Learn the wealthy habits that build lasting financial freedom. Joe Anderson, CFP® and Big Al Clopine, CPA show you how financial success often comes down to specific behaviors, not just raw dollars. Learn how millionaires measure their net worth and the practical steps they take to manage lifestyle spending. Retirement planning requires effective tax strategies and a clear roadmap. Whether you’re targeting financial freedom or just want to optimize your current assets, Joe and Big Al can help clarify your path forward and explain how working with qualified professionals can make a significant difference in your results.
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10 Habits of the Quietly Wealthy:
- Measure wealth the right way
- Don’t spend to look wealthy
- Automate your saving
- Choose your environment intentionally
- Save the gap, don’t spend it
- Run retirement like a business
- Build a freedom number
- Engineer how the money comes out
- Tax plan before RMDs hit
- Stay disciplined in good markets and bad
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Transcript:
Joe: Hey, do you think you could spot a millionaire? Nice car, great watch, beautiful home. But seeing isn’t always believing. We’re gonna break down what a true millionaire looks like and how you can get there, too. Welcome to the show, everyone. Show’s called Your Money, Your Wealth®. Joe Anderson here, president of Pure Financial Advisors, and of course, I’m with the big man, Big Al Clopine, sitting right over there.
Al: How you doing?
Joe: Good. How are you, sir?
Al: I am great. I’m excited to see how to become a millionaire.
Joe: we’re gonna break down the 10 habits-
Al: Damn …
Joe: that truly financial successful people have. Are you following these habits? some people don’t. That’s today’s financial focus.
The Retirement Wealth Gap: Average vs. Median Retirement Savings
All right, here’s the wealth gap. Average savings of a retirement household is $333,000, but the median is only 90,000. So what that tells me is that there’s a lot of people on this side with millions, and there’s a lot of people on this side that don’t necessarily have a ton of savings. So what side do you wanna be on?
You probably wanna lean over here. You have to follow the 10 steps. To help us with that, let’s bring in Big Al.
Al: So the quietly wealthy, what are their habits? We’re gonna dive into that, and you know what? There’s some traps. There’s some things that we’re doing wrong. We wanna make sure that you get on the best side of the habit, rather than the other side.
And then, of course, some tools to work with. You gotta know what you need to do, but how to do it, and the tools that you need to make sure you get there.
Joe: Yeah, I think a lot of people think that you need to make hundreds of thousands of dollars to become a millionaire.
Al: You don’t.
Joe: it’s just following some simple habits.
Habit 1: Measure Wealth the Right Way (The Millionaire Next Door Net Worth Formula)
Let’s break it down, Big Al. Habit number one, they measure wealth the right way. Why don’t you get into this little equation? You’re the math guy.
Al: Okay, this is from Thomas Stanley, The Millionaire Next Door. You may have heard of that book. So it’s just a formula that they came up with that you can sort of test where you’re at.
So here’s a 50-year-old, and they make $150,000 a year. You multiply those two together, divide by 10, and you get 750,000. That would, should be your approximate net worth. It can include your home value as well. So it gi- just gives you a sense, Joe, whether you’re on track or not.
Joe: Yeah, there’s all sorts of different calculators of taking a look at your age and your income- Right
and there’s a multiplier effect of how much liquid assets that you should have, how much retirement assets that you have. But this is the first one that I’ve seen in regards to net worth. Now, again, net worth is your assets. All of your assets, your home, your cash, your retirement accounts, your cars, whatever, all the assets that you have, minus your liabilities, so that would be your mortgage, credit card debt- That equals your total net worth.
That’s your report card. So if you’re 30 years old or 70 years old, take a look. What is your gross income? Divide that by 10. How about if you’re retired and don’t have any income?
Al: Well, you already, hopefully are already there. You already got, you already got your million there, look at your last salary and hope, hopefully you’re okay. So- But Joe, I think this is important because I think a lot of people don’t really measure their net worth, and this is something you ought to do periodically. if you like to do it all the time, some, there are some, little apps that’ll, that will do that for you.
But at least do it once a year. Check your progress, and, monitor your progress year to year, see how you’re doing. Make sure you’re going in the right direction.
Habit 2: Don’t Spend Money to Look Wealthy
Joe: Very well said. Spending. Look at this, 26% of Americans spend more than they earn. I think the number one rule of financial planning is spend less than what you make. 26, well, 75% of you are doing the golden rule, but still, 26, that’s a pretty big number More dollars are going out than going in. Um, almost sounds like our government.
