Stuart Zadel on The Millionaire Next Door Series. You could be doing something wrong with your time, energy & money. How do you allocate these resources efficiently?

ALLOCATING YOUR TIME, ENERGY, AND MONEY EFFICIENTLY

Hello there! We’re on to the third installment of The Millionaire Next Door Series. In this 8-part series, I am discussing the key denominators that set the wealthy (Prodigious Accumulators of Wealth or PAWs) and the non-wealthy (Under Accumulators of Wealth or UAWs) apart.

My discussions in this series are inspired by the book, The Millionaire Next Door by Thomas Stanley and William Danko, in an attempt to discover what the wealthy are doing to get even wealthier.

Let’s take a look at the last installment’s discussion.

IN REVIEW: LIVING WITHIN YOUR MEANS

In the second installment of this series, you may recall that we talked about what the Prodigious Accumulators of Wealth or PAWs are doing in order to be wealthy. The first factor was they’re living well within their means. Contrary to popular belief, many of these people are not out there buying designer handbags, clothes, or dining at expensive restaurants. That’s reserved for people who’d rather look rich than be rich. What are they doing?

They’re buying practical, value-for-money items and things that last. They’re not into impulse buying at all. The whole foundation is built on one word: frugal.

So thinking about how you handle your finances right now, how frugal do you think are you? Can you honestly say that you’re living within your means? I’ll leave that for you to think about. But in case you missed my discussion about it, or if you want to discover just how frugal the PAWs are, please click this link to have a read.

Moving on, this third installment talks about the second key factor that differentiate the PAWs from the UAWs. It is something that I always talk about in my events: it’s how you’re spending your time that determines the result you get in business and in life. So factor number two is how PAWs are investing their time, their energy, and their money.

ALLOCATING YOUR TIME, ENERGY, AND MONEY EFFICIENTLY

First, on average, PAWs spend 8.4 hours a month on their wealth accumulation and investment strategies. That’s in contrast to the UAWs who are spending only 4.6 hours a month. That’s a difference of about 83% between the amount of time they are spending on their wealth accumulation and being financially free despite both having the same goal which is financial freedom.

Second, PAWs invest a minimum of 15% of their pre-tax income into future investments. Compare that with UAWs who spend more than what they earn!

Third, PAWs are fiercely interested in knowing where every dollar they spend goes. They want to know how much they and their families are spending in the different areas of their lives. In contrast, that’s the last thing on the UAWs’ minds. They don’t want to know where their money goes at all!

Fourth, PAWs in general never buy a new car. They know that the value of a car plummets. The depreciation of a car is massive in the first three years. In fact, just driving a car out of the showroom will drop its value to about 30%. These days, when you’ve got 2, 3, and 5-year warranties on cars, a hundred thousand kilometers, you can buy a fantastic second-hand car.

Now this is outrageous to the high-income earner who has no wealth. They’ve got to look the part, they’ve got to impress their friends, and they blow their high-income on premium items such as brand new cars.

Finally, PAWs make strong independent children who can fend for themselves and move on through life in a functional way. In contrast, UAWs actually make their children financially dependent. Yes, financial dependency is hereditary.

Story: How Efficient Time, Energy And Money Allocation Makes A Difference

Here’s a story involving two of my friends who invested a significant amount of money on the same course I was offering. Both are located in the same city but are getting very different results at this point in time. And I wondered why. So I rang Friend A and guess what she was doing? She was watching X-Factor. I thought that she was torn between taking my call and watching the reality show.

In contrast, I rang Friend B shortly after I spoke to Friend A. Well, there he was on the phone prospecting for new deals and new houses. He was planning his work flow for today, and he was knee-deep in a renovation that he’s currently working on. Incidentally, Friend B has made in excess of $500,000 in the past year with the exact same strategy as Friend A.

INSIGHTS

To wrap our discussion, I’m offering you this piece directly from the book. Both PAWs and UAWs were asked to read the same statements but the level of agreement was very different. All PAWs agreed with the following statements while the UAWs disagreed:

• I spend a lot of time planning my financial future.
• Usually, I have sufficient time to handle my investments properly.
• When it comes to my allocation of my time, I place the management of my own asset before my other activities.

So let me close this discussion with the same question: where are you spending your time, energy, and money right now?

Watch the entire Next Door Millionaire Series episodes here.

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