Transcript

Hi, Everyone. Welcome to the Wiser Financial Advisor with Josh Nelson, where we get real, we get honest, and we get clear about the financial world and your money.

This is Josh Nelson, Certified Financial Planner and founder and CEO of Keystone Financial Services. We love feedback and we’d love it if you would pass it on to me directly at josh@keystonefinancial.com . Also, please stay plugged in with us and get updates on episodes and help us promote the podcast. You can subscribe to us at Apple podcasts, Google, Spotify, or your favorite podcast service. Let the financial fun begin!

A few years ago, a video game came out called “Among Us.” In the game, you’re on a spaceship and everybody looks the same but there are actually two different classes of people on board. There are crewmates, who are there to go about their mission and complete some tasks and so forth. But there is at least one impostor among the crew and the object of the game is to identify them by finding clues about who is legitimate and who is the impostor, then try to get rid of the impostor before they kill you.
I bring this up today because people often ask me: “What does it take to become a millionaire?” And of course, these days there are a lot of millionaires and in fact a million dollars doesn’t go nearly as far as it used to because of inflation. A million dollars is not a bad amount, but when you think about it from a retirement perspective, a million dollars will generate anywhere between forty and fifty thousand dollars per year in income. And based on a lot of people’s lifestyles, that isn’t going to cut it, especially when it comes to inflation. That being said, a million is still a nice round number, and since most of us are far, far away from being a billionaire, being a millionaire sounds pretty darn good.
So, people will ask me, “What does it take to be a millionaire and how do you spot an impostor?”
The reality is that it’s kind of difficult, because most of the time people who have quite a bit of wealth tend to be people who don’t brag, and so you wouldn’t even know how wealthy they are. They don’t flaunt their wealth. They don’t run around bragging. In fact, that’s usually a sign of an impostor: somebody who’s kind of over the top and really wants you to think that they are significant because of their amount of stuff. Usually, it’s about stuff—toys and so forth. So, it’s important to recognize that the people who actually have the wealth out there are not who you think they are. In fact, the occupations, the cars, and all the different things associated with wealth that you would expect are usually the opposite.
Let me give you an example. The vast majority of my clients have accumulated a fair amount of wealth, and so I like to observe what do they do, versus the average person in America. And one thing they do, is they tend to hold on to their vehicles for a long time. When I ask if they’re ready to replace their vehicle, often they’ll say, “No. This one is still good. You know, it still does the job and I still like my car.” They don’t feel like they have to go out and buy something new. So, it’s having that mentality of being an investor rather than a consumer, and that’s why they have what they have.
So, today I’m going to talk about a few clues, right? One of the anti-clues is spending. I’m talking about somebody who’s got all the toys; they’ve always got the new boat or jet ski or car or exotic vacation. Things like that. And although there are some people who legitimately have so much wealth that they can do that and still live below their means, the reality is that most people who look like a millionaire—meaning they look like they’re really wealthy—actually are not. They just have a bunch of stuff and they’re probably borrowing a lot of their money.
Let’s talk about a few clues to spotting millionaires: how you might identify one and how you might emulate what they’re doing and thus become a millionaire yourself.
First of all, they live below their means. I’m not saying it’s bad to buy stuff or buy good experiences. That’s kind of the whole point of accumulating wealth—to enjoy it, right? To enjoy it and hopefully not have to work forever. And many people accumulate wealth for that reason. They want income. And with that income they go out and buy stuff and have experiences. And, of course, they use the money to help others as well. But they always live below their means. They take the difference between what they earn and what they spend and then invest it consistently. They don’t compromise on that. It could be through a 401K. It could be through a company stock purchase plan. It could be through their own accumulation just by having money transferred into their brokerage account each month from their business. It’s automatically putting money away regardless of what’s going on. They gradually build wealth up over time.
So, they’re not going to look like the person with all the toys and vacations. They buy good vehicles and keep them a long time. That’s a commonality among people with wealth—they live below their means and take money and do something smart with it.
Number Two Clue of a true millionaire: They don’t tend to borrow money. In fact, most of the people with a lot of wealth don’t have any debt and they haven’t for a long, long time. They save up their money. When they buy a boat or a car or a vacation, they save up for it. They don’t just spend money first and ask questions later. Ultimately, these are people who tend to be planners. They plan ahead if there’s going to be a purchase. They plan far in advance and have plenty of money set aside in cash, just in case there’s an unexpected expense. They’re not just running around spending without thinking about it beforehand.
Another clue to a true millionaire: These tend to be people that accumulate wealth through owning assets. Here, wealth tends to be accumulated in a couple of different categories. One of those is by owning real estate. A lot of people are very wealthy due to accumulating real estate investments. Now, the home that you live in is not a great investment really. You know, my home I think will keep pace with inflation overtime, but is it really a great investment? No. It’s expensive. Think about all the money you put into your property. It doesn’t tend to be that great of a return over time. But investment real estate is a different story.
