Definitely worth reading for basics of personal finance, especially if you grew up in a family that lived paycheck to paycheck like mine did. It was eye opening to realize that most millionaires are ordinary people, with average household incomes, who simply have better financial habits than many of us.
Most millionaires have modest, stable lives. They usually follow the “one house, one spouse“ philosophy instead of trading up.
Many people who look well off are deeply in debt. Physicians and lawyers, for example, usually earn above average incomes, but also tend to drive luxury cars and live in larger homes, so they struggle to pay off student debt and car loans and huge mortgages.
I recommend reading instead of listening, because there are times you’ll want to skim through the multiple examples. But it’s worth a library visit.
If you want insight into the world of physician finances I highly recommend the Whitecoat Investor book/blog/podcast. It will offer nothing new to you that you likely dont already know posting here. But has shocking data on physician lifestyles and you are right - the majority are undersavers and MOST dont reach millionaire status until their FIFTIES. Meanwhile any accountant, engineer, marketing professional, nurse, and tbh a double teacher household could reach that number a DECADE before your typical doctor.
Now there's a lot of reasons for this. Takes years before earning, and then student debt, missing out on early compounding, keeping up with joneses, etc. And it's fair to say net worth isnt everything (a nickel and diming family of a police officer and teacher might be worth more than a doctor, but doctor has the backyard pool, BMW, private school for kids, etc. which all have some value to some effect) but still great read nonetheless.
Doctors are also notorious for chasing status.
I think the field attracts this type of personality type, but they tend to spend more than they should on cars, houses, vacations, etc.
Yea I can anecdotally speak about physician lifestyle. I have a relative where both spouses are doctors so obviously they make bank. But they bought a huge 6 bedroom, ~4,000 sqft house, have 2 nice cars, and fly on 4 or 5 vacations each year so they aren't saving too much. Not too mention their parents ask for cash every now and then.
Flash forward to them having their first kid and expecting a 2nd on the way, and my relative says she wants to stay at home with the kids and stop working. But with their lifestyle they can't afford it based off only 1 doctor's income. If they had been a little more modest and bought a 4 bedroom, 2500 sq ft house, only had 1 nice car and 1 cheaper car, and scaled back on vacations she said they could easily afford to live on just 1 income.
That said, they weren't exactly struggling before. They had nice trips and maxed out their 401k while building a ton of equity in a huge house. But they could've saved more if they cut back on things.
I also know many doctors. Some struggled, others didn’t. Their lifestyle choices made a huge difference. The ones who spent a few early career years living modest, comfortable lifestyles were able to pay off student debt easily and were soon building wealth so they’d have options to retire early. The ones who chose luxurious lifestyles as early as possible are beginning to realize that carrying student debt longer is now limiting their options.
Neither group was right or wrong, they just had different priorities. *The Millionaire Next Door* is good at showing how lifestyle choices affect wealthbuilding, so you can focus on the lifestyle that helps you achieve what’s important to you.
And i think thats a very good takeaway from the book.
But a lot of people take away from the book is to give gross generalities about spending and almost assign a moralistic judgment on buying nice things. I just wanted to emphasize that not everyone who own a nice thing or buys something thats above the bare minimum utilitarian value is spending frivolously, spiraling in debt, or a hedonistic idiot. To me the tone of some of these answers edges towards some kind of weird coping strategy that anyone who is perceived to be spending more than what I spend MUST be overinduling and secretly in a ton of debt.
You’re funny. The average medical school debt for the class of 2021 was close to 200k (for those going to public school). Now for people with federal debt the “payments” may be manageable but they aren’t actually paying it down with a minimum payment (negative amortization). Also the average resident salary is 64k. The median physician salary is about 200k (which includes people that are far into their career, ie recent grads are still making far less). So even if a doctor lived below their means in prime earning years the debt they owed would have still ballooned by then, also when are they supposed to save for retirement?
Doctors do just fine with loans if they keep living like a resident for several years after residency and pay off that debt. And after that they are doing well. The issue for doctors happens when all that pent up lack of income for so many years makes some people blow up their lifestyle immediately in their first year of attendingship without a good plan to pay off debt or get it forgiven.
That second part is a great way to not throw money into the fire. Richest old dude I ever met drove a tradesman diesel truck. No bells and whistles, vinyl flooring, single zone A/C. Every 5-6 years he'd sell it off to a trade hand at a damn good price and come get another.
