MANILA, Philippines--What comes to mind when you hear the word "millionaire"? Probably images of the usual suspects--a rich businessman in a pin-striped suit, a politician and his big SUV, a kid who inherited loads of cash from his parents and living it up in the big city, or the most common of all, the CEO-type.
It might be surprising (even depressing) that your next-door neighbor might have turned into a millionaire while you barely saved a few thousand pesos in a bank account every month. Recent interviews have shown that there are hidden, self-made millionaires around us and they are not your run-of-the-mill wealthy persons living in affluence.
Inspired by the best-selling book "The Millionaire Next Door" by Thomas J. Stanley and William D. Danko, I started last year to look for hidden millionaires in our society.
Based on Stanley and Danko's research, the portrait of America's millionaires is far removed from what most people expect it to be. It shows someone who is in a "dull or normal" business like paving contractors and rice farmers. They don't look like millionaires, they don't dress like millionaires and they don't eat like millionaires, but their frugal lifestyles allow them to have a "go to hell" fund they could live on for 10 years even if they don't lift a finger.
Different investments
They live on 7 percent of their wealth, save 15 percent and invest nearly 20 percent of their realized household income. They have "chosen to trade wealth for high-status material possessions," the book says, but invest heavily in education for themselves and their children.
Could it be that there are such millionaires in Philippine society?
Just like in Stanley and Danko's book, most of the hidden millionaires interviewed for this article did not inherit their money. Sure, we also have the big names with big inheritance, the superstars who made it big either in show business, basketball or boxing, as in Manny Pacquiao's case. But for Filipinos who don't have the significant last name, the superstar quality or the strength to be a boxing sensation, slowly socking away money has done the trick.
These "ordinary millionaires" also live way below their means, drive humble cars and live in simple homes. Unlike in "The Millionaire Next Door," however, Filipino self-made millionaires either own or rent their homes. Those who rent their homes do so while preparing to buy future properties on cash basis or saving up to minimize expensive mortgages.
They don't have much credit card debt, and cook their own birthday dinners. Some are employed while others are entrepreneurs. Most are happy in their relationships. All don't buy things for show, but get more satisfaction in an increasing portfolio of mutual funds, stocks, bonds, properties and businesses.
While they are frugal, they are not misers. Those who are in the professional world love their jobs but are not workaholics. They are aggressive when it comes to investing and are always on the lookout for ways to earn more. All are generally tightwads.
Low-key millionaires
Francis Kong, best-selling author, business consultant and corporate trainer, confirmed that there are many low-key millionaires in Philippine society. But when he talks about millionaires, he is not talking about those who just made their first. "One million these days is almost nothing. You can't even buy a decent car with that, unlike before. I'm talking about those who have at least P10 to P15 million that are liquid," he said.
They are low-key because they are aware that their wealth is a pittance compared to the Sys and Ayalas in the country, Kong observes. "They know deep in their hearts that they still have a lot to do to strive to be really wealthy," Kong said.
Millionaires, especially Chinese businessmen, fear kidnapping and thus prefer not to flaunt their wealth. Kong said in any nationality, self-made millionaires are hard working and always searching for additional ways to preserve their wealth.
"They are after comfort, yes, but they also understand that they need to grow their passive income. They are very open that's why they are eager to attend personal finance seminars. They want to learn what the really rich people are doing," he said.
The number one concern among self-made millionaires? Taxes. "They are super sensitive to taxes. They have a feeling that they have worked really hard to get where they are and they should at least be given the right services for what they pay," Kong said.
Filipinos whose net worth is between P1 million and P15 million consider themselves in the middle-income group, and they say the first million is the hardest to reach. After that, things get easier.
A 20-year old new graduate who sets aside P2,000 a month in an investment vehicle that earns 10 percent per annum and continues with dogged determination to do that consistently will become a millionaire when he reaches 36 years of age. It takes 16 long years to reach the first million.
After that, however, it gets easier. Using the same strategy, he will earn his second million after six years when he turns 42, his third million after four years when he turns 46 and his fourth million when he turns 49.
Money, as they say, begets money. If this is true, then the foremost qualities any Filipino should have to join the ranks of self-made millionaires are focus, dogged determination, frugality and love for hard work.
(For more articles on personal finance, visit MoneySmarts, a personal finance blog at Inquirer.net with this address: http://blogs.inquirer.net/moneysmarts).