Al: Well, Joe, and then of course wealthy habit number two, now this is one I think we all know about it. It’s like we feel like we gotta keep up with the Joneses. Yeah, you- you’ve probably heard that before. So the, what the wealthy, what the quietly wealthy don’t do is they don’t spend money to look wealthy. They’re actually investing. They’re going, they’re thinking about their future, doing things today that will help them retire later.
Joe: So $767 a month, or $46,000. If I decided to save that over five years at a 6% growth rate, that’s $61,000 sitting in my nice retirement nest egg. You look at 10 years, that turns into 82,000. 20 years, that turns into $150,000. So instead of having this nice sports car, yeah, it’s fun. You can drive around, go fast, whatever, but you’re giving up potentially $150,000.
Would you pay $150,000 for this car? Probably not. But you wanna start thinking about, hey, what is the opportunity cost of some of these purchases to kind of keep up with the Joneses?
Al: and I think, too, a lot of people don’t really think about, I can afford a $800 car payment. I got enough income. Should be fine. Can have the car I want, so forth. I’m not saying not drive a car that you want, just be careful because that s- $800 a month, you’re losing out on $150,000 later.
Habit 3: Automate Saving So Compounding Does the Work
Joe: 50% of Americans falling short of that 15% retirement rate. a good rule of thumb is that you wanna save about 15% of your income, right? Half of us are doing that. The other half needs a little bit of work. So how do we do it? Al, let’s automate it.
Al: Yeah, that’s exactly right. You gotta automate this to make sure that happens each and every month. So not that complicated. Hopefully your company has a 401(k), a 403(b). You get your paycheck, right? And you sign up for that 401(k), 403(b) so it automatically goes into your retirement account.
And guess what happens over time? You know this. Your money compounds. Depending upon the rate of return, it can be more or less, but that’s how you build wealth. It’s not like, you know what? I got this great investment, and then all of a sudden I’m a millionaire. No, it’s slowly, Joe, over time.
Joe: Yeah. Baby steps, right? One step at a time to get you there. How do you eat an elephant? One bite at a time.
Al: One bite at a time. That’s right.
Joe: All right. Hey, if you need more help with this, we got our Do It Yourself Retirement Guide. You wanna be a millionaire? All you gotta do is follow these 10 habits. It’s right there in our Do It Yourself Retirement Guide.
You don’t necessarily need to hire an advisor, but you need a strategy, you need a plan. If you wanna do it yourself, we got the guide for you. Go to YourMoneyYourWealth.com. Click on that special offer. It’s our DIY Retirement Guide. YourMoneyYourWealth.com. Click on that special offer. It’s our gift to you.
All right, when we get back, we got a lot more habits that we need to create, so you don’t wanna miss this. Don’t go anywhere. Show’s called Your Money, Your Wealth®.
Joe: Hey, welcome back to the show. Show’s called Your Money, Your Wealth®. Joe Anderson, Big Al, talking about the 10 healthy habits that you need to be quietly wealthy
You see the millionaires, big house, nice car, great watch, but are they really millionaires or they just have a bundle of debt? You don’t wanna be that person. You wanna be the quiet millionaire, the millionaire next door. Go to our website, get that DIY Retirement Guide, understand the things and the steps that you need to do.
YourMoneyYourWealth.com. It’s our gift to you today. It’s our DIY Retirement Guide. Let’s see how you did on that true/false question
True or False: Do Bankruptcy Filings Climb After a Neighbor Wins the Lottery?
Al: Bankruptcy filings climb in neighborhoods after a big lottery win. What an interesting statement. True or false, I n- I don’t even know that there’d be a relationship. But what’s the answer?
Joe: It’s true.
Al: Really?
Joe: I did not know that, right? Have you ever heard of that?
Al: I never heard of that.
Joe: this is from the Consumer Finance Institute.
So it’s like, all right, someone wins the lottery.
Al: Right.
Joe: And then all of a sudden they buy a boat, they get the nice car, they get the pool in the backyard, and your neighbors are like, “Man, I wanna do that.”
Al: I need to do that.
Joe: Where’s my boat?
Al: Yeah, okay, I guess that makes some sense.
Joe: where’s my nice car?
