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7 Secrets of the Invisible Rich

Date: 13/08/2015

What Does It Mean To Be Rich?

RichThe definition is quite subjective. Ask 100 people on the street what it means to be rich, and you’re likely to get 100 different answers. Being wealthy means different things to different people.

According to one study by an English investment firm, only 28 percent of people with a net worth between $1 million and $5 million consider themselves wealthy. It seems that human nature tends to define “rich” by pointing to someone else who has more.

Perspective can be gained through comparison, but not just for those who have more. According to this study by Gallup, the median annual household income worldwide is about $10,000. Per capita, it’s closer to $3,000 per year. By worldwide standards, even Aussies on the dole are rich. How’s that for putting it into perspective?

But, we don’t live in sub-Saharan Africa. We really need to take into consideration our context. According to this article, if you earn the average Aussie wage of $75,000 per year, you earn more than 70 percent of all Australian taxpayers. That’s because our nation’s median income is about $55,000 per year. Congratulations, because if you’re the average Aussie, the majority of people in this country would point their finger at you to define “rich.”

But why don’t you feel rich? The definition of “rich” is subjective because we all desire a different standard of living, and because we tend to want more than what we have. Lacking contentment, we may strive to earn more, but we never seem to be at peace with our financial achievements.

I’ll never forget hearing Steve McKnight once say, “If you never decide how much is enough, enough will always be just a little bit more.”

In light of this reality, I’ll define “rich” as follows: “The ability to maintain a desired standard of living without the need to trade time for money.” In other words, the rich are financially free. They’ve determined how much is enough, and they’ve acquired assets that spin off enough cash to free them from the need to work if they so choose.

By this definition, wealth is not determined simply by how much one earns, but also by how little one spends, and to what degree one can wisely invest the difference.

Who Are the “Invisible Rich”?

Invisible RichIn the mid-1990’s, two guys named Thomas Stanley and William Danko wrote a book called The Millionaire Next Door. It was a compilation of their research profiling unassuming people who possessed a net worth of over one million U.S. dollars.

To give it more context, based on the current value of gold, US$1 million in the mid-1990’s equates to about US$3 million today, or about AU$3.8 million. The book was written at a time when the median home price in the United States was about US$140,000. There was not a lot of wealth stored in people’s homes, as is the case in Australia today. These “millionaires next door” had earned, saved and invested their way to wealth.

Thomas Stanley, a business theorist and writer, died February 28, 2015, at the age of 71. In his honour, I’d like to offer seven secrets of the invisible rich, as summarised from the book he coauthored with William Danko, The Millionaire Next Door.

If you’ve been around the Property community for long, you may have heard many of these truths before. That should not surprise you. You may even be living some of them. If so, keep it up. Here’s Stanley’s seven secrets of the invisible rich:

1. They Have Long-Term Goals And A Plan For Allocating Money Towards Wealth Creation

Wealth CreationStanley and Danko found that millionaires would not wait until their income increased to begin investing. They would “save today’s cash for tomorrow.” Furthermore, when their income did increase, they resisted the urge to increase their standard of living.

I’ve written many times about the importance of establishing 10-to-20-year financial goals.

In our Property Apprenticeship course, we invest significant energy at the beginning of the program to help people clarify their vision and tap into the internal motivation to stay on track. The vision then guides the strategic plan, one that no doubt requires sacrifice and delayed gratification.

2. They Follow A Household Budget

Many of the men that Stanley and Danko profiled claimed to have wives who were “planners and meticulous budgeters” and who were even more conservative with money than they were. In other words, they were aligned with their spouses on their goals and plans, and they showed their commitment by meticulously planning their monthly household cash flow.

John Maxwell says, “A budget is telling your money where to go instead of wondering where it went.” For more insights on how to implement a budget, check out this article on getting out of debt.

3. They Forsake A Status Lifestyle In Favour Of Financial Freedom

Financial Freedom

Stanley and Danko found that the typical “millionaire next door” drives an average middle class car and lives in an average middle class neighborhood. They are motivated by a desire for financial freedom, not by a need to be admired and respected by other people.

Status objects depreciate and therefore lack value in the eyes of financially-astute people. Millionaires consider the opportunity cost of purchasing such items.

For example, rather than buying a new car on credit every two years, they quantify the future value of 25 years of car payments in light of compound interest.

4. Their Parents Insisted That They Be Financially Self-Sufficient

Stanley and Danko found that,at the time of their research, “80 percent of America’s millionaires are first-generation rich.” But whether their parents had money or not, they insisted that their children make their own way. By doing so, the millionaires developed the character to take responsibility for their own wealth creation, and were thus able to plan, save and sacrifice in order to reach their goal.

5. They Refuse To Fund Lavish Lifestyles For Their Children

Just as they were taught to be self-sufficient, the “millionaires next door” also insist that their children find their own way. Not only does this continue the generational blessing of sound fiscal responsibility, but it also insures that their children do not end up draining their parents’ savings accounts later in life.

6. They Tend To Be Entrepreneurial

Stanley and Danko found that about half of the millionaires they profiled owned a business, and many of them in non-glamorous blue-collar professions. Rather than slave away for someone else, millionaires tend to prefer a working environment in which they can leverage off the time of others.

Interestingly, they also found that millionaires who have more traditional jobs tended to prefer opportunities where they could serve or “target” wealthy people. Examples included financial planning, accounting and law.

7. They Take Calculated Investment Risks

Calculated Investment RisksThe “secret rich” avoid leaving significant amounts of money sitting around in interest-bearing savings accounts. They insist on the higher returns available in the share market and real estate. Although Stanley and Danko found that millionaires occasionally invest in higher risk private business ventures, they never gamble or speculate.

Furthermore, their research found that millionaires invest in their financial education and the evaluation of their investment strategies. On average, millionaires invest almost twice as much time and energy into financial planning than non-millionaires in similar professions.


If being rich is the ability to maintain a desired standard of living without the need to trade time for money, then we must all aspire for that, even if it’s only by the time we reach the traditional retirement age.

According to a research paper released a year ago by REST Industry Super, 74 percent of baby boomers have no idea how much money they’ll need in retirement.  Furthermore, most of the over 50’s surveyed who are still working have not accumulated enough superannuation savings to fund the retirement lifestyle they want.

One of our goals through the Property Apprenticeship course is to help Australians plan ahead financially. Whether you’re 25 or 55, now is the time to take responsibility for your financial future.

Profile photo of Jason Staggers

By Jason Staggers

Jason is a personal mentor for Steve McKnight's Property Apprentices. He has helped hundreds of investors apply Steve's teachings in the real world and achieve greater results on their journey to financial freedom. To learn more about Steve McKnight's Property Apprenticeship course, click here to set up a complimentary Jumpstart Strategy Session with Jason.


  1. Profile photo of Benny

    “The Millionaire Next Door” – one of the classics and a must-read. I haven’t read it in ten years (must be time to re-visit it), but parts of it stick with me.

    One that sticks was their comment that millionaires buy their motor vehicles following a “cheapest per pound (or Kg)” and went on to say that the most common Millionaires’ vehicle was the Ford F100. Certainly NOT what many would think….


  2. Actually read this yesterday, great book!

    Simply message to acquire wealth;
    . live under (within) your income and you will continually grow wealth.

    the only thing I perceived missing was (not in the book) that once you can sustain a lavish lifestyle you can if you can understand your limits and keep the wealth growing to support it.

    • Profile photo of Jason Staggers

      The challenge is that what motivates most people to live lavishly is the desire to project the appearance of wealth. But that’s a slippery slope because there will always be someone more wealthy than you to compare yourself to.

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