People with an average income can’t become wealthy, right?
Every time I write about the subject of wealth, and of becoming a millionaire, on this site, quite often one of the first comments that gets left on the post is one of the naysayers saying that the post isn’t relevant to the average reader, and that it’s not possible for someone with an average income to build a nest egg of a million dollars or more.
“It’s not possible” they say. But is it?
For most people, that may be the case, the average income can’t stretch far enough to build wealth.
Unless… Unless as author Thomas J. Stanley says, you play “great financial defense”.
Playing Great Financial Defense
In a recent post Stanley was examining the auto purchase decisions of millionaires in his studies, and he found that one particular group was more likely to have bought used cars than the rest of the millionaires he studied. He called them “used vehicle prone shoppers” or UVPSs, and they made up about 20% of the millionaires in his studies.
The reason they were so interesting was because UVPS were exceptionally good at transforming income into wealth, while being more likely than the norm for millionaires to have an income under six figures.
When asked how he gets a “good deal” when acquiring a motor vehicle, the UVPS’s number one response is “buying used cars via aggressive shopping among private owners, dealers, leasing companies, etc.” But there is much more to this story than just the acquisition of motor vehicles. The UVPS segment represents literally hundreds of productive habits, financial lifestyle patterns, and attitudes.
In fact, the UVPS segment is more productive in transforming income into wealth than any of the other vehicle acquisition groups among the millionaire population. Interestingly its members are more likely than the norm to have incomes under six figures. Most households in America will never generate a high income. Of course income is a correlate of net worth. But understanding this the UVPS members are determined to accumulate wealth via playing great financial defense, stretching their dollars of income in the most productive manners. For example, they spend less than 65% for their motor vehicles than is the norm for the other millionaire types.
So while there are more of the millionaire who are buying new cars than not, for many of those who are buying used cars, they are doing it as part of a pattern of great financial defense where they are more efficiently transferring income into net worth, versus just spending their income on things – without getting the most for their money.
Being Good At Finding A Great Deal
Those UVPSs are good at finding ways to get the best deal, whether it is in buying a car, or if it is in finding the best and most affordable service providers.
The hallmark of this segment is its tendency to use high grade, locally owned independent repair shops for maintenance, repairs, and evaluation of prospective vehicle purchases. As an important side note, UVPS segment also patronizes the top local/mom-pop appliance dealers and repair services, plumbers, electricians, roofers, etc. These suppliers charge less than more conventional service types. They consistently receive the highest evaluations for quality and integrity from the UVPS segment.
When interviewing UVPS respondents about automobile servicing often they say, “I only deal with Butch” or “Sal is the one.” The Butches and the Sals are not easy to find.
The UVPSs find the best and most affordable providers for services in their area, and they build a relationship with them.
They find the best most affordable way to buy a vehicle, and buy vehicles that way.
They do their research, and they spend their money in an efficient way that leaves more left over to save, invest and give.
So is it possible for someone with an average income to retire wealthy? Yes, it is. Many of the millionaires studied by Thomas J. Stanley had incomes of less than six figures, and found a way to become affluent.
The key is you have to be good at playing great financial defense, and finding ways to keep more of your money in your savings account, and less in the pockets of service providers and retailers.
Are you playing great financial defense?
I am a big fan of the books/studies that Thomas Stanley does. I drive a 12 year old car, not because I can’t afford something newer, but because of the opportunity cost of paying more for a more expensive car. Because I drive a modest car, we are able to travel the world and invest more. That is better to me than having a shiny new car.
Peter Anderson says
We always pay cash for our cars, and we tend to buy somewhat low mileage used cars a couple years after they are released – and we save thousands on the instant depreciation once the car drives off the lot that first time. So now we save cash until we have enough for our next car, and then we save the rest towards retirement, giving and other savings goals. Gotta love it!
Michael Taylor says
Peter, I paid cash for my used 2003 Ford F-150 a few years ago. I’m in a position to pay cash for our van replacement now. I love not having the monthly burden of a payment. The key to building wealth on an average income is to start early! I wish I would’ve been smart enough to do that when I was 21. :o)
Peter Anderson says
Agreed – if only my 21 year old self had thought far enough ahead to start making the good decisions back then!
Mario, Debt BLAG says
Some good points in here. One of my favorite things to say is that it’s very expensive to be poor. Banking, investing, borrowing — these and more all cost more when you’re cash-poor. If you’re a young person who’s planning to climb the ladder, it’s best to hustle as hard as you can early on to get out of that trap as soon as possible :)
Donny @ Personal Income says
I think having cash flow available is critical when it comes to being able to invest on a great deal. It also provides great leverage if you plan on doing a deal with partners or a bank.
Edgar Bennett says
Why do I have to make so many moves just to get the Book?, you promise a free book but then I have to under stand nothing in life is free.
Peter Anderson says
Edgar, if you’re referring to the free ebook with newsletter signup, you should get an email directing you to the download link as soon as you sign up? If you have issues finding it, please feel free to email me through the contact page. Thanks!
Lisa Rioux says
I am interested in reading more of your blog. I am a believer. Average people can become wealthy. I have personally witnessed it in my own family. The two key factors that I attributed to this occurrence is discipline and foregoing immediate gratification.
Warmly submitted #Rxforfinancialfitness