The Millionaire Next Door: The Surprising Secrets of Americas Wealthy By Thomas J. Stanley
Rating: ⭐⭐⭐ ½
Genre: Nonfiction
The Millionaire Next Door is a personal finance book written by Thomas J. Stanley and William D. Danko. The book examines the traits and routines of wealthy people and makes the case that wealth is more likely the outcome of prudent spending and saving habits than high income or inherited wealth.
One of the book's key themes is the fact that many people who on the surface appear wealthy with costly homes and vehicles yet lack financial security because of their high levels of debt and little savings. Contrarily, many people who might not appear wealthy based on their appearances are actually financially successful thanks to their conservative spending patterns and capacity for prudent saving and investing.
The book uses various case studies and examples to support its theories and is based on significant research. It provides helpful guidance on how to amass wealth, including pointers on debt management, investing, and saving.
The authors identify the following seven traits that are typical of millionaires:
-They are dedicated to a vision, have distinct objectives, and are aware of their future.
-They make the appropriate career decisions.
-They value being frugal.
-They consider having the financial security to be more significant than appearing to have good social standing.
-They efficiently spend their time, effort, and money in ways that support accumulating wealth.
-Their parents couldn't afford to pay for their outpatient care.
-Their grown children are financially independent.
The Millionaire Next Door is a good tool for anyone trying to get their finances under control. It is an easy and interesting read due to its lucid writing style, useful suggestions, and the fact that the insights it offers are relevant to readers of all socioeconomic levels. Thomas J. Stanley There are no secrets.
Also, the millionaires are not the kind you'd like to read about. Just bunch of people who saved for 30years and they have 1'000'000$ in the bank, living almost poor, and praising education. Thomas J. Stanley According to this book, there are two kinds of people: under-accumulators of wealth (UAWs), who spend everything they earn as soon as they get it (to say nothing of credit cards); and prodigious accumulators of wealth (PAWs), people who live frugally, save, invest, and end up becoming millionaires. So when you see someone who lives in a fancy house and drives a fancy car, chances are, he’s not a millionaire. He may be a high earner, but he’s also a big spender, so he’s a UAW. A real millionaire lives humbly and isn’t into consumption. He might even live right next door.
Now that’s an inspiring idea, one that made me go into this book with some hope of getting rich someday, but I didn’t have to read very far to realize that I’m in a hopeless UAW rut. That made reading it a pretty unpleasant look in the mirror, especially since I believe that what the authors are saying is completely true. I’ve seen it first-hand. I’ve worked for two estate planning attorneys and a bankruptcy attorney. I’ve seen both sides.
For me, the most painful, shame-inducing part of the book was the analysis of parental “outpatient economic care.” I guess it’s not really news, but parents who bestow too much of their wealth too easily on their children end up providing for them even in their forties and fifties. This was the longest section of the book, and I found it a bit repetitive, but then again, perhaps that’s part of my shame reaction.
Aside from this emotional reaction, I have a few technical criticisms. I didn’t finish the chapter called “You Are Not What You Drive,” since cars just don’t interest me that much. And though the book was full of charts with stats showing the authors’ research, I stopped looking at these about halfway through the book. On the flip side, I would have liked to read more about why the millionaires chose the businesses they did. The authors did give some advice on lucrative careers (estate planner was number one), but I would have liked more.
All of that might have induced me to give the book a rating of 2, but I don’t think that’s fair. Just because the book was mostly a downer for me doesn’t mean it isn’t worth reading. It really has gotten me to look more closely at my spending. I just fear that as the book itself warns, crash budgeting can be like crash dieting. Will the effect really last? Thomas J. Stanley Very hard to get through. Skim-read after 40%. Thomas J. Stanley There's a lot to say about this book, both positive and negative. It had some great ideas in it, some which are possibly quite revelatory for some people, and some really useful information which I would love to ensure certain people I know read. However, it was also a very dry read, somewhat repetitive and dwelled on some things I didn't think were all that fascinating (like what sorts of cars millionaires drive). It also had a lot of charts, which is fun from a stats perspective and lends credibility, but it's a bit too much irrelevant info to take in.
I honestly didn't care what sort of ancestry millionaires had or what cars they drove, but I saw that the authors were doing the Mythbusters thing and making sure people didn't believe in completely false things.
I felt they spent an incredible amount of this book talking about what happens to the kids of the rich. However, this can be used as a great parental tool to ensure parents teach their kids the right money tactics, whether starting rich or not. It also ends with sensible career ideas to suggest to kids (which make a lot of sense with the reasoning).
