabilities. So they want to look like they're wealthy, but they are not necessarily wealthy.
So this is the UAW, the under accumulator of wealth. Now what's quite interesting is that. Pivot here is the PA w the prodigious accumulator of wealth will often drive a much shabbier looking car. It's probably got a lot of Ks on the clock. They may have a house that is [00:18:00] modest in a modest neighborhood, and that they really do prioritize frugality over spending.
So the thrill that the UAW has on spending the paw, the accumulator of wealth has the same excitement and thrill through not spending. And I think this is the key concept and mark, which ones are the million is I think, as we learned from the millionaire next door, they're actually the PA W's the prodigious accumulators of wealth.
Yeah. It is. It's really interesting that societaly, I think we have certain attachments to things that say millionaire. However, the real truth that they found through the studying of 292 millionaires is that the [00:19:00] authors of the millionaire next door found actually it's the people that fundamentally don't spend discretionary money on lots of nice things.
It doesn't mean that that they're living in like a little box eating beans and rice and not interacting with the world. But I think fundamentally. They don't fall into the trap of having and wearing and idolizing these status. Symbols. In fact, the weird twist here is those that are millionaires.
Don't look like me in the right. I think this is a huge concept for us to wrap our heads around at the very start of today's show Mike, isn't it because what the implication of the. Understanding this concept reveals, is that nearly anybody who [00:20:00] has a steady job given the right lessons in frugality and discipline can amass a pretty tidy Fort tune or investment portfolio or just even savings, really.
And I think what's important to then realize is let's go back to the book title, the millionaire next door. It's not the millionaire in Beverly Hills. That's right. It's the millionaire next door because all of us are going to be in, or the majority of us are probably going to be in pretty nice or pretty common neighborhoods and it could be anybody around.
Given their job, given that focus, given their frugality, any of us can achieve that. Let's call it title or status. Exactly. All of us can do that. If we follow these traits that are broken down within the millionaire next door, because it's just a lot easier once you understand those concepts, those lessons, [00:21:00] and then you follow them day by day.
Absolutely. And one of the biggest things that strikes me about the message inside the book, the millionaire next door is it's screaming at us. Don't fall for the trap that. You think you need flashy brands, flashy cars, and flashy homes and flashing neighborhoods in order to be a millionaire.
And what's really inside of that is this next idea. That's in the book, which is, do not compare yourself with others because that is the trap. That's how you end up becoming an under accumulator of wealth. If you really want to have the mindset and we'll get to the tactics and the habits later. But if you want to have the right mindset, you shouldn't fall into that trap of trying to that classic saying, don't try and keep up with the Joneses, play your own game, stand above [00:22:00] it.
Stand beyond the expectations of society. Chart your own course and build your own wealth, which is so moonshots mark. So let's jump in and listen again to millionaire mastermind, talking about this next idea from the book, the millionaire next door, which is to stop comparing yourself. To others, you can calculate if you're not reaching your full financial potential with this simple equation, multiply your age with your pre-tax annual income and divide that by 10, whatever this number is reflects how rich you could be right now, if you've already cultivated good spending habits.
For example, if you, in $50,000 at age 30, your expected wealth comes out to $150,000. Now take this with a grain of salt. Since it takes younger people longer to reach their expected wealth because of compounding interest. So for all the youngsters out there don't feel bad because a old will have reaped the benefits of interest they get on their interest for much [00:23:00] longer.
But this is a decent indicator of how well you stack up and can keep you from becoming caught up in keeping up with the Joneses. There are so many people who appear wealthy, but in reality, spend all their money on keeping up with this illusion. They buy things. They don't need with money. They don't have to impress people.
They don't like try to get closer and closer to your expected wealth over time, not by saving excessively to the point that you can't enjoy life, but by avoiding spending money too much in the first place. Oh, this is the big one. Isn't a map because she's really talking about forget them and live well below your means spend less than you earn.
That's. That, that's the key lesson. Obviously our listeners you can break down with that little formula that's caught out within the millionaire next door, but really Mike, I think what we want to focus on here is that comparison piece don't, as you caught out, keep [00:24:00] up with the Joneses.
