by Don Taylor

In the used car business, they use a term to describe owing more on an automobile than it's worth. The term is "being upside down."

I know folks who live their entire lives "upside down." They earn good money, but they spend even more. They wear expensive clothes, drive ritzy cars and live in pricey homes.

To most folks, they look wealthy. Many people believe these "upside downers" are enjoying the American dream. They seem to have it all.

And, I guess in a way they do have it all. They have bills, payments, mortgages and long lease contracts. They have huge debt and difficulty in making ends meet. Very few of these "upside downers" could pay one month's cycle of bills if they didn't get their next paycheck.

Unfortunately, these folks are growing old, but not wealthy. They are spending their retirement to maintain a showy lifestyle. They are living above their means with the help of liberal credit policies and low monthly payments.

Many are trapped in the lifestyle. They love it when someone compliments their new suit or new car. The ego boost they get from creating the perception of wealth carries them through the next cycle of payments and into another spending spree.

However, many of these wealthy "wannabes" have little or no net worth. Their retirement portfolios are meager and they have no financial safety net. Both husband and wife must work full-time to keep up.

Bubba and Bill

Bubba and Bill are the same age, finished college the same year and work for the same company. Though they work at different jobs, their salaries are similar. Bill actually earns $1,800 per year more than Bubba.

That is difficult to believe, however, because Bubba is living the "upside downers" lifestyle. He drives a brand new SUV, lives near the country club, spends the weekends on the golf course and owns both a motor home and a boat. Bubba wears tailored suits and looks like a millionaire.

Now let's take a look at Bubba's personal balance sheet. Bubba has no savings and only enough cash to make it to the end of the month. If sold, Bubba's toys would not bring enough to pay them off. He has $52,000 in his company retirement account and $38,000 in credit card debt. His house is worth $60,000 more than the 24 years of mortgage payments he has left. Bubba's total net worth is about $100,000, including household items.

Bill, on the other hand, lives well below his means. He drives a six-year-old sedan and has lived in the same house for 14 years. Bill paid his house off four years ago and spends most weekends working in the part-time business he started in 1990. This year that business will bring in more than double the income of his full-time job. Bill and his wife have no debt and enough ready cash to cover four month's expenses.

What is Bill's net worth? Bill has $114,000 in his company retirement plan, more than $200,000 in other investments, market value real estate of about $85,000 and personal and household items worth nearly $30,000. In addition, he has nearly $140,000 in assets for his part-time business. Total, including his four-month cash reserve: $580,000.

Bill has nearly six times the net worth of Bubba. Bill's investments will make him an official "millionaire" before his 60th birthday.

Want to know how Bill did it? Read: The Millionaire Next Door, by Thomas J. Stanley and William D. Danko. This book will give you the surprising secrets of America's wealthy. You'll want to share a copy with your children.