In essence, the lessons from the book are to remain frugal, save money and to ensure you keep your money wherever possible. Employ good financial and legal help to ensure you save on taxes, invest wisely and whatnot.
Anyway, if you're frugal and live below your means you're on the right path. Then increase your income without changing your habits and be sure to invest the rest well and you'll be fine. Thomas J. Stanley
The incredible national bestseller that is changing people's lives -- and increasing their net worth!
CAN YOU SPOT THE MILLIONAIRE NEXT DOOR?
Who are the rich in this country?
What do they do?
Where do they shop?
What do they drive?
How do they invest?
Where did their ancestors come from?
How did they get rich?
Can I ever become one of them?
Get the answers in The Millionaire Next Door, the never-before-told story about wealth in America. You'll be surprised at what you find out....
The Millionaire Next Door: The Surprising Secrets of Americas WealthyIt's rare that you can find a book that is as boring as it is sanctimonious. But they pulled it off!
In a nutshell, millionaires aren't made by extraordinarily high incomes (those people's spending tends to increase as well), in fact they're typically people with merely very good incomes who are zealous about frugality and long term investments. Not a huge surprise actually, but its nice to have numbers to back up the story and they do. Many are small business owners, many don't spend much on cars or suits and 80% are first-generation millionaires (not those who happened into big inheritances).
And that's it.
The rest of the book is filled with awkward, pedantic number-twisting to prove that people who spend less on houses and cars will have more left for retirement. What's maddening is the constant tone that people who choose to spend now instead of when they're 65 are hyperconsumers. Can you believe this doctor, he makes $700,000 per year and spent a whopping $7000 of it on a vacation! What a dope! Wouldn't the $65,000 he spent on a Porsche have felt just as good in an IRA account?
They constantly fawn over blue-collar superstars who drive around in F-150s while their wives clip coupons. They start with the assumption from the very beginning that money is pre-ordained to end up in a retirement account and anything you do to interfere with that is stupid and indicative of poor discipline.
I can't wait for the next book about how Rock and Roll is too loud and women's skirts are too short. Thomas J. Stanley I learned that there are seven characteristics or common denominators among millionaires in America.
They are:
1.They live well below their means - They are frugal,frugal, frugal. They make more than they can spend. Pretty cool.
2.They allocate their time, energy, and money efficiently, in ways conducive to building wealth - How else did they get there right? Well this goes for those millionaires who didn't inherit their wealth.
3.They believe that financial independence is more important than displaying high social status - Practical. You can display high social status all you want, but if you're still dependent on active income then you're one very vulnerable fella.
4.Their parents did not provide economic outpatient care - Pretty good training ground, don't you think? They train their kids to be survivors and in the end, to be winners. This is the best legacy they can leave to their children.
5.Their adult children are economically self-sufficient -Pass on the buck right? That's why the rich get richer and the poor get poorer.
6.They are proficient in targeting market opportunities - Now this is one handy skill I want to get my hands on.
7.They chose the right occupation - Right! To wake up everyday itching so badly to get yourself to do the things you love. Ain't that a ball!
Learn from this. The lessons and ideas may seem repetitive, but the author is really trying so hard to drive home a point. We need to learn the lessons. He want us to. Well, we ought to. =) Thomas J. Stanley This was a great audio and text book (yes, I got both versions) - I especially enjoyed the chapter that had Working for the Tax Man and The Martin Method.
95% of the millionaires own stocks - most have 20% or more of their wealth in publicly traded stocks.
Build a good money team: accountant, attorney, financial advisor, and you (and spouse).
Looking to build your money team? Ask your CPA. If you do not have CPA... get one.
Be frugal, know your financial picture, and have goals with your money.
The good millionaires know how much their costs are in life - how much they spend shopping, traveling, etc.
You heard of emergency fund, car fund, retirement fund, etc. well I am adding the Go to Hell Fund.
The typical millionaire has a Go to Hell Fund which allows them to quit their job and not work for like 10 years or more. So when you quit your job or get fired, you can say to your employer go to hell and walk out the door and not worry about working.
I like this part in the book about UAWs and PAWs. You got three categories to millionaires.
UAW = Under Accumulator of Wealth (1/2 of AAW)
AAW = Average Accumulator of Wealth
PAW = Prodigious Accumulator of Wealth (2 * AAW)
To figure out what category you are in - do the following formula: Age/10 x Income
Example: Age 30, Income $45,000
30/10*45000 = $135,000
This person should have net worth of $135K.
