I know what you’re already thinking. This is going to be a big list of what stocks to buy, or trading strategies to employ. Nope. It’s way different than that, although those are very valuable strategies I excel at helping people with. This list is 7 strategies you have complete control over, and will alter your destiny for life. The strategies and tips I’ve laid out will allow you to save the capital to invest in assets that will allow to live an extraordinary life. After reading the article’s you’ll see how easy it can be to accumulate over $1 million!!!! If that’s not an enticing goal then simply stop reading now. For everyone else please continue below!
So without further adieu here is the list.
You turn vehicles into cash machines.
While these are not listed in any specific monetary order, these are the top obstacles I see preventing people from getting some MAD Wealth!!! Now this doesn’t mean you’re cutting expenses to live in a slum, purchase basic groceries, and lounge around in clothes with bigger holes than Swiss cheese. Instead, we prefer to live life to the fullest, buy the best quality items available(in context of course), and awash ourselves in happiness. For the average middle-class household with an income of $50-120k/yr the items above are likely to represent their largest expenditures throughout the year. We’ll tackle item #1 in this post.
To fully understand the magnitude of America’s car problem lets start with some population figures from the US Census Bureau. For 2010 there were 281 million people in this country with 74 million under the age of 18. Now even though the driving age is 16, not everyone immediately gets a license, or has their own car so for our example we are going to exclude them from the analysis. That equates to 207 million people driving around. Well according to the NADA in 2010 there were 249 million vehicles in use. That’s 1.20 cars per person, and you can see we are already on the wrong side of the road! Last year this country sold 16.4 million new vehicles, of which 1.72 million were pickup trucks. More impressive is pickup trucks from Ford, GM, & Dodge took the top 3 spots of overall vehicle sales. Now from what I notice is that all these people driving pickup trucks use them for heavy duty work applications(sarcasm). Because otherwise no human obviously has any need for one otherwise.
What blowing your money in a big way looks like.
There’s actually a whole continent that gets by without the USA’s best selling vehicle. Europe. You actually have to specially order it just to have it delivered there. We could go on about the differences between the two places; but if a whole continent of tradesmen and construction workers have determined they can get the job done without a pickup we just might not be as smart as we thought we were. Maybe Americans have been getting fed a bunch of BS as to why we need them so badly. Whatever the reason they are a waste of money for the majority of buyers. Now I’m not saying only pickup trucks are a waste of money, most of the vehicles we buy are a waste of money. According to the NADA in 2014 we had more SUVs & pickups on the road than passenger cars. Wow, there must be a lot of heavy-duty material hauling because there is no need for a human to have that much horsepower, and space to transport themselves down the block for their frappucino.
Maybe there’s a correlation between our love of bigger vehicles and the empty pockets of so many Americans. The bigger the vehicle the higher its costs to purchase and maintain. A small sedan costs 46.4 cents per mile while a large SUV costs 73.6 cents per mile with 2014 data. That means choosing a larger vehicle increased your driving costs by 58.2%!!! Did you get a 58.2% pay raise to drive that bigger car to work? Interestingly between 2003-2014 the cost to drive a vehicle also increased 60% which is compounding the problem.
I highly doubt most Americans received a pay raise large enough to cover these increases while they drive to their unfulfilling jobs the last decade+. Now maybe you never bought a new car, but with nearly 32 million new vehicles sold in the last two years, plenty of Americans are clearly making bad choices.
Now lets look at the cold hard cash impact.
The IRS sets the cost of operating a vehicle at 57.5 cents per mile for 2015. Now imagine you decide to live 30 miles from work, and I know quite a few people who do this. I even did it myself for a few years and I fast-forwarded my strategies to change my commute. Anyway if you live 30 miles from work you are incurring $34.50 in costs each day! For a year that’s $8,970 just for the privilege of driving to work, plus 15,600 miles on your vehicle. Now, let’s add some miles for personal driving. This would include driving a couple miles to the grocery store, a few more to the mall(spending money on fancier clothes and electronics than you need), grabbing your fancy frappuccino, a few weekend getaways, and countless other wasteful trips. Let’s estimate extra mileage will total 5,000 miles.
