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While reading 13 things millionaires do that you don’t do | Debt-Free Mom, I noticed that one of the readers was refuting this list.
Bob Smith says: "As one of those “millionaires” you describe, I’d say that some of the items on your list are correct, but many aren’t:,..."
And goes on to list the things that he doesn't do and why. 
Now I recognized immediately from the list of millionaire habits that the list comes from the excellent book "The Millionaire Next Door" (and DebtFreeMom says as much in her response to 'Bob'). The book is definitely worth a read and DFM is right on with her descriptions.
The Fast Millionaire
I think the main debate here is between what I call a Fast Millionaire, and a Slow Millionaire. The Fast Millionaire is someone that has accumulated their money in a relatively short amount of time, say a few years at most. I count among these; Internet Stock Millionaires (Microsoft employees for instance), Real Estate Investors (mainly the few that are able to follow the 'get-rich-quick' advice successfully, foreclosure buyers and house flippers) and Small-Business startups that gain business quickly. It could also include the 'new Rich' (someone inheriting the money, and lottery winners).
Fast millionaires haven't worked long enough for the money to develop the habits listed in the Millionaire Next Door. As the book itself wasn't published until 1998 (earliest I can find so far) it doesn't account for the 2000'ish Dot-Com boom and bust, where lots of millionaires were instantly made (mostly on paper). There is a significant number of people today with net worths over 1 million dollars that would scoff at many of the practices of the 'Slow Millionaires'.
Most of Bob's objections had to do with the time investment required vs. the value received. He felt that getting clothes mended and shoes repaired was more expensive from a time perspective, than buying new. Fast Millionaires value time over money, because they believe that they can always generate more money, but only have a limited amount of time.
The Slow Millionaire
Slow millionaires have earned their fortunes over a much longer time period; Years at least, but more likely decades. These millionaires are the ones that have had the time or the education to form the habits listed in the 'Millionaire Next Door'. Slow millionaires probably built their wealth by maintaining a frugal lifestyle while working at maintaining and increasing a (relative to the fast millionaire) smaller money flow. Running ubiquitous businesses like janitorial services, junk dealerships, plumbing, and other 'meat-and-potatoes' types of businesses that bring in a steady income. These aren't the glamorous businesses, but the ones that you read about "Founded in 1903" or some such.
To the Slow Millionaire, money is money. The more of it you save, the less of it gets spent. They understand the power of compound interest a little clearer than the Fast Millionaire, because that's what they've used to get where they are. For the price of a few new pairs of shoes, over 40 years at 5.5% interest, they could probably buy a car if they wanted to. It's just a different mentality.
Yeah, But Who's Right?!??
Neither, or both, depending on your point of view. In today's American society, it's fairly easy to start a business, work at it, and create a good life for yourself and your family. You can pursue the Slow Millionaire track, and spend decades accumulating your wealth.
It's also easy to spin a good idea into a HUGE amount of money (coming up with the idea is the hard part though.) Having an idea for a new product, service or improvement can be leveraged with a little money, time and elbow grease into a quickly-thriving niche. From there you can turn it into a real Slow-Millionaire perpetual business, or you can grab the money and run, selling to someone willing to take your startup and turn it into something bigger. (Think many of the companies bought by Google and Microsoft in the last 10 years or so).
Money now, or more money later, it just depends on your desire and drive.
Aah Yes, The Catch
As with any get-rich-scheme, whether legitimate or not, there are risks. With the Slow Millionaires, they spread their risks over a wide timeframe, so dealing with issues is easier (most of the time). With the Fast Millionaire, there's always someone that will be nipping at your heels, trying to take what you've done, spin it slightly differently, and undercut you and your niche. It's a high-intensity arms race. Working for the next big thing or the killer product. Also, because the Fast Millionaire many times doesn't have the training or background for handling large sums of money, they can see it slip through their fingers (Lottery winners and inheritance babies fit this bill). How many big-time performers have earned millions of dollars from their performances, only to declare bankruptcy a few years later? Too many!
"The art is not in making the money, but in keeping it. "
From ThinkExist.com
Slow millionaires and Fast millionaires have one thing in common. They're Millionaires! So whatever they did, worked. The only difference in my book is what you do to keep the money.
Do any of the readers out there have money habits that they think fit into the Slow or Fast Millionaire category? And if so, what are they? Leave a comment and let us know.
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December 31st, 2007 at 1:16 pm
Great post! I like the quote too - I've had it plastered across the top of my website.
