Location, location, location. Where you choose to live plays a crucial role in obtaining wealth, according to Sarah Stanley Fallaw; a woman with more than enough credentials to earn your consideration.
In addition to serving as the director of research for the Affluent Market Institute, Fallaw also co-authored The Next Millionaire, Next Door: Enduring Strategies for Building Wealth. The data presented in the book is derived from a surveyed she conducted on 600 millionaires in America. The book is in some ways a successor to her father’s Stop Acting Rich … And Start Living Like A Real Millionaire, published in 2009.
Her father, Thomas Jane Stanley, considered by many to be a well-established authority on the behaviors of the affluent, co-signs his daughter’s sentiments plainly: “If you live in a pricey home and neighborhood, you will act and buy like your neighbors.” This can be viewed as a warning against living beyond your means.
The importance of where you live as far as obtaining wealth is concerned falls into one of the six key conditions mentioned in Fallaw’s book. She coins them “wealth factors.” Frugality, confidence, responsibility, planning, focus, and most relevantly social indifference; not being pressured into spending by the scornful eye of trends, status or class:
“Spending above your means, spending instead of saving for retirement, spending in anticipation of becoming wealthy makes you a slave to the paycheck, even with a stellar level of income,”
If you live in an affluent neighborhood you are more likely to spend in a bid to keep up. It’s also important not to live in a home that you can afford but in a home that you can easily afford. Earning more doesn’t (and in fact shouldn’t) mean you have to spend more – this is a fallacy Thomas J. Cory calls the “lifestyle creep.”
Keeping your housing costs low should help toward doing a lot of the leg work on the road to sustainable wealth. A survey revealed that most millionaires don’t purchase homes that exceed three time their annual income. An affordable home can be reasonably defined as 30%of your pretax income.