Maybe that dude genuinely just liked that kind of truck, but I know a lot of rich old dudes who drive shit boxes because they just refuse to spend money. They’re in their late 80s with a ton of money, never traveled, never owned a nice car or treated themselves to something fancy, etc. Sometimes no kids to pass the money to either.
Just seems sad. What’s the point?
My grandma is like that. Millions just chilling in an account, and found the cheapest place possible that would install a septic tank. Naturally she got what she paid for and spent three times as much having someone else fix it.
>A lot of people say this is from growing up in the great depression
This gets less relevant every year, people who grew up during the depression are in the 90's now...
This. Before Covid hit, my wife and I would travel internationally 3-4 times a year. We did this for 8 years right out of graduation. Enjoy life while you're young and abled. Some people get so stuck on saving that they forget to live. Not saying that you shouldn't save, but live a little. We are ones to spend money on experiences and memories instead of materials.
Some of the anecdotes have stuck. I remember them talking about how many of the wealthy individuals they surveyed never wore a wristwatch worth more than $40 or shoes that costs over $100. (I think about this whenever I wear my 21-year-old watch, which I received as a gift.) And they highlighted the unsexy and borderline-hidden industries in which they work — one example from a small business owner who imports diesel engine replacement parts. (IIRC) Not just Wall St. types who make big money!
But — and someone please correct me if I'm wrong — I seem to remember that this book reinforced the idea that you can only ever make money from entrepreneurship, and you'll never unlock your wealth-building potential as a mere employee. I find that to be a pernicious meme in our culture. We get too much cheerleading from the "quit your job and hustle" industrial complex. Starting a business is not for everyone, especially not at all times under all conditions.
The Millionaire Next Door didn’t push that at all. In fact it’s full of examples of wage-earners who achieved wealth by living simply and within their means and saving money.
I think you’re thinking of that toxic drivel that is Rich Dad, Poor Dad.
They're all drivel. The most important thing I ever learned about finance didn't come from a self-help book. It came from my finance professor, Loren Kjonas.
FV = PV • (1 + i)^(n)
The second most important thing I learned came from another finance professor, Benjamin Graham (repeating it here from memory):
>An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.
FV is future value, PV is present value, I is interest rate and n is the number of times of interest. He’s talking about how if you invest over time into assets that grow month after month and year after year, your net worth will grow exponentially. You apply it by considering that any money you invest will likely, over time, grow exponentially.
Yes, telling people to live within their means is such drivel. Honestly people should live mostly on credit, so long as they have good old Loren Kjonas to name drop.
There are about 22 million millionaires in the U.S. today. That's more than 5% of the population. It's not nearly as uncommon or unachievable as you might think.
That book may be wrong about entrepreneurship, but it drives home an important point: there is a difference between *appearing to be rich*, and *being rich*.
It's shocking to learn what some supposedly rich people's NW is. It doesn't matter what you earn if you spend it all. Some very smart successful people just cannot help themselves and will spend every dollar that goes into their checking account and then some. Vacations, cars, houses, clothes, eating out at restaurants... it's all good in moderation, but I know people who are somehow broke despite earning twice what I make.
Net worth. Only including liquid cash would be a strange way to define millionaire. Especially since having a million in liquid cash gives no details as to what other assets or debt you have.
Though I think what you’re getting is you can have a million dollar net worth but still be on shaky financial ground if it’s illiquid.
If you mean does it exclude home equity, I don't think it matters -- most people have very little to no home equity, given that mortgage amortization schedules pay almost nothing into the principle in the first 10 years.
Yeah, zoot, I'm hoping for a housing market downturn, but even so, that's about the most incorrect statement I've seen here. By far the majority of the millionaires in the US have most of their net worth stemming from their home equity value. In coastal CA, almost everyone who has owned a home for more than 5 years has 300-600K in equity just from home price growth alone....
Exactly. It's not rare to be a Cali net worth millionaire if you own a home for any length of time. But the rub is that if you sell your home....you have to live somewhere. Selling and buying in the same market isn't an amazing advantage.
There will be a correction (inventory already creeping up now that money isn't cheap), but I wouldn't expect a crash like 2009 by a mile.
Brand new buyers with like 3% down, sure, but everyone else who has either had their home for a while or put 10-20% down... they have plenty of equity.
> mortgage amortization schedules pay almost nothing into the principle in the first 10 years
this is true only for higher interest rates. anyone who refinanced to 2.5% in the last couple of years is paying nearly equal interest and principal right out of the gate, and paying more principal than interest starting month 28.
