The Millionaire Next Door (by Thomas J. Stanley and William D. Danko) is a powerful book which I read last year. The book profiles real people who have already become millionaires. The media often portrays millionaires splashing cash, drinking expensive wine, partying with hot girls, and driving fancy cars. This is a LIE! The reality is that typical millionaires are normal people living simple lifestyles.
Many people who earn high incomes are not rich, the authors warn. Most people with high incomes fail to accumulate any lasting wealth. They live hyperconsumer lifestyles, spending their money as fast as they earn it. In order to accumulate wealth, in order to become rich, one must not only earn a lot (play “good offense”, according to Stanley and Danko), but also develop frugal habits (play “good defense”).
The book identifies seven common characteristics of typical millionaires:
1. They live well below their means. In general, millionaires are frugal. Not only do they self-identify as frugal, they actually live the life. They take extraordinary steps to save money. They don’t live lavish lifestyles. They’re willing to pay for quality, but not for image. Real millionaires don’t just pretend to be rich. They actually have real money.
2. They allocate their time, energy, and money efficiently, in ways conducive to building wealth. Millionaires budget. They also plan their investments. They begin earning and investing early in life. The authors note that “there is an inverse relationship between the time spent purchasing luxury items such as cars and clothes and the time spent planning one’s financial future”. In other words, the more time someone spends buying things that look good, the less time they spend on personal finance. Learn how to allocate your time and energy effectively to maximize your wealth.
3. They believe that financial independence is more important than displaying high social status. Usually millionaires don’t have fancy cars. They drive mundane domestic models, and they keep them for years. Cars are expensive and if not well managed can make you broke.
4. Most millionaires were not financially supported by their parents. The authors’ research indicates that “the more dollars adult children receive [from their parents], the fewer they accumulate, while those who are given fewer dollars accumulate more”. Hustling makes you tough to succeed in the world.
5. Their adult children are economically self-sufficient. The authors clearly believe that giving money to adult children damages their ability to succeed. Parents need to heed this advice and not over pamper their grown up kids.
6. They are proficient in targeting market opportunities. “Very often those who supply the affluent become wealthy themselves.” The authors discuss how one of the best ways to make money is to sell products or services to those who already have money. If you can figure out what the rich and middle class people want you will make a lot of money.
7. They chose the right occupation. “Self-employed people are four times more likely to be millionaires than those who work for others.” There is no magic list of businesses from which wealth is derived — people can be successful with any type of business. In fact, most millionaire business owners make their money in “dull-normal” industries. They build cabinets. They sell shoes. They’re dentists. They own bowling alleys. They make boxes. There’s no magic bullet.
Don’t be deceived by the so called “RICH” people you see on TV and social media. Having a high income/salary does not make one rich. The average RICH person lives a simple lifestyle. He/she rarely has the time to display his/her wealth. They are frugal and more often than not own a business or are self employed. They have actual assets which generate cash and little or no debt. They don’t depend on someone else to finance their expensive lifestyle. They do mundane things like budgeting, planning, investing, etc.
If you need a free soft copy of this book send me your email address and I will gladly share it with you.