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You Can Die A Millionaire! (Just Don't Live Like One)
Date of Review: Oct 10, 2000
Be frugal! Save, don't spend! Live well below your means! There. I've just summarized the bulk of the "profound" advice in this book in a nutshell. The Millionaire Next Door is long on the demographics of who today's millionaires are. It's short and naive on how you can join their ranks.
How Do Millionaires Spend Their Money
They don't. Obviously, everyone should be saving for retirement and keep an emergency fund. But there is a fine line between sensible frugality and pathological stinginess. This book glowingly describes millionaires who live in small houses in run-down neighborhoods, clip grocery coupons and wear cheap suits from discount stores.
While spending money doesn't buy happiness, who wants it said as he's lowered into his grave, "He died a millionaire but never saw Paris."
And some saving is just penny wise and pound foolish. The authors make a big point that most of today's millionaires operate "dull-normal" businesses such as janitorial services or are auctioneers. They buy cheap suits at Sears or Penneys and drive old cars. Now while this may be suitable for those particular businesses, in law or sales it IS important to dress well and have a car that makes you look successful. It's a kind of advertising. Law firms keep the lawyer in the old, cheap suit in the law library doing research. The lawyer who dresses well is introduced to the clients. Who do you think makes partner?
The authors spend way too much of the book space discussing the buying and selling of cars, which includes the following stupid advice. They say that the typical millionaire spends around $29,000 for his car. Since the average buyer of a motor vehicle in America has a net worth that is less than 2 percent of that of these millionaires, they should buy motor vehicles than cost 2 percent of what the millionaires pay. If they did, they would spend $580 on a car. Try getting to work in a $580 car. This type of advice simply ignores realities.
How Do Millionaires Make Their Money?
--Be self-employed. 75% of the millionaires in this country are self-employed. A very high percentage considering that fewer than 20% of the workers in this country are self-employed.
The flaw in this analysis isn't presented until we get to the last chapter. The average income for the more than fifteen million sole proprietorships in America is only $6,200. About 25% of sole proprietorships do not make one cent of profits during a single year.
--Be a self-employed professional. After slamming many of these people for spending too much on clothes and cars, ultimately, the authors advice is to become a self-employed doctor, lawyer, accountant, engineer, architect or dentist. (I didn't need this book to tell me that.)
Sensible Millionaires Don't Support Their Adult Children
It makes them dependent on Mom and Dad and less likely to succeed on their own. Except that sensible millionaires give $10,000 per year to their children and grandchildren in order to reduce their estates to an amount below the taxable limit.
Income Tax Is The Single Largest Annual Expenditure For Most Households
The authors don't spend more than this one line discussing how the tax code can make wealth accumulation possible or difficult. They never mention that the self-employed get many tax deductions that wage earners do not get.
Are You Meeting Savings Goals?
How much should you be worth right now. The authors have come up with this formula.
Multiply your age times your realized pretax annual household income from all sources except inheritances. Divide by ten. This, less any inherited wealth, is what you net worth should be.
In other words, if you are 40 and earn $100,000 per year, you should have net assets of $400,000. The authors never state how they came up with this formula or why it is valid. They never take it forward and analyze whether by having those net assets, the individual will have sufficient funds for retirement. They don't indicate how much you should be saving to meet those goals.
Conclusion
Don't buy this book. Be frugal. If you must take a peek, do as I did and get it at your local library. I'm sure this will impact the authors' plans to become millionaires, but it will be a small start on your way to millions.
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