This summer (remember summer? When it was warm?) I finally got around to reading The Millionaire Next Door, one of the quintessential personal finance books. Besides shining light on the habits that make and keep people wealthy, MND also gave rise to an intriguing measure of wealth accumulation.
In short, MND highlights the fact that most actual millionaires practice Stealth Wealth by driving non luxury cars, living in modest houses, and generally appearing “middle class” while secretly dedicating their time and energy towards starting businesses, managing their finances, and living below their means. On the other end, people who drive luxury cars, live in upscale neighborhoods, and send their kids to private schools likely have a very small net worth in relation to the large inflows of money that would support such a lifestyle. Big Hat, No Cattle indeed.
The latter group is referred to as UAWs, or Under Accumulators of Wealth. Towards the end of the book the influence of one’s parents on a person’s likelihood of being a UAW is heavily discussed. Adult UAWs who receive financial help from their parents, or EOC (Economic Outpatient Care) were found to be less likely to achieve financial independence and in some cases even maintain an average financial situation at best.
What got me a little nervous, and would likely strike a chord with most millennials, was that living at home after college is subsidization on the same level as ongoing financial assistance. Ideas about college, particularly the impetus that a degree is the only path to a good paying job, and the prevalence student loans, are probably a bit outdated (the book was published in 1996 after several years of research). But the reasoning behind why most on EOC never gain FI I believe is still sounds. The dampening of risk and the removal of “fight or flight” are still relevant.
I thought about how I moved back home for a couple years after graduating, with a good pile of student loans and few job prospects. I managed to advance from a nearly minimum wage position into salaried management in a couple of years and made regular payments on my loans. I also accomplished a lot creatively and developed a plan for what I realistically thought my life could be. I also spent a lot of money on things I don’t remember and made some mistakes (and passed up some risks) along the way.
I’ve moved past any regrets and feel I did contribute in many ways, although I don’t feel like that debt is truly paid off. I came to realize I’m very fortunate. I could have wasted a lot more time and money, or gotten stuck and never left. I feel lucky that my motivations are things like personal freedom, worthwhile work and being able to be there for people I care about when they need it – not nice cars or new electronics or expensive clothes. I feel lucky that I ended up on websites with examples on how to get that freedom.
Such pursuits seem pretty easy when you consider everything that led to you even knowing they existed.