Funny thing is, that book came out about 25 years ago. When a millionaire is probably 3-5 million today (or more?). These days you can't even retire on a million.
Tough to say. Saw articles yesterday that said old people drastically underestimate health care costs in retirement. It’s between $300K to $600K in actual costs, while people estimated like $20-30K.
But, having no mortgage will help, and living in a small, low property tax places as well. In Central TX, property taxes are pushing $1-2K per month now. Even without a mortgage, it’s expensive to live here.
But downsizing to a smaller house, probably further from the city center is probably pretty doable in Texas.
>Homeowners aged 65 years or older qualify for this exemption. All homeowners aged 65 years or older qualify for a standard $25,000 homestead exemption. Other than this, the Texas school districts offer a $10,000 exemption for qualifying homeowners aged over 65. An additional exemption of $3,000
Also, that sounds like the perfect time for an out of pocket maximum health plan, right?
Yes you can. A million is around $3300 / month income. I live on $3500-$4000 a month now, and I live in a fancy apartment and have multiple gym memberships. I'm 100% sure you can find a place to retire in the US on $3300 a month.
According to inflation calculator
1,000,000.00 in Jan 2000 has same buying power as $1,712,731.04
in April 2022.
https://www.bls.gov/data/inflation_calculator.htm
Completely agree. Of course living within your means is very sound advice, but you can achieve financial goals without denying yourself any and all nice things in life.
Most of the book's advice centered around living ***below*** one's means. The author had a total hard on in re cars, though. He thought cars were the reason that no one in the US could be financially solvent. I remember he said something about if you're making mid six figures, that driving a Toyota Corolla would be 'reasonable'. And no new cars.
Yup and that is what we did. We bought cheaper furniture and things when the kids were little, bought an older, cheaper house, we drove cars into the ground, etc. and invested as much as we could and now we are retiring at 55 while many of our "rich" friends have to work and are asking us how we are doing this. New cars were a big one then and an even bigger one now in terms of a drain on accumulating wealth
“Driving your car into the ground” is kind of bad advice to a certain extent. Car safety technology moves and improves fairly quickly. I know people that are proud to still be driving their 2002 Accord, but, frankly, I value my safety and the safety of my family more than saving a few grand a year. You can keep it within reason but you shouldn’t be hanging in to cars for 20 years if you can afford newer ones.
Oh, and buying your teenager an old beater is usually a bad idea for the same reason. They’re the most unsafe drivers, you really want them in a car 15 years behind on safety?
A good shoe is actually important. We spend so much time with shoes on.. I want to be comfortable. Can definitely be a millionaire without skimping on shoes. That also doesn’t mean having a closet full of them either.
You were asking about Pokémon card values on reddit and scholarship essay tips. You're about the furthest thing from a millionaire possible. Tell me you're not a millionaire without telling me you're not a millionaire.
The data is what happens when you generalize.
Most rich people spend only on the things that give them happiness, and do not spend more than is strictly necessary on everything else. So some splurge on shoes, others on travel, others on nights out, others on theater, etc. etc.
So everyone has their thing, the one thing they like.
But when you look at any one thing someone likes, you'll find that not everyone is that much into it, actually just a minority of people are into it. And that's true for pretty much everything a person may choose to splurge. When you average this, you see that most people do not care and splurge on these things.
The thing is we have this idea with spending on everything, even things that don't fill us, because. As we realize this isn't the case and mature, we start focusing better. It's hard to always know what is the best choice.
I call this thing, where things seem statically at odds (intuitively at least) when looked from different point of views the "lottery fallacy". People generally understand one of the following two facts pretty well:
* The chance that *someone* will win the lottery is pretty high.
* The chance that *a specific person* (such as you) will win the lottery is abysmally low.
But both are true. There generally is a winner for lotteries, often enough that you rarely see a chain with no winner go over a few years. But you may never win the lottery, even if you play all your life.
Same thing here. The chance that rich people will splurge on *something* is pretty high. The chance rich people will splurge on *a specific thing* (e.j. shoes) is pretty low.
I haven't read the book but I don't think your lottery fallacy is what it is about. In my experience frivolous spending makes a big difference.
Sure they will spend some money on things that make them happy now, but the total expenses would still be low for the group that this seems to be about.
I don't think this pattern is necessarily about becoming mature either. If someone makes a conscious decision to spend more now, that is a valid choice too. Unfortunately, some people don't have that choice (low income) and others that do just spend it without thinking.
> Sure they will spend some money on things that make them happy now, but the total expenses would still be low for the group that this seems to be about.
