Monday, October 29, 2012
Book 18: The Millionaire Next Door by Thomas Stanley and William Danko
Fantastic read, and really one that felt like three books in one. The Millionaire Next Door Habits, The Millionaire Not Next Door, and The Millionaire Next Door, Next Generation. At least that was my interpretation.
The authors composed a fairly radical research project desperate to find out who these millionaires actually are and how they created their wealth. Their findings are incredible and not at all what you would imagine.
The authors look at wealth as your net worth minus your liabilities and then found multi-millionaires for their study. Who are these people?
Hard earners, and even harder savers.
In fact, millionaires are some of the most frugal of all spenders. That's how they made their millions! Yup. Millionaires are not made, they are saved.
So what of these luxury car owning, international traveling, designer clothes wearing individuals? They may earn a high income, but the majority of those living this lifestyle are actually broke! Can you imagine earning $500,000/year and living paycheck to paycheck?? When you think you have to "keep up the appearances" then yes, you can.
In fact, less than 20% of net-worth millionaires lease anything. If they desire a higher end product, they purchase it. BUT, they are sure to acquire assets, not liabilities. Liabilities are those things that will always depreciate such as (*clears throat*) your car and your clothes. What are assets then? Property, land, stocks, bonds, cash, and precious metals.
You don't have to earn high to save and invest high. In fact, more than 80% of those with a net-worth of more than 1 million earn less than $100,000 per year! They pay their investments and savings first, live on less than they earn, set annual financial goals, and have a long-term financial plan in action.
The authors continue on to share in how Economic Outpatient Care (cash gifts from affluent parents) are the reason of ineffective and under-earning/overspending children and that the only gift affluent parents ought to pass on are education and principles.
Their parting thought is how to market to the true affluent. Remember, the true affluent purchase assets such as investments, health, and good retirement packages.
All in all, a fantastic read. If you are suffering from wealthitis (misbelief that wealth is for the wealthy) then read it!