Hey, the Joneses, we gotta keep up with them, and I guess they go bananas- … to the point where they’re filing bankruptcy. All right, let’s go into healthy habits. We’re not filing bankruptcy. We’re gonna get into the right habits.
Habit 4: Choose Their Environment Intentionally
They choose their environment intentionally. Maybe this has something to do with it, right?
High-status neighborhoods. You look at the influence, the country club, and, oh, the parties and you gotta go here. Oh, w- we have to keep up. So that influences maybe some spending behavior, right? The quietly wealthy, they understand their surroundings. They wanna set the standards. So this is probably a little bit more fun.
Al: Yes.
Joe: But that can get you into trouble. It- This is a little bit more, all right, strategic. Your surroundings. Now, it has nothing to do with what you’re saving. It’s like, hey, let’s curb the spending a little bit by going into maybe a different type of neighborhood and who you’re surrounding your, your social life with.
Al: Yeah, and I think maybe the best example of that might even be Warren Buffett. I mean, he still lives in the same home that he had well before his wealth. He’s living the same lifestyle. I’m not saying you have to be that extreme, but just consider where you’re living, Joe, because that can make a big difference in your spending.
Habit 5: Save the Gap Instead of Letting Lifestyle Creep Take It
Joe: Control your spending. Let your wealth continue to grow, and, don’t overspend. But 40% of Americans are overspending to keep up appearances. Here’s a really good example of lifestyle creep. Al, why don’t you kind of walk me through this, but I’ll start out of like y- all right, here is my income, here is my spending, right?
And I have this $4,000 gap, all right, and I’m in my 30s and 20s, right? Hopefully, I can save that. But when people make a little bit more money What happens is that creep either comes up, but if you can keep it steady, right, this is what the quiet millionaire does is save that gap. But I think most of us, unfortunately, kind of spend that gap.
Al: Yeah, and of course, the numbers, this is just an illustration. I mean, you look at your own situation. But the concept is this: You get a raise, you get a bonus. The inclination is to spend it, to live a better lifestyle. And you know what? We work hard. We deserve it, we’ve got kids. We gotta get some stuff for them, whatever.
We need to do better vacations, or how about a nicer car? We can afford it. Here’s what quiet millionaires actually do. Every time they get a raise or a bonus, a little bit more of it goes to savings, and consistently. So they get a raise, maybe they spend a little bit more. Why not, right? You have earned it.
But make sure you’re saving more, too, all the way through, Joe, and then you get to a point where you become the millionaire next door.
Joe: Just understand what that gap is and where your spending is going as well as your income. Is, do you have the gap where you can save a little bit more, or is your spending going up with those raises, promotions, and higher income?
If you can kind of keep a handle on that or understand where the money goes, I think that’s how the quietly wealthy makes it happen.
Habit 6: Run Retirement Like a Business With a Written Plan
Al: I, think so, too. and part of the way that you can make this happen is you have a financial plan. Only about 36% of all Americans have a plan, so b- that means two-thirds of the folks out there do not have a written plan.
But Joe, even kind of more interesting is 25% only are sort of treating their retirement like a business. And if you think about it as a business, you might think about it a little bit differently.
Joe: Yeah, because you’re not as emotional with your money. if I’m running a business, you’re not doing it off the cuff.
You have a written business plan that you’re executing on a day-by-day basis. So if you treat your overall finances very similar, like this is your financial business, I think you could see some different results, such as, like, your overhead. What is your overhead? What are your fixed expenses? What is your rent?
What is your mortgage payment? What are the utilities? What is your insurance? What are the things that have to be paid every single month? And then you look at your profit margin or the gap. Here’s your income versus your spending, right? How big of a gap is that? What surplus do you have? And then from there, what is the burn rate, right?
So you got discretionary spending, dining, travel, entertainment. It’s not saying don’t do all of this. Absolutely. But making sure that you understand your fixed expenses, understand your discretionary expenses, and then you can find out what that gap is. As we looked at earlier, a lot of you don’t have a surplus.
It’s actually a deficit. As you’re continuing to try to build, this is where you wanna maybe take out a pad of paper- You can start writing some stuff down
Al: Well, it’s such an important concept, and when you think about it, you can also say it as needs and wants, right? I need to pay my mortgage. I need to pay property taxes.