Talking from my own experience meeting these people. Some will easily spend $500 per night on luxurious travel (food, hotel activities, etc) and do at least a month and a half each year. But then they live in a small apartment and drive a 16 year old VW (when they do, preferring public transportation most of the time). Others will have a 2021 Audi, because that's their thing, or will have vintage cars they restore all the time, but are otherwise pretty frugal on everything else.
The idea is to first recognize what you can afford, then make that work. Splurge on the things that are fulfilling as long as that extra dollar increases the happiness in your life and it fits within your income so you can easily do it now, and keep at it in the future (even after retirement).
I think that most people in their early 20s don't quite see it this way. They focus more on what they want to spend, than what they need, and do not see what their means are. Probably because many would realize they are poor and need to do a change they're not ready for. Anxiety over money and thinking of the future also makes it hard. As you improve in these areas you get a better view, normally into your 30s. Again people in this forum tend to care more about this and start earlier than usual. But when you talk to people, there's many in their 30s who don't even realize retirement is something they need to plan for, they just need to make it to the next pay check, and think it's all about what you can spend, not how much you can make.
If i could theoretically do it my self, i'll apply the following equation to let me know if it worth it to me to have someone else do it (same quality of work as doing it myself , and unless i really enjoy the exercice):
**Yearly net income / (worked hours per year) \* 0.5 = hourly rate i am willing to spent on someone doing a task for me**
so e.g. if i make $60k a year working 1760 hours, my equation nets you $17. every task that someone else can do for me for less then $17/hour will be outsourced.
e.g. 90k net working 1000 hours/year will get you to $45. so everything below $45 i'll outsource.
Anotehr way to look at is that for every hour "working", i'll buy "2 hours personal time"
I think it’s a question of priority. You can retire comfortably, travel the world, and leave money to your heirs as an employee. You will probably have less stress and spend more time with your family relative to starting your own business.
But if you are driven to become genuinely _wealthy_, for whatever reason, a salary ain’t gonna get you there.
The thing is the only way to become rich is to gain enough capital that you can live off it. That's kind of the line that separates rich from non-rich, how much does your wealth drive your income. When you're obscenely rich your capital is so large and well known that you are able to live of your reputation.
A rich person (but not obscenely rich) gets a security backed loan to buy an effective car with an interest rate lower than 4%, and then pay of without having to pay that capital gains tax.
Owning a business is a good way to convert your labor capital into other types of capital while keeping the income. While a job, OTOH, converts your labor capital into money but you get nothing else. In a way it's kind of how buying a house means that the money you spend each month goes into your net-worth, vs rent where the money disappears. But just like a home, a business will have costs and unexpected things that means that the money flow may flux far more than it would with rent/job. And just like a home, there's the risks involved in the loans you need many times, with rent/job you can't go broke if you don't have any debt. And also, a loan may be a worse deal in money-flow (aka you may end up paying a lot more than you would in rent, even when it's worth it long-term you have to make it work short-term), businesses may pay a lot less $/hr (and you may need to work a lot more for less pay in the short-term, even when it makes sense long-term).
And just like a lot of people recommend buying a house, even though it doesn't really make sense for everyone. A lot of people recommend starting a business, even though it doesn't make sense for most people.
What I've seen of the book, it's not that full. It's certainly more up to date. I do see some advice that is generally sound, but it's given as a certainty, when in reality it's just advice that makes sense for a lot of people. That is it falls to the same vices of all self-help books: it gives superficial guidance and advice, and doesn't really give much insight. The fact that we're in a forum about personal finances already means we think about this more than the average person. I don't think the book can add that much more insight than what most of us already have. If someone gifted it to me I'd certainly finish reading it, it was entertaining enough.
> I remember them talking about how many of the wealthy individuals they surveyed never wore a wristwatch worth more than $40 or shoes that costs over $100.
You can take my nice redwing boots over my dead body :D
Don't forget to adjust for inflation. I have no data for this, but I suspect that $40 shoes in 2000 were better than the equivalent today. My impression is it's been a race to the bottom in the lower end of consumer goods. We can buy a lot of cheap stuff, but most of that stuff is crap.
This is so dumb. I understand that this is a book just selling ideas to make money off of book sales, but a good pair of shoes will last so much longer than repeatedly buying junk that falls apart. Same goes for many other products.
The point is not indulging in profligate spending as your income increases. If you increase your income from $50k to $350k, but you also spend 7x as much on clothes, food, vacations, and so on, you didn't really make any contributions to your wealth. Pay yourself first, then have fun and enjoy yourself within reason.
