Editor’s note: This article was first published in May 2011. Its description of Buffett as “the man of the moment”, the references to Trump and the Forbes rich list, and Kiyosaki’s travels reflect that time.
Warren Buffett says that when you decide to start a plan in life, whether to get rich or to achieve financial freedom, there is one initial piece of advice that is the first step you need to be very clear about. In life you can look wealthy or you can be wealthy, but the two are completely incompatible, especially if your aim is to become a millionaire one day or to achieve that much-desired financial freedom.
Buffett says that looking wealthy costs money you could be investing, and that’s why he hasn’t spent on luxuries. We mention Warren Buffett because he is the man of the moment, but these principles are followed by the select millionaires’ club all over the world.
Millionaires don’t drive luxury cars
Despite what we see in films, the real millionaire doesn’t drive the latest model, because they are so financially educated that they know a luxury car is a very unprofitable asset that loses value over time. Even when they own works of art, some of them don’t even like art, but they are aware that nowadays some works of art will rise in value well above inflation.
Another piece of advice the great millionaires give us, even if half-jokingly, is that if you want to be a millionaire you should marry only once, and to a woman who is more thrifty than you.
Why isn’t Donald Trump on the Forbes list of the 10 richest men in the world?
Quite simply because his love life has been chaotic, and he has spent a fortune on divorces that could have ended hunger in the developing world. And what about our friend Robert Kiyosaki? Well, the truth is that Robert didn’t want to be rich; he wanted to achieve financial freedom. So he keeps receiving income from his investments while, right now, he is travelling halfway around the world.
A millionaire rarely owns a Rolex, and if they do, as a rule they bought it with 33% of the profits from one of their latest investments.
We don’t say 33% by chance. It’s a financial strategy many of these millionaires follow: after a good investment, they take the profits from that asset (only the profits, never the whole capital) and usually put 33% into a new investment, another 33% into an account… (well, another kind of investment), and the remaining 33% is usually a reward they allow themselves, although they rarely spend it on whims.
Even with donations they don’t lose out, since a donation to a philanthropic cause can usually be deducted at up to 29% on the income tax return. So in some cases they actually make money from this kind of cause, because the difference between what they owed in tax on their wealth and what their donation will save them is usually larger.
Still, those donations are welcome, since there are other ways to cut your tax bill and, thank God, some of them choose this one.
In a nutshell, summing up the message they want to send us: “they are millionaires because they don’t live like millionaires; they even work harder than the working class, although in one hour they generate more money than some people do in a whole year.” That’s why they are what they are.
If you want to know more about the real millionaire (the one who doesn’t appear on the Forbes list or among the richest people in the world), the book The Millionaire Next Door is an interesting read that will open your eyes to financial matters.
I’m glad to see that they fully agree with our article “The only secrets to getting rich“, which I recommend you read, as it contains the only valid advice for getting rich; there is no other.