I need to pay my utility bills. Those are things you have to do. But then you take that from your net salary, that’s your profit margin. Make sure you’re saving a good chunk of that. And Joe, the best way to do that is automatically, like through a payroll deduction 401(k).
Joe: Yep, pay yourself first, right? I think before you pay anyone else, pay yourself first, and then pay, all right, what do I have to get paid, and then everything else is discretionary.
All right, if you wanna spend it all. But you did pay yourself first. All right, if you want more help with this, go to our website, YourMoneyYourWealth.com. Click on our special offer this week. It’s our DIY Retirement Guide. Can you do it yourself? But we’re giving you the guide to try.
YourMoneyYourWealth.com, click on that special offer. It’s our DIY Retirement Guide. All right, don’t go anywhere. When we get back, we’re gonna wrap it up, talking about the 10 habits the quietly wealthy have. You don’t wanna miss this show. It’s called Your Money, Your Wealth®.
Andi: Can’t get enough Joe and Big Al? Follow us on the Your Money, Your Wealth® podcast in your favorite podcast app and on YouTube.
Joe: Hey, welcome back to the show. Show’s called Your Money, Your Wealth®. Joe Anderson, Big Al, talking about the 10 healthy habits that you need to be quietly wealthy
You wanna do this stuff yourself? We got the guide for you. YourMoneyYourWealth.com, click on that DIY, Do It Yourself Retirement Guide. All right, let’s see how you did on that true false question
Al: Almost 70% of Americans currently saving for retirement feel optimistic, yet approximately 60% expect to outlive their savings. True or false? Well, that’s a mouthful and hard to believe, Joe, but that’s actually a true statement.
Joe: You gotta just run the numbers here. You gotta take a look. Are you on track? I know it’s like, “Oh, I don’t wanna to check it out.
I don’t wanna change my lifestyle. Really happy with what we’re currently doing,” but you gotta think of your future self sometime, 5, 10, 15 years, 20 years from now. What is that lifestyle going to look like? If you can save a little bit of dollar today, guess what? You’re not ignoring your future self.
Habit 7: Build a Freedom Number, Not Just a Savings Target
Let’s go here. Healthy habit number seven. They built a freedom number, Al, not just a savings target.
Al: Yes, and so what the heck does that mean? Well, first of all, power to decline, which basically means you got a job or you got a situation that’s not making sense, you can say, “No, thank you,” if you’ve got extra funds, if you know you’re fine.
That, that’s probably one of the most important things. If something goes wrong, you’ve got resources to be able to cover that. Purposeful allocation. You know what? I got some extra money. I can put it towards these organizations that I really believe in. And true independence, Joe, that’s when you got control of your own time.
Joe: I like this freedom number. I think we get s- too caught up in how much money do I need. Is it a, a million dollars, $5 million, $500,000, whatever. We get target on those. If we reverse the psychology here and look at when am I free, right? It doesn’t necessarily have to… Of course, you need resources to make you feel this way, but the power to decline, just say no, right?
We say yes to everything, right? Oh, I wanna go over here. I want… All right, yes. If we can decline, and then also if we can look at just get out of bad situations. Financial reserves, like Al said, purpose allocations, that gives you the true independence where, A, happiness is the key. If you have all the money in the world and you’re miserable- That’s the fun, right?
But if I can find my freedom number and I’m happy, right, then those resources are going to help me. You’re going to have a better strategy if you can kind of turn the dial a little bit of how you’re thinking about your overall financial independence.
Habit 8: Engineer a Retirement Withdrawal Strategy
All right, let’s go to number eight. They engineered how the money should come out.
They have a distribution strategy. Saving money is one thing. Taking dollars out of your account is totally different. If you don’t have the right strategy, you could end up here, right? I started with a million dollars. Instead of like, “Hey, I wanna look at taxes. I wanna look at how I’m creating the income from the overall portfolio, I can make my money last a little bit longer.”
So rules of thumb, not a big fan here, but here’s the wrong way. Roth first, then your traditional last. You wanna do a combination of all three. So when you look at taxes, right, you’ve got different ways to draw. You got tax-free money, taxable, and tax-deferred. So this is your Roth, right? If you blow out of this first, that’s all tax-free.
So you’re taking all of these dollars out. You’re not paying any tax. That’s great, but you’re missing the compounding effect of tax-free growth. This should be your last or part of an overall strategy. Your tax-deferred assets are gonna be taxed at ordinary income rate. So you have to understand the tax code.