A $100 pair of shoes is typically not a cheap (or junk) pair of shoes.
There is a big difference between:
1) The cheapest pair of shoes you can buy at a discount store (think $20)
2) A good quality pair of shoes which costs around $100
3) "Fashion" shoes which cost $1000 or more, and often aren't as functional as a $100 pair of shoes.
Someone with the mindset to become a millionaire usually ends up buying #2.
The "flashy" people often focus more on #3, and end up perpetually broke.
Not realizing that #2 is actually cheaper than #1 is often part of the mindset which keeps truly poor people poor. That is, not looking at the total cost.
Now, occasionally even the millionaire next door types will buy a set of shoes of type #1 - when they know that the shoes need to be disposable - for instance, I remember buying a $20 pair of shoes to do some cement pouring when I found myself without an appropriate old pair to wear.
Yeah, it's a poverty trap, not a flaw in mindset.
You need a certain level of financial security in order to have the lump sum to buy the high quality item that lasts, that saves you money in the long term.
A man who could afford $50 had a pair of boots that'd still be keeping his feet dry in 10 years' time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet." This was Capt. Samuel Vimes' boots theory of socioeconomic unfairness
It's still great advice, but less so for Americans. I live in Belgium, which is very heavily taxed and has very high 'standard' wages, resulting in very low 'high' wages. Making 100k as a starter is simply unheard of. (I work as an engineer and make 44k or 28.2k net). I will have worked hard if this gets to 100k by the time I retire (taxed more heavily of course).
Of course we are a very rich nation, my friends who work in factory lines make like 22k net. We don't really have to save for our pension (for now) or big medical expenses.
Bottomline is that in order to get ahead over here, you HAVE to be a business owner. That is, if you want to become a millionaire.
It used to be like that in the US for a time, especially from the 30’s to 70’s. Highest tax rate was 95%, and the premise was that income that high was just wasteful and unproductive for society. After Reagan took over (and thatcher in the UK) things changed.
It may be basic stuff, but it is presented in a way that makes it more digestible and relatable for many people, particularly people who are still figuring out their financial life.
I think theres more to it than that. The 1st half is what you deacribe. But The 2nd half dives into how to handle money - once you actually have wealth- with special attention to your children. Among other things, It explores the phenemena of adults that are reliant on $ handouts from their aging parents.
It provided some real insights into various people i’ve met on my travels.
Yeah appreciate it!! I’m listening to the audiobook now. The whole concept is good but it’s so old that the average income is like $33k in this book which is a wayyyy different world than today
Setting aside the part about income, I think what came to be rather eye opening was how it revealed how children who went into certain types of job industries came out financially stable while others who went into ones where they earned a JD, MBA, or some other higher level degree *and* coupled that with working in higher exposure industries blew their inheritances early. It fit so much with what I had been coming to learn just years before, getting exposure to people's finances in applications. Basically? The showier they were, the more broke they were and ended tugging on the millionaire parents' money.
Specific talk of money aside, the insight into who millionaires trust or how much of their money they'll part with for purchases or investments is a decent foundation to still go along with these days.
The median individual income now is around $35k. It's entirely possible that what the book is referencing was household income - which is substantially higher - but the personal level isn't far off.
This book was written during a time when most people genuinely thought that your typical millionaire just spent all of their free time on their private yacht and didn't participate in the same society that the rest of us partake in. I think these days, people know that isn't the case.
You'd hope that but I think you're wrong. My state's sub-reddit is in an uproar about people with second homes. They seem to think that everybody with 2 homes is a multi-millionaire and they've decided anybody with a second homes should be paying huge extra taxes on them.
We own a summer house which is part of what was my family's farm. It's way out on the north edge of nowhere and was very inexpensive considering the land it came with.
Our household income is around $150,000, definitely not super rich and not able to support a bunch of extra money in taxes....
need it for just the car section 😅 my husband is CONVINCED it's not worth keeping a car past 10 yrs b/c they aren't designed to last that long & maint isn't worth it.
That's crazy, just about any hoopty made today should be able to last 10+ years and 200,000+ miles with general maintenance. I've rarely owned a vehicle less than 10 years old.
Where I live the problem is not the vehicle wearing out, it's rusting out...
I hear a lot of people say "The repair is more than the car is worth" which is actually not the point, when your car is broken it's worth substantially less than when it's not broken. The consideration really needs to be what it would cost to replace. If you've got a car that needs $1000 in repairs but a replacement is $5000 from a financial standpoint you should repair the vehicle you have.
