Millionaire next door

Crown Money, where we show you how to pay your home loan off in up to half the time of a normal bank loan. Hi, I'm Jessie Edge and I'm joined today by our CEO and founder, Scott Parry. How you going today?

Absolutely awesome. It's been a great week and looking forward to educating our listeners out there.

Awesome. We're going to talk about like a really cool subject today. So we're going to talk about the millionaire next door and basically we just want to go through what are some things that millionaires do differently to the average person? Why are they a millionaire and how have they stayed a millionaire? So how about, Scott, you kick us off?

Sure. I mean we all look at millionaires basically these days. It's not that much money. I remember growing up and the concept of if you're a millionaire then, then you'll set for life. Whereas these days if you're a millionaire, it doesn't really mean too much, unfortunately. But millionaires, they just do things differently. And probably easy way to explain this is they zig when everyone else zags. And what I mean by that is they're not buying brand new cars every two or three years. They're because they've got to service their car and the mechanic says it's not going to last that long. They literally driving cars which are three to four years of age, they really drive them into the ground and they're not buying these liabilities which just chew their cash flow on a monthly basis. So that's a, that's a really good point.

Like they're not buying liabilities because they know they're not going to make them money. And it's like you need money to make money nowadays. And so if you're chewing up your money in these liabilities, that means less money to be earning you interest or putting into investments and all that sort of stuff.

Yeah, they just reject the status symbols, you know, I mean the flashy car or the really blinged out purses or bags or shoes that the everyday person who wants to look like a millionaire buyers. And that's one of the craziest things is what I've learned is the people who look like millionaires inverted commas are usually the ones up to their eyeballs in debt. They've got massive car loans, they've got credit card debt trying to keep up with the Joneses, trying to make that appearance that they are a millionaire, when in actual fact the guy who's just wearing tracksuit pants and an unbranded T shirt is usually the Guy with all the money.

Yeah, yeah. They're trying to keep up appearances with other people that are trying to keep up appearances. So everyone's in this vicious little cycle. It's kind of sad, to be honest.

Yeah, I mean, we've always said drive the cheapest car your ego can afford. And a lot of this comes down to ego. You know, it's just that I'm not enough and I've got to prove myself to others. And I think these millionaires, they just don't care what other people think of them in that way, that whether or not they think they're rich or poor is irrelevant to them and they don't have to impress anyone. I think another key factor that these millionaires next door do is actually plan their finance and financial world. I they don't just wing it, they don't just go by the seat of their pants. They set time every single month or every single quarter to review the quarter. What are we spending, what's coming in, where is it going? We've got a stat coming in From Eubank saying 86% of Australians don't actually know where their money goes, which is fascinating. I've even sat down with clients who don't even know how much they earn, which is mind blowing quite often.

Yeah, absolutely.

So knowing your numbers is critical. And if you're trying to lose weight, you're going to have a set of scales and you need to be looking at your numbers. And these millionaires are very aware of what's coming in, what's going out, what their surplus is. And the secret equation is it's not about how much you earn, but how much you keep. And it's what you do with what you keep. They don't just sit it in a savings account with one of the banks, they have that money invested where it's growing, it's compounding and it's producing a passive income stream. And that's the key to retiring early. How can I replace my income with passive income where I don't have to get out of bed to earn it? And those can be from a variety of investments, whether it be passive income off an investment property that's paid off, whether it be passive income off a share portfolio or may even be other sort of peer to peer lending, sort of passive income streams where you're lending money out and basically becoming a bank.

Absolutely. So they're spending their money not on things, but on investment, aren't they?

And experiences. What I've found the millionaires is they're not big on the TVs or the flashy cars. What they are really big on is buying experiences and buying investments. And I think that really gives them financial progress. And that's why their happiness levels are usually a lot higher than those people just drowning in debt. Credit cards, car loans, personal loans, Buyer's Edge cards, those sort of things where they're spending money they don't have.

Yeah. And that's another important point to add in there, is that millionaires don't have credit cards and personal loans and things like that. You know, they're spending cash and they understand the importance of that, of not having bad debt sitting on their balance sheet.

Definitely. I mean, there are those different sorts of debt where everyone says, oh, debt must be bad. Well, no, debt for investments is not bad. You're getting deductible interest on that debt as well as it's producing an income. And it's usually being used to buy assets. Getting debt to buy a boat or a car, which goes down in value is horrific financially compared to getting debt to buy shares or buy an investment property or something of that nature, which is going to produce income on a regular basis.