You don't need to buy stuff. You don't need to impress people. You don't even I know what a trap and it happens, doesn't it. It's funny, like this idea of you should run your personal life, your personal money, like a business. And that is you want to spend less than you earn or said differently live well below your means.
And I think the transition here is that if you can find the thrill in keeping a monthly. And sticking to the monthly budget. The Sydney end is so moonshots because what you're doing is you're setting a goal and you're achieving it. And remember, like we've talked about with atomic habits by James clear 1% better every day.
If you can save 10 bucks a day at the end of the month, you're looking pretty good. [00:25:00] And then you have the chance to follow Robert Kiyosaki's advice and invest in assets rather than liabilities. But I think every day, every week, every month, if you take pride in spending less than you earn this to me, is.
The essential, not only mindset, but behavior of those that are on the path to creating financial independence, prosperity wealth. Maybe they will be a millionaire next door. But I think this is a concept that it, to me, way too long in life to truly get on board with I need to spend less, then I'm earning. And if you can set yourself goals and achieve those, you might not be a millionaire, but you are somebody who lived within their means. You were disciplined, you had a goal, you achieved it and that can give you the momentum for the next month to do the same again. Yeah. I think it's really [00:26:00] around expectations. Isn't it? And I think you're right. It took me a long time to also get into a good or you said that a habit when I think about my money, because it's quite tempting to end up in the. Of purchasing because you think you either deserve it. I work hard, so I deserve an Audi or a fancy car, or I deserve that big house, or I deserve that liability, whatever it might be, because you think it's going to make you happy, or it's going to impress others around you and therefore feed your ego.
And I think what's been really interesting throughout this whole money series. In fact, going back to think and grow rich as well as rich dad, poor dad is trying to change that presumption that I think is inherent amongst a lot of us. And as we found through Robert Kiyosaki's work, we don't really get taught much about managing money.
And I would argue that [00:27:00] the mindset that a lot of us have towards money as well. Imagination of what a millionaire looks like, what they drive, where they live is down to not having the ability to talk about money that much, not really learn about money that much. And without having books like the millionaire next door, it's quite difficult to then get yourself out of a particular line of thinking and then work on yourself in order to improve your financial standing.
I think it's a really valuable call out that we need books like the millionaire next door to help us re imagine how we look at finances and millionaires in order to manage money a little bit better. Yeah. I totally agree with you. And the big thing here is that if you can put yourself into a situation where you're truly [00:28:00] and deeply.
Focused on this idea of a monthly P and L a monthly profit and loss sheet for you as an individual, you, with your partner, with your family, just like you were a business, and to make sure that every month there's a bit leftover and every month you put that leftover to work, not in liabilities, right?
Where we'd Robert Kiyosaki encourage you to put it into assets. Yeah, totally. And then those assets grow over time. And then you put a little bit more in and they grow over time. And then do this for month on month, do this four year a year. Things compound things grow. And this is really the start of the journey.
Isn't it? Yep. It's the start of the journey and talking about the start of journey, Mick, I think we, we need to remind our listeners about a little bit something called the moonshots master series. Absolutely. [00:29:00] As you can become a member, jump onto Patrion supporters, you get the moonshots master series, you can do all sorts of interactive things, but we want to make sure that the master series is available to everyone.
So to start, we've just started publishing the moonshots master series on the apple podcast app. So you can actually subscribe directly in the same app that you listened to the show on. For many of you, we know you listen on. And podcast app. I do promise you is once the Spotify allows us to offer subscribed podcasts, we'll do the same in Spotify, but for now, if you are listening to this show right now on your apple podcast app, you can go in and type moonshots master series, and right there, you will be able to enjoy our moonshots master shares directly in the same app that you listened to the show in.
So just go over to moonshots.io. You [00:30:00] can get all the links to our apple shows. You can head straight into the app and just type in shots, master series, and you can subscribe to the show there. So we really encourage you to get in there, enjoy the show and give us feedback. And for all of you that do listen on Spotify, as soon as they make that available to them.
