Check out this great story from a reader, Drake, on how his rich father handles money. Sometimes we like to think all rich people are driving around in brand new BMW’s and Mercedes… when in fact, most of those new cars are driven by people who can’t even afford them! Here’s the story:
I’m not personally wealthy, but my dad is moderately affluent and I’ve learned the power of frugality and living below one’s means from him over the years. He’s been driving Japanese econoboxes and minivans for as long as I can remember. He’s driven 3 cars in his lifetime (all of which he wrote a check for in full at the time of purchase except for his very first car which he financed) – an ’84 Toyota Camry, a ’95 Nisan Quest, and an ’06 Honda Pilot. That’s it. He write checks for cars in full and drives them until they break down.
Currently he’s 55 and will pull in, oh I don’t know, anywhere from $550k to $700k per year (AGI – federal income tax takes a hefty $150k-$200k of that each year. I’ve seen the checks to the U.S. Treasury!) or so and yet he spends maybe $6k-$7k per month on total living expenses in a relatively low cost of living area (Texas). As a result his overall net worth is between $5M and $10M and yet he doesn’t harbor any notions of ever driving a luxury car. In fact, he doesn’t even consider himself to be wealthy. If someone were to ask him what social class he’d consider himself to be in he’d probably say “middle class” and then begrudgingly add “upper middle” as a qualifier if pressed.
After his Pilot he’s already told me that he has plans on purchasing a Prius as his next vehicle.
Granted this is not to say that he’ll never spend money on anything. He values experiences more than material possessions. For example, one of his dreams is to ride that Virgin Atlantic aircraft to space ($250,000 per ticket!). But really, more than anything else he values financial freedom. He says the feeling of working only because you want to and not because you have to is just amazing and is worth working towards.
But, I mention this because I’ve noticed a trend where a lot of people seem to doubt the pentamillionaire and decamillionaire statistics (not in the comments section of this article, but just in general), but they definitely ring true in my dad’s case. The ’06 Pilot is the most expensive car that he’s ever purchased and it was in the high 20s or low 30s I believe. He also never gets navigation with his cars because he thinks a handheld $100 garmin does the job just fine and you can save a good $3000-$4000 this way. For what it’s worth he wears a ~$200 Seiko, wears $~100 dress shoes, and the most expensive suit he owns is maybe $400 or $500 (because to my knowledge Stanley’s books mention pentamillionaire/decamillionaire stats for various items like these in addition to large purchases like cars and homes).
Pretty great story, right?! If your parents are decamillionaires and you want to share a story, please send it my way 🙂