1st & 15th Financial Corner - Apr 1, 2011

April 1, 2011

In this edition of 1st and 15th Financial Corner, I won't cover finances directly; I'll try to show how finances relate to my overall philosophy.

Here's a good interview with Thomas Stanley, one of the co-authors of The Millionaire Next Door. He has done in-depth research on millionaires and happiness, and what he has found is that high net worth is a closer cause of happiness than possessions.

RB: What if someone says to you, “Big deal if I spend everything I make. I live a better life than these frugal ‘millionaires’ who have big bank accounts but don’t have any fun?”


TS: If you look at the statistics on happiness in life overall, those people who live below their means are happier than people who don’t. Some people may tell you they are happy because they’ve got that leased BMW or they wear thousand-dollar suits or have a closet full of clothing, but that’s not what happiness is.


...


The happiest people are the people who have substantially more money than most of the people that live in their neighborhood. So they don’t worry about keeping up with the Joneses; they are the Joneses.

It is clear that their studies have shown that there is no correlation between material possessions and happiness.

I like this bit about engineers:

RB: I’ll pick up on that in a little bit. Your studies show that a disproportionate number of millionaires are business owners and self-employed. So what do you say to someone who says, “Then obviously I need to start my own business?”


TS: Most people should not be in their own business. For a lot of the people who started their own business, it was a slow process.


But the other thing is that there are a whole lot of folks out there in this country who are millionaires [but not self-employed]. For example, I mentioned in the latest book about engineers. Engineers typically are people who are frugal. They view products in terms of their performance characteristics and their durability. So they are big on Toyotas and Hondas and cars like that. And they do quite well. Plus, they [engineers] are analytical; they’re very good at investing, typically. Educators do well also. So there are a lot of folks out there who are disciplined and who know how to play the game. You don’t have to own a business.

CONCLUSION
There's no shame in living below your means

COMING SOON
Allocation strategy and investing vs. debt payoff