We'll get it to you there as well. So wherever you are patriarch on apple podcast, Spotify, we'll get you the master series. It is really another great extension of how we think here on the moonshots podcasts, which is all about thinking out loud, together, learning how to be the best version of ourselves and shooting for the moon.
And that sounds like a pretty good idea to me. What do you think that, yeah that's a pretty nice proposition. And along with our community and our moonshots members and listeners, we hope to achieve that every single day. And I think you and I, Mike, as well as all the moonshots team get a lot of kicks out of learning out loud and we're pleased to welcome so many listeners every week to the [00:31:00] moonshot shows.
Totally. All right, mark. Listen, I think we've set the mindset pretty well. What happens now? Once you and I and our listeners, we've got our minds in the right place. We've now I think changed fundamentally our assumptions and visualizations of what it takes or means to be a millionaire driving those fancy cars, forget about it.
Living in over inflated houses, forget about it. We're now really in the heart and the guts of really thinking about what it means to be a millionaire. Now we need to know, okay how do we actually go out and achieve it? What are the lessons? And the advice that William Danko and Thomas Stanley found when they interviewed 292 millionaires over the course of Mike 20 years, patient guys, I got to say amazing work very patient very Jim Collins.
So we've got a couple of really [00:32:00] big tips and pieces of advice from the millionaire next door. And let's start by actually reframing the way that we think about. Most people think that the only way to become a millionaire is to earn at least a million a year. But even if you're one of the top earners in the world, taxes will eat away, roughly 50% of your income annually.
Then after you deduct living expenses, the cost of rent or a mortgage and a few vacations, you might end up with just 200,000, if that, but if you truly want to be a millionaire, you never even have to earn near that much. Not with this role. Anyways, the moment you earn more than you need to live, save as much as you responsibly can and avoid spending money on non necessities, having a good budget and living a fruitful life is really all.
You need to build wealth, especially if you start young around 55% of all millionaires credit their wealth to simply being deliberate about their finances and having discipline when it comes to.[00:33:00] Discipline wildest. And we could apply that to so many parts of the moonshot podcast count. We Mack, it's crazy how these themes about money.
You could apply to so many other parts of your life. Just to name a couple, we dug into discipline when it's about exercise, when it's about health, but also around the resilience. Mike when we were learning from Eric Greitens, essentially discipline with your mindset being focused on the task at hand, nobody, none of the moonshots individuals that we've really dug into, whether they're entrepreneurs, sports stars figures in politics, all of them have really communicated to you and our listeners that you've just got to be really focused on that end goal, whatever it might be, don't let distractions or comparisons or ego throw you off.
All about just really allocating that, that time and energy [00:34:00] towards your ultimate goal. And yeah, I don't think any of us can get anywhere without being self-disciplined. And that's again, a bit of a surprise as we're thinking about money. I think yes. Saving is a pretty easy. Concepts to get your head around, but really being focused and disciplined is something that kind of surprised me yet.
Again, when we were digging into the money series of how important it really was. So a great example of how you can get disciplined with your money is back in the day, one of the best practices you could do is create money envelopes. Okay. This is before we got to cashless and contactless payments, but bear with me Hema.
So the idea was that let's say your spending budget for the month, let's say it was $200. What you would do is you would put $50 in[00:35:00] an envelope and that's your spend for the. And what you would do is not allow yourself to take money from the next week to bring it into pay for something this week, or if you did.
So you had to go super frugal the following week. This is a really good example of just creating structures around you for self-discipline with money. Now, the interesting thing is that there. 20, 21, you can do the same thing. You can create all sorts of interesting ways to get yourself disciplined.
I would say I've a couple of really practical things is run that monthly budget religiously, make sure that it, particularly if you have a partner or you have a family that you should actually sit down and look at a consolidated, how much did we spend? How much did we earn and make that a monthly ritual?
More specifically you can allocate. I know people who do this [00:36:00] trick that their discretionary spending is on a separate credit card that only gets allocated a fixed amount every month. So for example, going out entertainment, Restaurants and a lie. Let's say you had a budget for the month of $500.
That's $500 is automatically transferred to your spending card. And that's the only card that you can use. And so this is a way that you create discipline around you. Here's another one mark that people do is in order to ensure that they work within their budget. Let's say they have a savings of $500 a month.