Awesome. Anything else that millionaires are doing that the average person isn't doing?

Just like live well below their means, they spend less what they earn, as simple as that sounds. That's actually the secret. And just loops back to that previous point. It's not about what you earn, it's about what you keep. And we've got clients who are earning $440,000 a year as lawyers, but spending $460,000 a year. We've had clients who are spending $25,000 a month because they're earning $25,000 per month. So most humans will spend what they have direct access to. And these millionaires have just got that discipline to not spend everything that they've got access to.

Absolutely. I think another important thing is that millionaires understand how powerful compound interest is and they really use it to their own benefit. Do you want to talk about what compound interest is and how effective it can be?

Yeah. Compound interest is the easiest way to explain. This is your super fund. Your super fund goes up. And the reason why it goes up is because there's regular investments going into it and you're getting interest on the interest every single year. So if you have $1000 in super, you get a 10% return. Next year you're going to have 1100 in super, and you're going to get another 10% return and you're getting the interest on 1100, not the thousand. And so compound interest, like when you start that early in life, it grows phenomenally. A perfect example of that is if I ask you the question, would you rather a million dollars today or at the end of this month? $0.01 that doubles every single day of the month and then at the end of the month you get all the money there. What would you prefer?

I love this question because it's such a. I would obviously go for the million dollars right now. That's what you would think would be the right choice. Right? But it's not, is it?

No. The facts are a million dollars right now versus a compound interest of $0.01 doubling every single day for 30 days. You're going to walk away 10 million dol. And so that snowball, that power of that compounding effect of getting interest on interest, on interest is phenomenal.

Yeah. That's incredible, isn't it? So what have we learned? So millionaires don't spend money on liabilities. They're investing their money instead and buying experiences. They utilize the power of compound interest. What else can we add to this conversation?

Yeah, they, they basically aware of their numbers. They are very, very smart and they look at what they're doing financially on a monthly or quarterly basis. They have targets and they have goals. And it's something where, like if you're trying to fly a plane, you don't know how much altitude you've got or how much fuel you've got. I mean, very difficult. I think most Australians, 86% of them, don't know where they're at, don't know where they're going, and they're just so busy with work and life and parenting and the kids and family that just such a third or fourth or fifth on the rung of importance and no one ever has that bandwidth that time to really focus on it. I think it's so important that we know our body weight, but no one knows their financial weight. And I think that's something that we can really start to take into account for this financial year saying, okay, if I just know my numbers, subconsciously, it shifts. If you start measuring something that energy and that focus, then you start acting differently, behaving differently. And so that would really be a key takeaway.

Absolutely. And I think the plane analogy is a really good one as well. And you know, another one that an extension of that is that, you know, millionaires will make small incremental improvements ongoing as well, because, you know, a plane you may move slightly to the left makes not that Much of a difference. But it could be the difference from flying to Sydney compared to flying to Queensland. That tiny little shift just right at the beginning. And so they're consistently making these tiny little shifts to head towards the direction and or correct the direction to make sure they're going to hit their very long term goals.

Great point. I mean, if you're not measuring things, then you could have a bad year, but if you're measuring things quarterly, you could have a bad quarter, you're not going to have a bad year. If you're measuring things monthly, you could have a bad month, but you're not gonna have a bad quarter and you're definitely not gonna have a bad year. And so what gets measured gets done. And that really just comes back down to knowing the numbers. And so many people just want to bury their head in the sand. It scares them. They don't want to have to think about it or worry about it, which I totally get. But it's really important for your financial future and for the family's future to actually take notice of this and just start doing little things. We've spoken so many times about these apps like Spaceship or Raise Rais where you can download these on your phone. And just fractional investing, we investing like $0.50, $0.80 a day, you don't even notice it, but you're actually doing something to move yourself forward financially. And the other point, which I just want to finish on here, the millionaire next door automates all their finances.

That's a very good point. Very good point. Awesome. Well, that's great. I think, you know, lots to take away there. Thank you so much for, you know, the conversation. It's really good to talk about these sort of things and you know, I hope people that are listening can take something away from this.

Absolutely. Have a great day.

See ya.