87 out of 87 people found this review helpful.
Wouldn't We All Like To Be The Millionaire Next Door!!
Date of Review: Apr 19, 2001
The Bottom Line: This is a good book and I would recommend it. I would hope that many of these principles are already known by people.
"The Millionaire Next Door" is an interesting look at the subject of how people become wealthy in America. The authors say that it is rarely from an inheritance, advanced degrees or even intelligence that builds a huge fortune. Instead wealth is usually from hard work, diligent savings and living below your means.
In the introduction the seven common denominators for those who build wealth are listed. Among them, their adult children are economically self-sufficient and they believe that independence is more important than displaying high social status.
Chapter one gives us the portrait of a millionaire. Several interesting statistics are noted such as the fact that self-employed people make up less than twenty percent of the workers in America but account for two thirds of the millionaires and that about eighty percent are first-generation affluent and don't feel at a disadvantage because they didn't receive an inheritance. They define wealth as your net worth; the current value of one's assets less liabilities (excluding the principle on trust accounts).
Chapter two discusses the first principle of gaining wealth which is to live well below your means. Here they profile the lifestyle of the typical American millionaire by calling it frugal. It says that to his neighbors, the millionaire family appear to be nondescript middle-class folks. Very few people claims the book are affluent, even those with six-figure incomes. The reason is that they believe in spending tomorrow's cash today and that they believe that those who don't display abundant material possessions are not successful. Most millionaires don't spend a lot of money on clothes, shoes or other artifacts.
Chapter three discusses the second principle of gaining wealth which is that most millionaires allocate their time, energy and money efficiently in ways conducive to building wealth. Here it states that the wealthy spend twice as much time planning their financial investments as the rest of us do. Millionaires typically indicated on surveys that they were a "business owner" with "some college," "four year college graduate" or "no college." It mentions that many of those who have high incomes often had a head start on many well educated workers. Most experts on wealth agree that the earlier one starts investing one's income, the greater the opportunity to accumulate wealth.
Chapter four discusses the third principle of gaining wealth. They believe that financial independence is more important than displaying high social status.
Here it is explained that most millionaires do not buy the most expensive car and that they are very concerned about the price. Of those who do patronize car dealers, many do those who are their clients or customers. The fact that many of the wealthy are net workers is explained. It mentions that many of them buy used cares or keep a car for a long time.
It sounds great but there is a big difference between buying a good cheaper model new car and buying more expensive models. If you know that they used car is a good quality one or if you are a mechanic then great. Otherwise a used or old car could cost you thousands in car repairs and could be dangerous to a woman if it breaks down on her when she's in a bad area or miles from help. Even with a cell phone I would prefer a dependable car that doesn't break down!
Chapter five discusses the fourth principle for becoming wealthy which is, their parents did not provide economic outpatient care. It says that it is much easier to spend other people's money than dollars that are self generated. It says that the more wealth the parents accumulated, the more economically disciplined their adult children will be. It says that many wealthy parents subsidize their children's education, earmark gifts so they can start on enhance a business, or give them private stock that cannot be readily traded in for a new foreign luxury automobile.
Chapter six discusses the fifth principle for gaining wealth which is that their adult children are economically self-sufficient. It says that if you are wealthy and want your children to become happy and independent adults, minimize discussions and behavior that center on the topic of receiving money.
It's not just the dollar value. I knew of a family that fought over a will. The family was torn up and zap, just like that the children never saw their cousins again. The mother was burned and warned her children that she would determine who got what. In this case the children learned from that bad example and determined that there would be no fighting between the siblings and none of them expect to get any money. They determined not to put their kids through that and I agree with them. I would refuse a gift or inheritance that has strings attached. Trust your kids or keep your money!
Ten rules for affluent parents and productive children are noted. Such things as no matter how wealthy you are, teach your children discipline and frugality and stay out your adult children's family matters. Excellent advice and better than leaving an inheritance!
Chapter seven discusses the sixth principle for gaining wealth which is that they are proficient in targeting marketing opportunities. Here it mentions that perhaps the reason you're not wealthy is that you're not pursuing opportunities in the market place. There are significant business opportunities for those who target the affluent, the children of the affluent and the widows and widowers of the affluent. Several opportunities exist such as purchasing investments, medical care, and products for their children and grandchildren.
The eight and final chapter discusses the seventh and final principle for gaining wealth which is, they choose the right occupations. Here it states that most of the affluent in America are business owners, including self-employed professionals. It says that these self-employed people are four times more likely to be millionaires than those who work for others.
They have an appendix detailing the prices of the various makes and models of the 1996 cars, per pound. Why the per pound price I'm not sure. It did help me convince my not frugal in technology but a miser otherwise who hates to buy new cars that our 1997 Ford Escort was an excellent value and far better than paying an extra $900 (plus $1,200 so far that year) in car repairs on an old 1987 Reliant with 133,000 miles on it!
This is an interesting book and I enjoyed both reading it and writing the review. It is interesting to see their findings of what an average millionaire is like.