They have an automatic debit on their account for $500. That puts that money either into a savings account, which is separate, which doesn't have a credit card next to it, or turn it to the fleet and even better. It routes that money directly to an investment vehicle [00:37:00] that invests it, maybe in a stock fund ETF And it happens on the first of every month after you've been paid so that you don't even have the chance to spend it.
It's just simply not there in the account. Those are pretty good. Don't you think as ways of getting ourselves almost forcing discipline on post? Yeah. I actually hear that. I think that's a good word. You forcing yourself into calibrating your finances or spending in a more appropriate way.
That's a very habit or mutated approach. Isn't it? For me, there was a long time that I would keep my spending on a different card. So I'd use a credit card for my big purchases. And then once a month I'd do obviously paid off in full when possible. And I use my debit card very infrequently.
So all of my spending where possible was on a credit card, what I've actually adopted more recently is the other way around. [00:38:00] So I started shifting all of my subscriptions Netflix and so on onto my debit card or into joint accounts actually should say. And suddenly what became quite evident to me once I had almost removed the invisible elements of a credit that I would pay off at the end of the following month, it was more immediate.
So I could see from a debit, transactional perspective, all of the outgoings far easier by consolidating things that's what helped me personally become a little bit more disciplined because everything was in one place. I'll still do big purchases on a credit card, of course, but for these smaller things, they're now more focused into a debit scenario.
And for me, as well as my wife, it's easier for us to budget because it's all in one almost dashboard that we then can plug into our budgeting software. Yeah. And I would say a big thing there. [00:39:00] Mark is having somewhere that you can look at and see your complete financial picture. I re when I lived in the U S I loved mint.com.
It's a great service where you basically connect up all your accounts and you can see a consolidated view here in Australia. I use a different service called pockets mates, which is also very good. What those services do is if you want to talk about discipline, the first thing is you just actually need to be able to see what do we own?
What have we spent? And I think that you need to create these these tools. And if you think about it, you couldn't run a business without a consolidated P and L. So why would you think you could run your life without one? Yeah of course you need to do that. And not what I think is also important here is it takes out all that second guessing, because let's say you and I were chatting.
About you living [00:40:00] within your means mark, and I would say to you, okay, what did you spend and what did you what did you learn? And you're like hang on a sec. So I think I've got this over here and I've got that over there. That would, that's all you're almost setting yourself up for failure because you're like if you don't have that consolidated view, you're going to miss things and you're like, oh, I forgot about that.
Actually. Yeah, we did spend more than we earned last month. Oh, damn. I didn't realize. And that's the point. You've got to make it easy to realize where you are. Yeah. There's nothing worse than that feeling of, okay. Where is my money? What am I spending that lack of ownership is actually a sure fire way to create anxiety around your money and your cashflow.
And for me, when I was younger, I was pretty guilty of this. It felt too stressful to try and get a reign over the horse has bolted, as they say, my finances were running away from me. And the thought of trying to consolidate it was a little bit [00:41:00] intimidating. So what happens? You put it. It off again and again, and until you start realizing that the only way to control it is to take ownership yourself because nobody else is going to do it.
They're busy running their businesses and their own finances. You suddenly feel more empowered. And actually the truth is by just doing that little bit, day by day, taking that a little bit more control of your finances. It becomes a lot easier. And as you said earlier in the show today, Mike, you actually get a lot of joy.
Seeing that little pot grow over time and being frugal actually becomes the reward in itself. Yeah. It's like a school board and then you can enjoy the thrill of the game. So let's just look at what we've talked about so far. Obviously paradigm number one you live well below your means you use your time, your energy [00:42:00] efficiently to manage money, to get it all consolidated and don't fall for the trap of China, look fancy and snazzy and all that kind of stuff.
Be humble. Be frugal. You don't have to have the Lamborghini. Now. I think those are, there's a huge ideas. There's really good practices about getting disciplined. The one thing to close the discipline conversation before we get into the last few ideas. One of the big breakthroughs that I've discovered is that when you have set a budget for a light item in your personal.
