What would you do if you had a million dollars in the bank? Would you buy a high-priced, flashy sports car? A huge house? Go to all the most expensive restaurants in your town? Jet around the world?
It’s possible you’d do any number of those things, but if you did you might notice that million-dollar balance dipping lower and lower. Having a lot of money at one time doesn’t mean you have an unlimited ability to spend. Every purchase you make—big or small—will hit your bottom line and chip away at your balance, whether it’s $5 million or $500.
Many people who do have a million or more tucked away have that money because they choose not to live like millionaires. Look at financial guru Warren Buffet. He’s passed the millionaire marker more than a thousand times over, making him a multi-billionaire, yet he still pays himself a salary of just $100,000 per year, drives an older Lincoln, doesn’t own any islands or take any fantastic vacations, and often chooses fast food over fancy fare.
Another example of a millionaire living a modest lifestyle is former Baltimore mayor William Donald Schaefer. At his death, The Baltimore Sun reported that his estate was worth $2.5 million. In 1986, during his last term as mayor, his salary was just $53,000 per year. That’s not poverty level—especially in 1986—but it certainly isn’t the income you’d think a millionaire would earn. He went on to become governor, making a salary of about $120,000. That was an above-average salary, especially for that time period, but make no mistake—it was his frugal lifestyle and focus on savings that made him a millionaire, not his income. He could have easily squandered every last dollar on expensive homes and cars.
Not everyone can become a millionaire. Simple lifestyle expenses and low salaries can make it impossible to save any amount substantial enough to get there, no matter how strict an individual’s budget. But that doesn’t mean huge salaries make millionaires. In fact, in 1996 the book, The Millionaire Next Door: The Surprising Secrets of American’s Wealthy found that the median taxable income of the typical American millionaire was just $131,000. It also found that the average millionaire had living expenses totaling just 7 percent of their wealth, which, for a millionaire, would mean living on about $70,000 per year.
A modest lifestyle, more likely than not, is what really makes most millionaires, millionaires—and keeps them that way.