Johnny Jones is a millionaire. Johnny, or JJ as he’s known to his friends and close business associates, is 57 and has the energy of a man half his age. JJ is the owner of a small contract cleaning company. He employs thirty staff and they clean offices, schools, and factories. JJ makes sure that they wear smart uniforms — he cares about his company’s image.

To his neighbours JJ and his family appear to be ordinary people; certainly no one would guess that JJ was rich. In fact, he has a net worth of more than $5,000,000 and in terms of earnings his household ranks among the top 10% of all the households in his pleasant, middle-class — but not luxurious — neighbourhood. JJ has no college degree — he left school at the age of sixteen — and did not inherit money from his parents. He has never won a competition or lottery. So, how did he make his money?

The answer is that JJ made money by not spending the money he makes! A few examples will help to explain JJ’s approach to accumulating wealth. He could afford to drive a luxurious car, but in fact he drives a basic ten-year-old family car. He could afford to wear the best and smartest clothes — with designer labels such as Gucci and Armani — but in fact he wears mass-produced suits which never cost more than $300 each. He could afford a Rolex watch, but in fact he tells the time from a fourteen-year-old Casio — it cost $18.

You see, JJ is not a sports or pop star; he’s not a media star; he’s not famous. He’s under no pressure to buy smart clothes and cars because he is not in the public eye and does not work in a smart office. JJ also respects his workforce. He cares about the feelings of his employees and is determined not to upset them. If they saw him driving a luxurious car, they might think he was making excessive profit from their labour. Let’s compare or rather — since there are more differences than similarities — contrast JJ’s lifestyle with that of Michael Peters, or Mike as his friends call him. Mike is a lawyer — a good one, too, who makes a lot of money. The problem for Mike is that, unlike JJ, he cannot save his money.

He cannot save his money because he and his colleagues and neighbours have certain (high) expectations concerning the clothes Mike should wear, the car he should drive and the restaurants he should eat at. JJ is happy to drive around in a ten-year-old car but Mike feels that he has to have a new BMW or Mercedes. The really big difference between the two men is that Mike is buying his expensive house with the help of a large loan, which he has to pay back in monthly instalments over the next twenty years. JJ, by contrast, bought his house for cash a long time ago. Mike hopes to upgrade soon to an even finer house, while JJ is happy to stay in his original neighbourhood for the rest of his life.

During his high school years, Mike made a promise to himself that he would become richer than his parents had been. His objectives were a fine house, an expensive car, membership of good clubs and items purchased in upmarket stores. To achieve his objectives, Mike realized that he would have to get a good education, obtain high-paying employment and work very hard. But Mike never equated being rich with the accumulation of wealth, but rather with the purchase and display of high quality goods. In other words, Mike never translated his high earnings into stored or invested wealth.

The very different attitudes and aspirations of the two men have important effects on how they view life. JJ has fewer concerns than Mike and tends to be more optimistic — if JJ’s business went bankrupt today he could survive. This is because he has no debts but does have several sources of income: his business, his investments, and the consultancy work he does for other companies. Mike, on the other hand, is constantly worried about losing his job — he leads an expensive 60 lifestyle, owes a lot of money and his salary is his family’s only source of income.

Mike’s position is a dangerous one and it does cause him a few sleepless nights. Mike spends most of his life working. In fact, he works so hard and for so many hours each day that he has no time to enjoy the things he possesses. He also has little time for his family. He leaves his house each day before dawn and rarely returns home in time for dinner at 8.00 p.m. For Mike, financial independence and early retirement are just dreams. If he lost his job and could not find another, he could survive for no more than a year on his savings.

Another important difference between JJ and Mike is that JJ is self-employed, i.e. he is his own boss, while Mike is an employee in a large law firm. According to research in The Millionaire Next Door, more than two-thirds of American millionaires are self-employed — either as owners of businesses or as professionals such as doctors and lawyers. Self-employed people tend to pay less tax than employees do, since they are allowed to claim many business expenses against their tax bills. An employee is not allowed to make such claims and, of course, his/her income is easy to trace through employers’ records. However, if JJ had Mike’s spending habits, he would not be a millionaire.

Millionaires can be assertive and entrepreneurial; they may, like JJ, be quiet and conservative. They may also, of course, be sports, music or film stars — these are the cases — the glamorous cases — we read about in the newspapers and see on TV. But, in fact, most millionaires are not glamorous and do not have glamorous lifestyles. Most of them achieve financial success by being frugal. Being frugal is the cornerstone of wealth building. The opposite of a person who is frugal is one who is high-spending, and ordinary millionaires are never high-spending. Indeed, they often lead hard lives. Unlike glamorous millionaires in show business, they care little about their appearance and are willing to get their hands dirty helping their employees to finish jobs. Interestingly, divorce is very rare among ordinary millionaires. But the species is a rare one. Why is this?

The answer is that nowadays people are less likely to be willing to make the sacrifices necessary to build a foundation of wealth. This would mean working extremely long and hard in their late teens and early twenties — a time when most people want to go out and enjoy themselves with their friends. In addition to the hard work, the potential millionaire would need to spend long hours each week doing research to determine the best investments — millionaires, you will not 100 be surprised to learn, are often hands-on investors. They don’t just give their money to experts to invest on their behalf, but rather actively monitor and switch their investments to ensure that the very best returns are made on any capital investment.

As JJ once remarked: “A lot of people are good at making a certain amount of money by working hard at their jobs but very few actually keep enough of it to make serious investments which can lead to really profitable gains and the chance to become financially independent. My main motivation to succeed was always so that I could be my own boss — so that I didn’t have to rely on anyone. For me, being a salaried employee is a dangerously dependent way of living. Independence and caution are the main qualities needed to become an ordinary millionaire.”