What is critical is to understand what that looks like as a behavior. And an example I wanted to share mark is let's say you've got to take out, eat out budget allocated for the month. And so my family we have set a budget not only for the groceries separately, but also for takeout. And I can tell you if you're living in any sort of Western modern city, you're going to find that [00:43:00] food is like one of your biggest line items, everywhere I've lived. Everyone complains about the cost of food. Is it the same for you, mark? It's crazy. Isn't it? Absolutely crazy. Always. So expensive. It adds up. Yeah. But you and I have both lived in London and then food is so expensive there. Yeah. It really is. And again, it's too tempting because of the immediacy of it.
Yeah. And then, so I moved to San Francisco. Guess what? Super expensive moved back to Sydney 16 years later after being abroad. Guess what? One of our biggest costs items are. I know families that on groceries and take out a dropping two up to $3,000 a month. Wow. Families with two kids or three kids easily blowing three grand a month on food.
Okay. Now, so here's the thing that I wanted to share. [00:44:00] One of the breakthroughs that my family made is we translated our monthly allocation for eating out, into frequency of either we go out and eat together or we get Uber eats. So we know that if we want to hit our budget, we have allocated to.
Nights a month, we eat out together, and we were going to drop a lot of money for that even just for our humble meal is very expensive to eat out in Sydney, but that we know is our cap. So what was one of the things that we did is that we learnt to make pizzas at home. Cause we can do it for about the third of what it costs to go to our favorite pizza store.
Now we still go to that. Our favorite Italian pizza place down the road. In fact, we did it just a week ago, but the thing is it's much rarer now because we can enjoy a whole lot more pizza, save a ton of money than just getting the local pizza [00:45:00] joint. So if you know the frequency cap like food is a great example.
I would say mark let's say you love clothes. What's your budget? Is it one top, one pair of pants? Just translate your budget into something very simple target or a limit, and stick it to that because then you don't need to worry about, will I become a millionaire, just make sure that you only order takeout twice a month.
Like to me that's so that's the key or the discipline. Does that make sense? It totally does. And I think one, much like we learned in the habits series, the thing that puts people off picking up a new habit is when they find it too hard to stick with. So I think from my own personal experience, it's quite difficult to really know what your cap is, how much should I budget on clothes per month?
How much should I budget on food per month? I like your family's adoption of a frequency rather than perhaps a specific number, [00:46:00] which I think is a great tip. I think for listeners who were thinking of trying to take more ownership of their finances, I think a really. Practice to remember is just to test and learn set yourself for the month of November.
Let's say $200 on clothes. Let's for example, if you find that you only spend a hundred dollars, great, the next month you change your target, $200, you're just saving another 100 within your budget. And really, I think it comes down to just being a little bit brutal and honest and disciplined with yourself and trying to understand, okay what is the absolute max that I want to spend and then bringing it down from there in order to make it stick much like any habit, what you don't want to find is you start doing, and then you realize, oh, you know what?
I forgot about that, that making pizza at home, I'm going to go to the pizza joint every Friday. Now[00:47:00] you want. Determine how to make it a daily habit. Don't you? And making it easy, I think is the way to do that. Yeah. It goes in the next step. So some of the things we do is we buy lots of pizza bases and we freeze them.
So there's always a pizza base in the freezer, right? Don't make it hard for yourself to stick to these disciplined budget structures, just do what it takes, do the hard work, get it set up and remember it's not like a fad. It has to become a lifestyle. And if it can become a lifestyle, you're really going places.
And it's really quite interesting. If you think about. This kind of financial awareness lifestyle, this money, mindfulness so that you can create opportunities yourself. It's really essential. And we've talked a lot about how often school and family environment monies is not really discussed, but another big part of that sort of family [00:48:00] context of money that comes up in this book is this really interesting idea that they talk about.
Economic outpatient care and it really comes to this interesting insight that the authors of the millionaire next or have around the way parents and children relate to each other with money. So if you're a parent listening to this show is really important to understand how you can create financial independence for your kids.
And if you're someone young and you want to understand your relationship with your parents this next clip is really powerful in framing a new way to look at it so everybody can prosper. So let's have a listen to millionaire mastermind talking about this really interesting idea in the millionaire next door.