Let’s take a look at the long term implications of the above circumstances. If you live 30 miles from work and still put on an additional 5k miles per year for 20,600 total; well congratulations since you just drove yourself out of $11,845 with an average car. If you drive a pickup truck or SUV you’ve been emptying your wallet to the tune of $15,161 each year!!!
Maybe you think $11,845 isn’t so bad, but let us compound it to see what you could have had in your pocket if you invested this money instead at a historical return of 8% each year. Let’s add in the annual driving cost($11,845) for each year and consider it a contribution. You could have saved up a nest egg of $197,165 over 10 years!!! I bet that’s enough money to have helped you pay off the mortgage, beef up your retirement savings, fund your business idea, allowed you to quit your job, or even jump-start a college fund for the children. Not sure how much you spend on vehicle costs each year? Use our free income and expense budgeting tool to start tracking your actual costs. It’s a cinch to set up.
This is serious money going out the tailpipe each year. If your household has two cars the numbers are obviously even worse. You should be making a very conscious effort to reduce the amount of driving you do each day, or at the very least be driving a compact car if you have no need to be hauling large items for work.
But everyone has new cars you may think to yourself, and I’d agree it does appear that way. If you’ve ever been to LA there are luxury import cars all over the place. Visitors must think everyone is a rich movie star! They couldn’t be further from the truth. Some of the people may be earning above-average incomes, but are probably loaded up the wazoo with debt. These people drive around their new(usually leased) Lexus or BMW and look the part, but in reality they have low chances of ever being millionaires or becoming financially independent.
What if I told you that the majority of real millionaires(not high income earners) according to the book “The Millionaire Next Door” don’t buy luxury import vehicles? 37% of millionaires buy used, and the majority spent less than $44,500* on their vehicle. Stunning isn’t it? These people can actually afford to buy a luxury car with cash outright yet still choose used vehicles. The authors of The Millionaire Next Door also reported only 23.5% of millionaires drive the current year model.
If we do some basic backtracking that 63% of millionaires buy new cars, and 23.5% drive the current year model; we can estimate how many of them(based on head of household status) actually bought a new car in 2014. We have 10.1 million millionaire households in America for 2014. If the average household size is 2.6 people we now have 3.8 million people who likely are head of household and buying a new vehicle. If 23.5% of these people are driving the current year model, then 3.8 million X 23.5% = 893,000 millionaires bought a new car in 2014. Remember we sold 16.4 million new vehicles in 2014. This means millionaires only bought 5.4% of the new vehicles sold while representing 8.2% of all households**.
Clearly the majority of what we call rich people are not buying new cars. They are smart money for a reason. Not because they know how to invest it better than everyone else, but because they spend it smarter than the rest of Americans.
Now that was a ton of data I gave in this post, and I’ll elaborate more in future articles. The basic premise here is that if you’re anything short of upper class you should not be buying a new vehicle, or ever drive a pickup truck unless you have a darn good reason. Additionally always think of ways to lessen the amount you drive. The best options are public transportation, and biking. When used in conjunction with each other you can get spectacular results.
I’ll end this post with a quote from the Millionaire Next Door which I highly recommend.
“It is unfortunate that some people judge others by their choice in foods, beverages, suits, watches, motor vehicles, and such. To them, superior people have excellent tastes in consumer goods. But it is easier to purchase products that denote superiority than to be actually superior in economic achievement. Allocating time and money in the pursuit of looking superior often has a predictable outcome: inferior economic achievement.”
1: The Millionaire Next Door by Thomas Stanley & William Danko
*Inflation adjusted number. The authors reported $30,000
**Based off 123 million total households
