Steven Truong [dot] Com

Hidden Truth

If you have not read a book titled “The Millionaire Next Door”, it talks about how most millionaires live frugally and look like everyday people. Often times you never know when you might bump into one because some of them live so frugally, you might consider them poor “looking”. I read this book a couple years back and theres nothing particular about it that I would necessarily recommend for you to go out and buy unless you don’t understand the premise I just talked about.

Realistically there are two types of rich people, those who make more than they can spend and flaunt their wealth and those who live frugally. Then there are those who appear rich but in fact are not. Unfortunately most people still don’t grasp this concept and always consider others with fancy new toys, a nice expensive car, and a big house as being rich. This may not be true. Sometimes people associate rich with having a high paying job such as a doctor or lawyer. Think for a moment if a doctor makes $300,000 per year but spends all of it on new furniture for his home, buying a new car, expensive toys, etc… and eats out at fancy expensive restaurants all the time racking up his expenses along with his bills to $300,000 a year or more in some cases (this is the reason why most people are in debt), are they truly rich?! Not at all.

Being rich in my definition is owning all those things, living a luxurious lifestyle while NOT having any debt. Most people have the latest and greatest but how many can honestly say their house is fully paid off, their car is fully paid off, they have $0 in credit card debt or of any kind of loans including student loans and still manage to buy all these things. That said, some consider having those fancy toys as oppose to living frugally and not being able to enjoy their money. I prefer to be wealthy enough to be in a position where I make more money than I can ever spend including the shop till you drop lifestyle. To have the image and still retain the true rich or wealthy lifestyle.

Recall the old Sprite commercials where their slogan is “Image is nothing, thirst is everything”. I highly disagree with this in the business sense as image is everything. While those who are wannabe rich buy expensive things and get into debt only to have what they want, show-off to their friends, or whatever the reason, they are not utilizing the image they create. They do it for dumb reasons. If you are going to be the flaunting type, make it to your advantage. In business, there is no such thing as a depreciating asset similar to there is no bubble (many will probably disagree with this). You just have to determine how you can turn a disadvantage into an advantage. Remember anything is possible.

In the case with depreciating assets, most people would rather spend $500,000 towards a house that typically will appreciate in value rather than on a new Lamborghini that will depreciate in value over time. However $500,000 houses don’t give off the same impression as a Lamborghini. You tell your friend you bought a new $500,000 house, he might be excited for you initially but not about as impressive if he knows you’re rolling around in a Lamborghini. Why would you want to buy something that depreciates when you can invest that money into something that can accumulate more wealth? Simple. You create an image and in business, image is everything. There is no doubt that when done correctly, wealth attract attention. Attention equates to traffic (customers, clients, people…) which in turn equals money. Recall that traffic is everything in business. Build your image correctly and the return on investment can be greater in the long run than initial investments up front. The unfortunate problem is not everything knows how to do this correctly and is safer investing in what they know.

In the case with market bubbles, most claim there are bubbles in business. Such as the stock market bubble that crashed years before. The tech bubble. The current real estate bubble. The problem with this is that they don’t realize there is no bubble. Business changes all the time and smart business people will know which side of the fense to be on regardless of when its good or bad. In the case of the recent mortgage crisis, while many home owners are losing lots of money and having a hard time to sell, buyers are finding lower and lower rates and a much easier time to get in. Keep in mind that no crisis lasts forever and that from the buyer prospective, this is a positive. Take inflation as another example. Consumers will complain if inflation goes up in general, however investors love it because they make more money such as a real estate investor (generally property value increases). So again, learning to tell where you should stand will greatly help you understand that there is no such thing as a bad scenario, only bad choices.