Let's have a listen to this idea of economic outpatient care is what we call economic outpatient care. You know how rich kids typically can't handle their own finances [00:49:00] and never have to worry about spending money excessively that's what economic outpatient care or ER. Is all about as much as affluent parents mean?
When they support their children with their own hard-earned money, the reality is it hurts their ability to handle money. Almost half of all wealthy Americans sponsor their children and grandchildren with over 15,000 a year, which leads to them having luxurious lifestyles, which they technically can't afford growing up.
I was never really crazy with money, but I know for a fact that I still didn't know how to save and grow my money until I started earning it on my own, because that's when you truly see the value of a hard-earned dollar, the problem with regular EOC is that it eventually just blends in with your annual income making you believe that you earn more than you do the lesson to be learned here.
If you have rich parents, don't waste their money, at least invest it wisely. And if you are a rich parent, don't spoil your kids. You really are doing them a [00:50:00] disservice in the long run. Okay, Mike, this is good. This is a real practical tip for all of our listeners, as well as ourselves. Not only as we think about our kids, but how we manage our own finances.
And I think, again, what's clear to me as we hear that breakdown of economic outpatient care is learning to manage money yourself by taking ownership rather than relying on somebody else, whether it's your parents or your partner or your kids, even in some instances, I'm sure having the discipline and resilience, it's a lesson that you have to learn by doing it yourself.
Isn't it? It is. And it reminds me of what Joe Rogan says. In the end of the day, you don't want to win the lottery because you didn't really earn it like as nice as it is as an idea, he said, surely Earning or creating [00:51:00] a mid 10th of what you might win in. The lottery is going to feel 20 times better because you've put in the work.
So when you think about what you can do for your kids, give them economic self-sufficiency and independence. So they know how to do it. This idea of just parachuting money into them ends up. We've all seen it. People that have. Being granted this unlimited feed of money often end up in all sorts of trouble because they just don't have the means to manage the money.
So it's really cheating them, actually, even though you think you're giving them love and opportunity, what you need to do is you don't give a man fish, you teach him how to fish. And as we know, and our listeners know that value of doing a job really well, working really hard and getting to an end result, whether it's money or some kind of output feels far more.
Great when you've done [00:52:00] it yourself and you've put in the hard yards. It doesn't it. Yeah, it really does. And I'll tell you who put in the Hyde yards, mark. That's the two co-authors of the millionaire next door. And one of them William D Danco, we have here in our last clip and he's really going to bring this whole story home for us.
So let's all lend areas to the co-author of the millionaire next door, Mr. William de Danco. What are the behaviors that, those, what are the behaviors that those people, what behaviors are most likely gonna get? Yeah. One of the problems we have in America in Western society in general is how pervasive advertising can be and how influential it can be.
And you look at all these beautiful people and beer commercials or car commercials and say, my gosh, I want to aspire to be like that. I want to buy what they're buying. One of the things that we know based on the empirical evidence is that for every wealthy [00:53:00] person who can actually afford one of those luxury items, the car, the house, the whatever, there are four to five non millionaires or non wealthy people buying the same product.
Because they want to look like a millionaire. See, and this is really critical. So there, there is a group of people who can really afford to buy their helicopters and private planes and everything else. I have a number of friends who can do that and do that. And they are truly mega millionaires.
I don't know any billionaires yet personally, but people with 20, $50 million net worth can live that kind of lifestyle. No question. But when you realize and look at the, what is the median net worth in America today? It's about $120,000 per household, 120,000. That's a current data to be a one percenter, $11 million net worth [00:54:00] will get you there.
That's the. And the threshold to get into the 1% category. And so w when you have say $2 million, you're in the 95th percentile, you're in the top 5%. So when you say a million doesn't go as far as it used to then this is true. It's absolutely true. But we still have people stuck in this mindset that they're going to spend their way to wealth and of course, that's the number one problem.
That's preventing them from becoming wealthy. They want to create a lifestyle because I want to emulate others in their neighborhood. Don't spend your way to wealth to emulate others in your neighborhood. If there was a quick summation of the millionaire next door, Mike, I think William Danko himself is the perfect one to round out the show.
