These people cannot be millionaires! They don’t look like millionaires, they don’t dress like millionaires, they don’t eat like millionaires, they don’t act like millionaires–they don’t even have millionaire names. Where are the millionaires who look like millionaires?
– A trust officer’s response to a focus group of millionaires (The Millionaire Next Door, by Thomas J. Stanley)
The trust officer looks the part of a millionaire, with his expensive watch and clothes. He stands in stark contrast to the millionaires in the focus group that Thomas Stanley writes about in his book, The Millionaire Next Door.
The trust officer was one of the Big-Hat-No-Cattle-minded people whose assessment of what it takes to build wealth has more to do with the size of the hat worn in public than the size of the cattle herd back at the ranch.
Just because you wear a big hat and talk big doesn’t mean that you are on your way to building lasting wealth.
Yet, it’s not unlike the talk I often hear when I am in my circle of authors, coaches, and speakers with their focus on whether you have a six-, seven-, or eight-figure business.
It may seem sacrilegious to say but having a lot of money coming in the front door doesn’t mean you have a lot of money back at the ranch. Too often the high income is used to make a good impression in social circles than it is to create enduring prosperity.
Other terms I have come across recently are the dual concepts of Income Statement Affluence and Balance Sheet Affluence.
In case you need an accounting refresher on the difference between the Income Statement and the Balance Sheet, an Income Statement reflects the amount of money flowing through a business during a period (i.e., a month, quarter, or year.) It’s sales minus expenses.
A balance sheet, on the other hand, is a snapshot in time. It shows how much is in the bank and how much is owed at a point in time.
A Big Hat No Cattle person has Income Statement Affluence. They have a high income, but that income isn’t being preserved. The income is being drained by excessive expenses and debt.
They may be able to flash a fancy watch or a fancy car today but may be in serious trouble when the financial storms rain on their parade.
On the other hand, the person who has a healthy herd of cattle and enjoys Balance Sheet Affluence can more easily weather the storms that come their way. In fact, they often take advantage of those stormy days. They seize opportunities while their neighbors with the big hats are running for shelter.
Are you running your business like your neighbors with the Big Hats? If you are, it’s not too late to make changes and be better prepared for the coming storms and opportunities.