Not that anything is guaranteed, but owning residential real estate or commercial real estate or some combination can bring in not only price appreciation over time, but also income. You gain income off that property unless you’ve got vacancies, and anticipating vacancies is a good reason to diversify. If you’re going to buy real estate, make sure you can do it in a diversified way and without accumulating a bunch of debt.
So, a lot of millionaires accumulate wealth because they own real estate or they own a business. Maybe they own both. They could own a business one of two ways. You might say, “Josh, I do not want to open a business. It sounds like a nightmare as far as the risk and the time and everything that goes into it.” And I would tend to agree with you. There are some downsides to owning a business. Personally, I like it. Do I like every aspect of it? No, and in fact the average person that opens a business does it saying, “It’s going to be great because I’ll have so much freedom and so much time. That’s what I want versus working for somebody else.” But if you talk to most business owners, they’ll tell you that’s not what happens. You realize pretty quickly that there’s a lot of time and stress that comes with it. So, the other way of owning businesses is to own somebody else’s business or part of it.
The way we would do that is often through investing in the stock market. When we invest in the stock market, that means we get to own pieces of companies. They could be big companies like Apple or a small company. There are all kinds of different ways you can invest in businesses. Most often, that would be through owning shares of company stock.
So that tends to be where wealth is built over time: by owning one of those two things, real estate or a business or part of a business.
A lot of our clients are from the tech sector. They worked in corporations and didn’t own their own business. Many of them just started early on in their careers with these habits that I’m talking about. Living below their means. Taking their extra money and investing it consistently through their 401K stock purchase plan. If they were lucky, they also got some equity awards and things through their company that they built up through the employee benefits. That is a good thing, but even if you work for a company that doesn’t have employee benefits or you are self-employed and don’t have a company with a plan you can participate in, there are all kinds of things you can do on your own. And certainly a good financial planner can help you figure out what that should look like for you.
The whole point is to take money and put it away someplace reasonably smart. And long-term investments that are reasonably smart are often real estate or stocks. Make sure you can do it in a diversified way and make sure you get your financial foundation set.
Getting your financial foundation means getting all your debt paid off. It means you’ve got cash in the bank for emergencies. You’ve got health insurance and other types of insurance. You’ve got your estate documents done. We talk about a lot of financial foundation stuff here, because often those things are not in place. People kind of rush into wanting to invest and build up their wealth, but if you don’t have health insurance, you’re going to be in trouble at some point. There’s going to be a big medical bill and it’s going to knock out all those investments very quickly. So it’s important to make sure you’ve got your financial foundation before you start accumulating wealth.
As I said, people who are truly wealthy financially live below their means. They save to buy things and if they do borrow money, they pay it off faster than the loan contract specifies. They really try to get rid of debt as fast as they possibly can.
I get it that there are some debts that actually make sense. For example, if you’re buying a business or if you are buying real estate. Most people don’t just have the money to write a check for those things. So there might be a smart reason why you’re borrowing money if you’re borrowing for an appreciating asset versus a depreciating asset.
For example, a boat or RV or car. Those things are just going to depreciate. Then not only will you be making payments that affect your cash flow, but also you will be paying interest on those things. Save the money up. That’s what a millionaire would do. They pay cash because they plan ahead.
The Number Three Clue to a true millionaire is that they plan. They budget. They think ahead and do not make impulse purchases.
All three of these clues are the antithesis of how the average American operates. That’s why people don’t tend to accumulate a lot of financial wealth—because they’re not following these principles.
If you’re not following these principles right now, you can start today. There’s no reason to wait. If you’re just starting out, I highly suggest you take these to heart right away on how you’re handling debt, how you’re handling cash and income, and how you’re handling your budget.
It’s important to develop those financial habits early on, because that’s how all my wealthy clients accumulated the wealth that they have. Nobody got lucky. I don’t have any lottery winners. I don’t have any professional athletes. I don’t have, you know, the lucky few that ended up getting some huge windfall. Instead, the wealthy people I work with followed these financial habits from an early point in their career or their life. They started early and followed these habits over and over until they accumulated wealth.
So I hope that was helpful for today. I hope you are enjoying the Wiser Financial Advisor. And if you want to support what we’re doing, please click subscribe on your favorite podcast service. If you write us a review, that’s even better. I certainly appreciate any help you’re able to provide in getting the word out there, because this isn’t just about building a business. This is about helping real people because we know people need help. We know that if they follow these principles, they’ve got a much higher likelihood of success.
I hope you have a great week, and God bless.

The opinions voiced in this episode of the Wiser Financial Advisor with host Josh Nelson are for general information only and not intended to provide specific advice or recommendations for any individual. Investment advisory services offered through Keystone Financial Services, an SEC Registered Investment Advisor.