Robert Kiyosaki with attendees of the Great Gatsby Party

The Poor Mindset of a Millionaire

Why saving a million bucks will get you nowhere

For many decades, the million-dollar mark has been the proverbial measure of success. Yet, for most people, the idea of becoming a millionaire seems like a pipe dream.

We often hear terms like this:

“If I could only make a million dollars, I could retire securely.”

“When I grow up, I want to be a millionaire!”

“I feel like a million bucks.”

Culturally, we are obsessed with the idea of a million dollars. And for those who want to be millionaires, there’s good news…and there’s bad news.

The good news about a cool million

The USA Today reports that at least 37% of American’s believe they’ll need at least $1 million saved up in order to retire safely. And though for many that feels like a stretch goal, the reality is that saving up a million bucks isn’t really that hard to do—especially if you start saving early.

Based on the median incomes provided by the Bureau of Labor Statistics, if at the age of 20, you start saving 13% of your income and assume a 7% return per year over a lifetime until age 63, you’ll be able to bank that million dollars.

Is this realistic?

But that is a lot of assumption coming in at quite a lot of sacrifice.

For one, savings rates are at all time lows and not even near the 7% needed to achieve these savings goals. And two, the income/expense models used are simply not realistic.

As author Christy Bieber writes:

In fact, 46% of Americans save less than 5% of what they earn, according to a March 2017 survey commissioned by Bankrate of more than 1,000 households. Nineteen percent of survey respondents said they save none of their annual income, and only 25% of respondents said they save 11% or more.

But is it possible for the average person to actually meet the savings goals necessary to become a millionaire? Consider the spending of a frugal 20-year-old who needs to save 13.35% of a $2,288 median monthly income.

If that 20-year-old paid the median rent in one of the 10 cheapest U.S. cities, their monthly housing cost would be $632. Add on around $300 monthly in federal taxes, an average student loan payment of $242, a low-cost grocery bill of $206, average Internet and utility bills of $364, and average commuting costs of $216 -- and they’d be spending $1,960 monthly just for necessities.

If we reserved $305 for savings, it would leave our 20-year-old with just $22 in spending cash. And that doesn’t include a cellphone, clothing, or entertainment expenses.

Basically, it comes down to this: if from the age of twenty you live as cheaply as possible in one of the 10 cheapest cities in America, are more disciplined than 99% of the people in your age group, and don’t have any extra financial expenses like health issues or your car breaking down…you may get the point—after 43 years of toiling—where you’ll have finally saved enough to be a millionaire.

Congrats? No, sorry. I have some bad news for you.

The bad news about a cool million

Besides that fact that as you start saving for your million dollars later in life the scenarios above get increasingly more fantasy like, there is another reason why you may read this article and weep.

In some parts of the US, that $1 million nest egg will last barely a decade. This according to another article in the USA Today.

Map showing how many months $1M would last in each state

Unless you’re planning to live in the Southeastern part of the US, your money won’t last long.

As USA Today reports, “the top 5 states where your dollar will last the shortest” are:

  1. Hawaii: $1 million will last: 11 years, 11 months
  2. California: $1 million will last: 16 years, 5 months
  3. Alaska: $1 million will last: 17 years, 0 months
  4. New York: $1 million will last: 17 years, 1 month
  5. Massachusetts: $1 million will last: 17 years, 4 months

If you want that million bucks to last until you statistically might finally pass on, you’ll need to live in places like Mississippi, Arkansas, Oklahoma, Michigan, or Tennessee.

Now, there’s nothing wrong with those places, but that leaves out a big part of the country, and the reality is that most people don’t want to move away from the places where they’ve built their lives just so they can retire comfortably.

The poor mindset of the million dollar saver

At the end of the day, the idea of saving enough money on the average salary is a myth and a dangerous one, both because it is unrealistic and because it is diminishing.

In all of the above scenarios, there is one common theme—live below your means. In some cases, substantially so.

This is a poor mindset, and damaging. It is a mindset that looks at the world as one that is scarce in resources rather than one that is abundant in resources. And it creates closed-minded, mundane approaches to money rather than inspiring innovation and creativity.

In the past, I’ve written about the idea of asking, “How can I afford it?” rather than saying, “I can’t afford it.” I learned this type of thinking from observing my rich friend’s parents and how they approached life, especially my rich dad.

Rich dad and his friends looked at money as a game that they could both play and win at. When they wanted something in life, they got creative and figured out how to make it happen.

Too often, however, most people simply throw their hands up in defeat, saying, “I can’t do this. It’s too hard.” If they even play the game of money at all.

Where to start

The best way to change your mindset about money is to start with this fundamental truth: the fastest way to grow rich is to invest in assets that produce consistent cash flow.

If you can build upon that foundation, you’ll outpace 99% of all your peers when it comes to building and keeping wealth.

And you’ll have a lot more than $1 million by the time you retire.

Don’t know where to start? Try Rich Dad Coaching or attend a workshop.

Original publish date: September 19, 2017