As the New Year starts to loom closer (where did the year go?!), you may be thinking about your goals for the upcoming year. I know I am! Both my husband and I are curious how goal setting will go with a newborn! =) One of the things that people often make goals around are Finances.
- I’m going to save more.
- I’m going to spend less.
- I’m going to ask for a raise.
If you’re thinking about those very things, know that those goals I listed above are TERRIBLE. No, it’s not that they are bad ideas. It’s that they’re written in a cavalier manner that won’t get you to your goal. Your goals need to be:
Specific
Measurable
Achievable
Realistic
Time Oriented
So, those goals would be:
- I’m going to save $500 by June 1, 2011. I am going to do this by putting away 5% of my income on an automatic deposit into my savings account.
- I am going to make a budget and spend $55 per month less than I spent in 2010. My budget will be completed and reviewed by February 1, 2011.
- I am going to ask for a 3% raise by March 15th.
Most people want to improve their financial lot in life. You could always be a little more comfortable, a little less stressed and be able to go on a slightly more lavish vacation. But surprisingly, most of the ‘wealthy’ millionaires in America actually live very frugal lives. There’s a new book called “Stop Acting Rich … and Start Living Like a Real Millionaire” (by Thomas J. Stanley). In the book he debunks the idea that millionaires have flashy lives. In fact, it turns out that they lead very unassuming and unpretentious lifestyles.
They don’t have palatial homes. Approximately, 90% of millionaires live in homes worth less than $1,000,000 and 67,000 of them in the U.S. actually live in mobile homes. They don’t even have vacation homes. 64% of millionaires have never owned a vacation home. In fact, the typical second home buyer has a median household income of just over $80,000. Why don’t millionaires buy second homes? Simple. They understand that second homes are costly to maintain and they don’t want to be locked into vacationing the same place every year.
Interestingly enough, true millionaires don’t buy expensive toys either. More than 93% of the boats purchased in the U.S. are not bought by millionaires. The majority of American millionaires have never owned any type of watercraft. Again, they know how much it costs to maintain.
But surely, they must be spending their money someplace, right? New cars! They must have nice wheels! Wrong again. Eighty-six percent of all expensive makes and models of cars are driving by non-millionaires. The typical millionaire drives a Toyota (11%), followed by Ford and Chevys. And the average price paid is more like $30,000. Millionaires are looking for cars that maintain value, cost less to maintain and aren’t flashy. They don’t want to attract thieves nor do they need the cars for status.
The bottom line? Millionaires often become ‘rich’ because of their frugal lifestyle. They made conscious, smart spending habits to get to be a millionaire and they kept them long after they became millionaires.
If the millionaires aren’t spending like millionaires … then what should we be doing in 2011 around our personal and business finances?
I have heard really good things about it.
I was agreed, I’ll keep in touch to your blog.
Granted, we probably need to do a little work in there too (LOL!) but even the process of writing them down allows you to start chunking them down into manageable goals.
I agree; there’s some sort of interesting, strange, cool magic that happens when I write my goals down too. =) Love it!
This is exactly how we set our goals each and every year. We set the bar high and I am always amazed at how well it works to help you hit the target.
This is the way we plan for our business using SMART goals. Sometimes when we set our goals it seems like a huge stretch, but somehow just writing them down seems to work!
OOOOH! Cool. I love iPhone apps. And, I haven’t heard of that one. Thanks for the heads up.
Great post. I’ve been using The Habit Factor iPhone app. It’s a great tool to connect specific goals with specific activities (habits) to achieve them. I highly recommend it.
I really need to read that book. I have heard really good things about it.
I’ve never seen House Hunters. Sounds interesting! =)
Oh definitely exceptions – all you have to do is pick up People magazine to see the exceptions =) I know a few people of means as well and they are amazing philanthropists but they don’t drive the flashy cars or the really nice house etc… They definitely like their wine though! =)
The theory the book puts forth is that to get to be a millionaire, you have to do so much scraping and frugal behavior that by the time you have the means, you don’t spend it because it’s not a habit.
Love those budgets =)
The S.M.A.R.T. advice is so great that it bears repeating time and again, and I’m glad you do! This post reminds me of the book “The Millionaire Next Door”. It is so true that the majority of millionaires lead ordinary and frugal lives. The line about millionaires not buying vacation homes made me smile. We like to watch House Hunters and we always marvel at the people who buy a second/vacation home. We never could understand why a lot of these people would tie themselves down to a second mortgage, extra maintenance work, and a place they always have to visit (versus being able to go anywhere in the world).
I believe your stats, but there are definite exceptions…
I have a couple of customers here that are millionaires and they ARE what you would think millionaires are like, although they are wonderful people, kind, generous and funny. One of them drives a Bentley sports car, has second mansion, full time house managers at both homes, a private jet… they are philanthropists. But then again, I am living in a unique area of the world… Palm Beach County Florida. Some of the richest people live in this county.
Thanks for a great article! It’s a nice reminder that careful, wise planning is worth it in the long run!
Love it!!! My husband’s words are lingering through this article. The only part he had a problem with was the mobile home thing. He’s an architect so that’s a hard pill to swallow, but hey, I’m game if it means less debt and more security. We should read this book!
What a great phrase! Love it!
Great topic Anne-Marie! I made this decision a few years ago and has been the best choice. Like one of my favorite financial experts says ” Live like no one else so later you can live like no one else”
It’s always this time of year that it comes up – when we’re making budgets and thinking about how next year can (and will!) be different than this year … Excited to make our family financial goals in the next week too.
Great thoughts Anne-Marie. I’ve been contemplating this very subject today and this info is very helpful. 🙂