I wonder how many fast millionaires stay millionaires. I suspect they don't have the appreciation for money that slow millionaires do, and think it would be easy to make it all back. Kind of like how everyone is a great stock picker in a bull market.
December 31st, 2007 at 1:17 pm
I'd rather build the habits and be a slow millionaire. I don't have the constitution for the other.
Besides, good habits are good habits whether you're a millionaire or not.
December 31st, 2007 at 1:26 pm
@MMH,
Yeah, that's the big risk, easy come, easy go. It's easy to let it slip through your fingers if you don't have to work TOO hard for it. and when it's gone, it's not ALWAYS possible to make another million or two.
@MrsMicah,
I agree with the habits, but I can identify with the Fast millionaires too. Who wants to have a million dollars when they're 65-70 and can't readily enjoy it like you could if you were in your 30-40s. It's tempting to take the short road and enjoy life, at the risk of not having too much to show for it later on. Tempting,...
December 31st, 2007 at 1:43 pm
I too am a fan of building the good habits, which can be applied in so many facets of life. But, to Randall's point, I can see the fast millionaire's side of things as you never know what tomorrow will bring, so enjoy it while you can I guess.
December 31st, 2007 at 7:05 pm
While I agree that good habits are important, some people are definitely better off taking the more expensive/lazy route to getting things done. It makes little sense to save a few dollars if you could make more dollars (after tax etc) by reallocating your time to your job and outsourcing the mundane task. I know a number of high income earners (investment bankers, fund managers etc) who are desparately short of time. For them it makes sense to pay someone else to do basic tasks or to take the quick way of getting things done (rather than the cheapest).
While this approach is correct, it has to be remembered that once retirement comes around or the high income stops flowing, you need to get out of the habit - something that I suspect is easier said than done.
December 31st, 2007 at 8:09 pm
Why can't I try for both? I'm trying my best to be frugal and wise with my money and investments. I'm also working on building my business (first as a side business then full time).
I might be only successful with the slow millionaire's method, but at least I tried with the fast way.
Good article!
January 1st, 2008 at 5:45 am
'Old Money' isn't the same as what you term a 'slow' millionaire - it's generally applied to families that have been rich for generations and are used to conserving it and passing it along (lots of 'slow' millionaire families lose it all when the 2nd or 3rd generations spends it all).
Being a 'slow' millionaire doesn't have to take until 65 or 70 - I made it by 45, and could have made it by 40 if I'd focussed more seriously on learning about investing when I was in my twenties. A 'fast' millionaire would probably be those that made their million before turning 30.
BTW - the cost of a pair of shoes (say, $200) invested at 5.5% for 40 years is only $1,700 - and that isn't adjusted for inflation. I seriously doubt that it would buy you a decent car! Then again, if you invested the cost of a pair of shoes in a high-growth index fund for 40 years you might be able to buy a car (at 11% the $200 would grow to $13,000 - but that still isn't inflation adjusted).
Regards
http://enoughwealth.com
January 1st, 2008 at 8:21 am
Wow! Lots of good comments!
@Traineeinvestor - The ones you mention (investment bankers, etc) I consider the Fast millionaires because they can make LOTS of money in a short amount of time. It'd be easy for them to take a little more time (assuming they could find it) and set up retirement funds, on-going self-managing investments, etc. to cover their later-life expenses.
@Laura - No reason they can't do both, but personality comes into play and they tend to drift towards one or the other a little more strongly. I'd assume that the SMART millionaires are using tactics from both sides of the board.
@EnoughWealth - Agreed. "Old Money", or money that's lasted past the first generation inheritance is different. By then the money has turned into an institution and can't be readily squandered by a single generation. It's surviving the first 'generation pass' that I'm talking about. Many rich people that pass on their riches to their children never realize it won't get to their grandchildren.
Your 40's is where I placed the (imaginary) dividing line between fast and slow, but it could go either way by a decade or more depending on the habits of the millionaire; a Slow millionaire could have made his first million by 30, but practice all/most of the 'slow' habits, a Fast millionaire could wait until they're 50 to make their first million, but might have started at 45 or so. It's just an arbitrary division.
(I did say a 'few' pairs of shoes, so maybe 10 pairs at $200 over 40 years would put you closer, but even then it was just an illustration, not an exact number. And if I were taking into account inflation, I would also have used the historic average rate of stock market increase - ~10%) Great comment though!!
January 17th, 2008 at 12:21 am
I think Randall's point is that,"I can see the fast millionaire's side of things as you never know what tomorrow will bring, so enjoy it while you can I guess."The Fast Millionaire is someone that has accumulated their money in a relatively short amount of time, say a few years at most.