(Haven't heard the episode with Sarah Fallaw of Data Points yet? Listen here.)
Does the thought of becoming a millionaire excite you?
What about understanding your financial characteristics, so that you can assess your ability to build wealth?
I was able to sit down with Sarah Fallaw, whose father, Thomas J. Stanley, is the author of The Millionaire Next Door, which was a best seller in the 1990s. She has continued his legacy and is the co-author of The Next Millionaire Next Door.
Her background is in industrial psychology, and she started her career helping companies hire the right people for various jobs based on their characteristics.
She founded Data Points LLC, a research and technology company that provides advisors and individuals with behavioral science tools. In fact, Data Points created the industry's first assessment of individual propensity to build wealth based on the book, The Millionaire Next Door.
She was also interested in the flip-side of building wealth. Sarah knew the same information could be used to help people who were going down the wrong financial path.
For a long time, Sarah ignored her father’s work because she wanted to carve her own path in life. She wanted to do her own thing (and learn her own lessons).
There were already books written that indicated how millionaires tend to handle their money. Sarah departed from their advice. While she was in Grad school, she chose to gamble on stocks. She states it was for fun and entertainment, certainly she wasn’t thinking about it from a financial perspective.
Then she bought Krispy Kreme and watched it tank.
She’ll tell you that she learned the hard way that investing takes time, patience, and knowledge. That dabbling in isn’t always the right way to go.
However, she did learn some important lessons!
It wasn’t until after she had children, that she started looking at the data her father had collected. She began to understand that there are people who are good at building wealth. She saw a predictable pattern and was interested in the psychology behind what it took them to build their wealth.
It was this part of our conversation that made me wonder what it was like for Sarah growing up around all these financial conversations.
She indicated that her father was a marketing professor, who studied consumer behavior. His focus was on how we make decisions about the things that we buy.
He was always observing consumer behavior and doing research. He was interested in how things were marketed to individuals. She grew up with an emphasis on consumer finance, rather than personal finance.
Her father started doing consulting work for large financial institutions that were trying to pinpoint who these millionaires next door were.
She learned through him how companies and organizations are marketing to us.
During my first job as a financial planner, it was The Millionaire Next Door that changed the way I related to money. It determined my financial characteristics. It made me think about my life in relation to my purchases. I considered the ramifications of being attached to material things. That book made me think about long-term versus short-term financial decisions.
Sarah said it’s the book her father is known best for and one she suggests people start with who have never read one of her father’s books. It continues to be recommended by university professors and financial experts. Her father was good at storytelling, so even if you don't love reading personal finance books, you’ll enjoy reading tales of people accumulating wealth, or throwing it all away.
Sarah also recommends his book, Millionaire Women Next Door, especially since women are becoming more involved in the financial services field.
The Next Millionaire Next Door
Sarah and her father were working on The Next Millionaire Door, which takes a look at what has changed in wealth building over the last 20 years. Unfortunately, Sarah’s father was killed by a drunk driver in 2015. She finished writing the book.
I wondered what had changed over the past 20 years? How do those changes impact how people build wealth?
Housing, education, and healthcare are all the more expensive. The price of consumer goods has dropped. That means clothing (and similar items) generally cost the same.
There are a lot of changes in how we communicate, and how we are influenced by other people (compared to 1996). These days comparisons are constantly fed to us through social media.
We have to be careful of the impact on our own financial characteristics and choices.
The Next Millionaire Next Door In Education
There is a new teacher out there listening who has a negative net worth (that student loan debt).
Fast forward to the teacher who is close to retirement, who on paper does not look like a millionaire. However, if you were to look at the valuations of their pensions, they are millionaires!
Sarah answered the important question of which millionaire behaviors and mindsets can teachers apply to their own lives?
If you are trying to build wealth learn to live below your means.
Don’t be influenced by what someone else is driving or wearing.
Recognize you can make changes and impact your financial future.
Sarah stated her father said educators are often very frugal. They have a limited budget for their household and their classroom. That means they have to make the most of what they have.
It’s time to think about how you see “value”.
What are your goals (both financial and long-term)?
What's important to you?
You need to look at the long term implications for these things.
If you want to explore your own financial characteristics, you can go to the Data Points website to take assessments to discover your spending behaviors and assess your ability to build wealth.
(Haven't listened to Developing Your Millionaire Mindset to Build Wealth yet? The timing is really good right about now to do that!)
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I'd love to help you.