How much should you pull to keep yourself in certain brackets? And then your taxable accounts are taxed at capital gains rates. So instead of just having no strategy at all, you could definitely run out of money a lot sooner than you want to. If you have a tax strategy on how you’re taking the distributions, how you’re controlling the risk, how you’re being tax managed in the overall account, you could see that money grow or stretch a lot further.
Al: Yeah, and speaking of tax plans, um, 33% of all retirees or pre-retirees don’t have a tax plan. I’d be willing to bet it’s actually a higher number. And basically what that means is don’t get to retirement and all of a sudden you start thinking about, taxes because there’s a lot of things that you wanna do before retirement to get yourself set up so that by the time you hit retirement, you’ll have a strategy to be able to save taxes throughout the rest of your life.
Habit 9: Tax Plan in the Years Before Required Minimum Distributions
Joe: And then there’s certain timeframes that you wanna make sure that you’re really taking advantage of them. So we have a timeframe here of age 55, 65, and then here now we’re currently retired. So this is the sweet zone here, right? A lot of things where you’re setting yourself up. You got a 10-year timeframe to make sure that you’re doing things appropriately.
This is prior to retirement So Roth conversions, making sure you’re tax diversifying. Do you have money in a tax-free account versus everything bundled in a tax-deferred account that will all come out at ordinary income rates? Now, you have to understand what tax bracket that you’re in to determine if Roth planning makes sense.
If I’m in a low tax bracket and I will remain in a low tax bracket, maybe it doesn’t matter. But if I’m gonna be in a larger tax bracket because of the mo- monies, the amount of money that I’ve saved, well then Roth planning, tax loss harvesting, managing your bracket, is gonna be really key to make sure that you have more success.
Al: Well, and how many times, Joe, have we met with folks that, they’re 70 years old, their required minimum date is coming up. All of a sudden they realize, “I’m gonna have a much bigger income stream ’cause I got all this money in my 401(k)or IRA.” And in doing so, currently at age 73, you’re forced to pull money out, and it starts about 4% of the balance and goes up each year.
All of a sudden you’ve got a lot of extra income. Had you been doing Roth conversions or other tax planning during the period leading up to age 70, you could be in a much better spot.
Habit 10: Stay Disciplined in Good Markets and Bad
Joe: All right, let’s put this into action, folks. There’s some things we talked about, the 10 healthy habits, but here’s the most important.
You gotta put the stuff in action. Know your number. What are you shooting for? When do you wanna retire? How much money are you accumulating? Right? What is your freedom number as well? Savings on auto-drive, making sure that you pay yourself first, right? Pay yourself first. You’re the most important person.
Pay it first, everything else comes later. Look at your tax situation. If I can give less money to Uncle Sam, right, that means more savings to you Then you wanna make sure that you have the discipline to keep it going in good times and in bad times. I know at good times it’s like, oh, maybe we splurge a little bit.
In bad times, we freak out and abandon our overall strategy. Simple things that you can potentially do to get you on track and to keep you on track.
Al: Yeah, and when you think about this, just the psychology, even of, investing, people tend to invest more when the market’s zooming up, because it seems like the market’s working, so you’re buying high.
And when the market crashes, people have a tendency to sell. They can’t afford the losses. They need to get out. That’s actually when it’s time to buy, because you’re gonna get that recovery. So when you have a disciplined plan, then you can handle good times and bad times and know what to do.
Joe: Go to our website, folks.
If you wanna do this yourself, by all means, we created a guide just for you. It’s our Do It Yourself Retirement Guide, DIY Retirement Guide. YourMoneyYourWealth.com, click on that special offer, right? You could download it right there. Boom, right in your hands. You don’t gotta wait. DIY Retirement Guide. Go to YourMoneyYourWealth.com, click on that special offer.
It’s our gift to you this week. Hopefully you enjoyed the show. 10 habits, folks. That’s all it is. Get the 10 habits. Start making it a habit, and lo and behold, you’ll be a millionaire, too. Thanks for watching. For Big Al Clopine, I’m Joe Anderson. We’ll see you next time.
IMPORTANT DISCLOSURES:
• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC. A Registered Investment Advisor.
• Pure Financial Advisors, LLC. does not offer tax or legal advice. Consult with a tax advisor or attorney regarding specific situations.
• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.
• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.
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