Don't [00:55:00] you think? Yeah I think he's just saying guys, don't fall for the trap. Just take enormous pride in accumulating savings every month and put them to work whilst that sounds insanely simple. Doesn't it scare you that he says like the average American choose a net worth of $125,000.
If you think about. A lifetime of work and they achieved that. You remember in some of the earliest shows we were talking about only 10% of people in the U S are confident that they're going to accumulate enough money for retirement. Only a quarter of people actually have money when, and when they retire, like how to live a whole life and to get to your lady years and having not been able to achieve this simple rule of spend less than you earn, but to live within your [00:56:00] means.
Like it's. This is a twist of life that there's this simple rule, but yet, so few do it. Yeah. And I think as William Danko calls out at the beginning of that clip it's because there are so many. Distractions and temptations all years, particularly with comparison going back to that earlier clip, and actually going back to our series on Jordan Peterson, rather than comparing yourself to others, thinking about what they drive, where they live, what they spend their money on.
Just focus on you. Are you getting better day by day? Who were you yesterday? Who do you want to be today? And having that again, we called it out in today's show on the millionaire next door. That discipline to say, no, I don't need to spend $60,000 on that car. And instead, maybe I'll go and purchase a secondhand version.
That's half the price, or even less than half the price [00:57:00] or just one year old, even you'll save a lot. Yeah, exactly. You can save quite a significant. Percentage of that total and by then saving it, reinvesting it is going to pay off dividends in the long run. And I think that's where the insight for me really sings.
True. I think we all have a tendency to maybe just focus on the short term, what will make me happy tomorrow? Oh, it'll be a brand new TV, but that's a liability. It will cost me in the long run. Instead of thinking about that long-term goal and being frugal and thinking about how I can achieve a better freedom rather than be attached to two items.
I think it's the whole money series going from think and grow rich. Rich dad, poor dad through today with the millionaire. Next door has shown me quite a substantial amount of tips as well as mindsets Mike. That will help me rethink how I, myself, I'm looking at my finances. [00:58:00] Yeah, me too. Me too. And I think the important thing here is that what we've discovered is there is like this simple model that applies across this series.
One Napoleon hill is you must be positive in your attitude towards rich achieving riches and to grow, it starts with priming positive thinking, don't be a victim then Robert Kiyosaki. He's okay guys, key concept assets versus liabilities. Watch out for those liabilities, those fancy cars that depreciate in value cost you a lot in insurance and upkeep watch out for those things.
And then when we turn our mind to the millionaire next, or it's the simple habit of actually spending way less than what you earn consistently over time, over weeks, months, years, and decades, this is the path. Very stoic. It's very habit based. It is so moonshots.[00:59:00] It's been just a blast to put this series of, yeah, it hasn't been, it's been so surprising to me how consistent the threads and the themes that we've discovered on the other moonshot shows how well they are connected into a space.
That for me, felt very intimidating. A financial and money series could have gone down quite a, an economic financial mathematical route. But what I've been really surprised at Mike is how much these mindsets disciplines, lessons in resilience have rung true throughout this whole money series as well.
It's been a real pleasure digging in. It has fantastic stuff. Mark, thank you to you. Thank you for taking the time. Thank you for building that tough, resilient attitude towards money. Let's get on top of that. Let's create opportunities and possibilities for us because that's true prosperity and wealth.
And today as the final part of our money [01:00:00] series, we dove into the world of this great book, the millionaire next door, and it was based on 292 millionaires and how they did it over 20 years of research. And that's why we know the following truth that the true secret to millionaires is that they are prodigious accumulators of wealth.
They are not wasting their money. In fact, their key mantra is to spend less than you. To stop comparing to others and to be disciplined every single day. And if you do this, you won't spend your way to wealth about what we learned is that you can build your way to wealth and you can do that to create possibilities, to create options.
And every single month, when you meet your budget, you can feel proud and satisfied and fulfilled that you're actually demonstrating the discipline and the hard work to unlock the very best version of yourself. And that's what we're all about here on the Ben shuts podcast. [01:01:00] That's a wrap.