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Wanted to write a bit on another chapter of "The Millionaire Women Next Door"... the interesting facts the authors stumbled on while interviewing people about generosity. Basically they found that people who donated at least 10% of their income were much more likely to have a higher net worth than people who gave away less than 1%.

They saw the difference even more drastically with the women. When asked "what's the best thing about being wealthy?" the top answers were 1) security, knowing you don't depend on one person or job and 2) I can support the causes that are important to me.

In contrast, when "normal" people were asked to imagine what would be the best thing about wealth, they all replied that they'd get to quit their jobs and buy a big huge house. This is really the whole point of the book... the fact that people who are rich think differently from the rest of us. That's why they're rich. And you ask them, "what's the point of being rich if you can't enjoy it?" And they reply that they DO enjoy it. They enjoy security, and supporting their causes.

It's a little counterintuitive to think that if you give away a lot of money you'll have more money, so the authors put a lot of research into seeing whether rich people give away more money, or people who give away money become rich... and they found the later. People who give away money tend to become rich.

For three reasons:
1) The people who donate a lot are doing something they enjoy with their wealth, so they don't need to buy houses/cars/boats/country club memberships that cost a lot too.

2) The parents who teach kids to give away money are the same parents who teach general financial responsibility and the idea that material things just aren't that important.

3) It takes some budget planning to donate a lot on a recurring basis, you have to sit down, look at your situation, and ask yourself how much you can afford to give. Other expenses are more "pay as you go"... bill comes in, you pay it, you can live like that for years without ever sitting down and making a budget and seeing where your money is going. People who donate are people who budget.

I've read about this idea before, that large donations go hand-in-hand with financial responsibility and eventually wealth, just hadn't seen it put quite this way. It makes sense to me though.

Comments

( 2 comments — Leave a comment )
okoshun
Nov. 23rd, 2013 09:28 pm (UTC)
This is heartening because it's how I think. I have a house that's big enough. It's a nice little 1.5 storey and I've always said that if I win the lottery, I'd just fast track the already planned renovations.

I don't need a big house. I would like to buy more real art from local artists, though.

I think that being able to donate to causes that I feel are doing a good job to help people and being able to donate my time to cat rescues is important to me.

I also budget on a yearly basis - every input/output for the entire year from birthdays to weekly/monthly/quarterly expenditures and donations. I know exactly where every dollar is going and how much goes into savings, investment and into my "woo hoo buy whatever I want" spending account. :)

I should read this book and see if I'm on the right track. :)



Edited at 2013-11-23 09:29 pm (UTC)
aryanhwy
Nov. 24th, 2013 01:56 am (UTC)
If I were really really really rich, I'd buy books.

And then I'd buy the house to put them in. :)
( 2 comments — Leave a comment )

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