UAW = $67,500
AAW = $135,000
PAW = $270,000
To figure out your actual net worth - do the following formula: Assets - Liabilities
Example: Age 30, Income $45,000, Credit Card Debt $12,0000, Car Loan $20,000
45000-(12000+20000) = $13,000
This person has Net Worth of $13K.
Thomas J. Stanley Most Americans believe wealthy and high-income are synonymous. Surprisingly, most high-income earners are not wealthy; although they earn a lot of money, they don't keep much of it. To be wealthy is not to amass material possessions, but to increase net worth by collecting appreciating assets.
The book categorizes people as PAWs or UAWs; Prodigious Accumulators of Wealth (PAWs) achieve, create wealth, become financially independent, and build from scratch. Under Accumulators of Wealth (UAWs) simply display a high-status lifestyle. Most wealthy people (PAWs) don't drive new cars, buy expensive clothes, or live in upscale neighborhoods.
I read this book because it was recommended by one of my favorite financial authors, Robert Kiyosaki, author of the Rich Dad Poor Dad series. This book explains 7 factors that contribute to wealth-building. These factors aren't set forth in a step-by-step how to become wealthy checklist, but are more indirectly investigated through statistics and interviews explaining the behavior of the wealthy.
The briefest formula for wealth given: be frugal, invest, and own a profitable business.
I found it interesting that (as of 1996) self-employed people (entrepreneurs and self-employed professionals) are less than 20% of the American workforce, but 33% of millionaires. Also, 80% of American millionaires are 1st-generation rich, people who earned their wealth rather than inheriting it.
I liked the comparison between budgeting and dieting or exercising. When you see a fit person eating healthy or working out, you're tempted to think Why do they need to diet and exercise? They're in great shape! Of course, the reason they're in shape is because of their diet and exercise regimen. The same goes for the wealthy. You might think that they don't need to budget because they're wealthy, but it's often due to their budgeting that they became wealthy.
To determine your expected net worth, multiply your age by your gross (pretax) annual income, then divide by 10.
The 7 factors of wealth
They live well below their means.
Control spending by creating an artificial economic environment of scarcity. Pay yourself first by investing at least 15% of income before spending on anything else.
Minimize realized (taxable) income, maximize unrealized (non-taxable) income.
Sacrifice high consumption today for financial independence tomorrow.
Get a mortgage less than twice your annual income.
They allocate their time, energy, and money efficiently, in ways conducive to building wealth.
Save and invest early. An early start with low income can outweigh a late start with high income.
Invest at least 15% of gross/pretax income.
Follow a budgeting and plan your finances.
Invest passively with a buy-and-hold method to reduce capital gains and turnover.
They believe that financial independence is more important than displaying high social status.
Dollars are like seeds; you can consume them or plant them to grow.
Their parents did not provide economic outpatient care.
The more dollars adult children receive, the fewer dollars they accumulate. Those forced to provide for themselves tend to be wealthier than those who are given financial aid.
Their adult children are economically self-sufficient.
Helping the financially weak generally makes them weaker.
They are proficient in targeting market opportunities.
Offer goods and services to the affluent. Although they're often frugal concerning consumer goods and services, they're not as price-sensitive about investment services, accounting services, tax advice, legal services, medical care, educational products, homes, and products and services for their businesses.
They chose the right occupation.
Sell your intellect; it's portable across industries and geographic locations. Thomas J. Stanley The point of this book comes through loud and clear, the people that we think are millionaires are more than likely swimming in debt. Just because you live in a fancy neighborhood and drive an expensive car does not make you rich. In fact it goes as far as to say that most millionaires live in less costly areas because it costs alot of money to keep up with the JONES! In fact their study showed 37 percent of their millionaires bought used cars opposed to new and paid cash of course. Now their used cars may be Mercedes but they save on the depreciation of the person that bought it new.
They reference one guy nameed W. W. Allen who is a self made MUTImillionaire. He and his wife have lived in the same three-bedroom house in the same middle class neighborhood for nearly forty years Living in less costly areas can enable you to spend less and to invest more of your income. You will pay less for your home and correspondingly less for your property taxes. Your neighbors will be less likely to drive expensive motor vehicles. You will find it easier to keep up, even ahed of the Joneses and still accumulate wealth
Ok, makes total sense but not something that is usually pointed out by the financial world. People tend to spend more than they make making it nearly impossible to accumulate wealth. I love the message of this book and their is extensive research used to back it up. Thomas J. Stanley