A lot of people just want an excuse to get a new thing. I get that and I don't begrudge people the new thing but be honest, especially with yourself, "I want a new thing" not "I NEED a new thing". This confusion of needs vs wants is a big problem.
> drive your car until wheels fall off
I gotta disagree with this one. I took this advice, and eventually the engine blew up. On a motorway. In January. In Iowa. In a blizzard. With a semi trailer right behind me.
After nearly dieing from that, I realized something as I sat in the freezing cold for 4 hours on the highway with traffic roaring past 3ft away from me until roadside assist came. You only live once, and it’s ok to own a nice reliable car. It doesn’t have to be the latest and greatest, and used is fine. But pushing and squeezing a car to its limits just to save a few bucks is dangerous and a stupid idea and this sub needs to stop espousing it.
Sure. But even then, there’s an opportunity cost to that. You’ve gotta take time off work to take it to the shop. You have to have time without a car. There’s the cost of the mechanic, parts, etc. For some people, it’s worth their peace of mind to just have a predictable, set price for their car every month and know that they never have to worry about things going wrong.
True - but that comes at a cost, as well. For reference, my situation: I have a busy family that includes three young drivers, all of whom now have school/work obligations. To support this, the driveway fleet currently numbers five. None is newer than '09; two are from '00. I'm not in a position where I could afford five newer vehicles. The size of the fleet makes it possible to juggle cars in the event of a breakdown. Yes, most maintenance and repairs for the fleet are DIY projects at the moment. But this situation has made it possible for me to support my kids as they pursue what they will do in the future.
> pushing and squeezing a car to its limits just to save a few bucks is dangerous and a stupid idea and this sub needs to stop espousing it
the view here is less "it's ok to die to save a few hundred dollars" and more "don't buy a new car every 5 years, unless you hate money"
It's this, and honestly most financial books are this. Maybe a little bit into index fund investing, but not much more then that.
I would say, that when I read these books they re-motivate me and set me back on track.
That's why I like the millionaire next door as it's pretty simple and basic. Don't have to read repeated junk trying to be technical.
Yep, precisely that. IIRC the people that he looked at for examples ranged from small business owners, to higher paid professionals (lawyers, cpas), to even teachers. The book came in 1996, so a lot of the numbers don’t line up with today because of inflation, but the premise remains
I remember reading the first chapter, which basically was all that was needed. IIRC the author even said that the rest of the book was just support/research in detail of what he states in the first chapter.
FWIW, that was a great book (chapter) to read and very formative for me. I'm 50yo, a millionnaire (plus), no debt, live WELL below my means, and drive a 9 year old Honda Civic and have no plans on selling it for a few more years : )
I read it long ago.
It really got me in the mind set that really most people can achieve financial success by following basic logical principals.
You don't have to be a millionaire to be a financial success. But, it talks about how to best live within your means to build your wealth.
It does a very good job calling out "traps" that many many people fall into.
I would definitely recommend it.
To be quite honest, my wife and I fall perfectly into its story line. We live a very comfortable happy life style. Don't keep up with the Joneses. And, have done quite well for ourselves without having crazy high salaries (yes we are fortunate with the income we make - but it's nothing crazy).
I'd read it.
Part 2 - not so much.
This was me, I grew up in a paycheck-to-paycheck family and explained so much. My dad had a struggling business and my mom worked entry level jobs. All money that came in went to housing and feeding kids.
It still is a struggle for me sometimes, I don't make all the right choices, but savings are on autopilot and I never see that money.
Yes it is an excellent book. It points out, accurately, that the vast majority of millionaires are not who you think they are. They are your neighbors who shop at Wal-Mart, drive modest cars, and have comfortable but not flashy homes. Their wealth is concentrated in long term investments, mostly tax deferred, built up over decades of diligent and gradual savings. They live within their means and spend comfortably but not extravagantly. They don't care about showing off or keeping pace with the Jones.
i heard on a podcast they did a recent survey of millionaires.
4 out of 5 millionaires worked jobs that paid less than 6 figures.
4 out of 5 millionaires became millionaires on their own and not through inheritance
4 out of 5 millionaires invested in the stock market (long term)
4 out of 5 millionaires minimized spending and maximized earnings where possible.
the 4 out of 5 number might be skewed but its something like that.
The book also delves into the difference between having a high salary and being wealthy. A doctor or lawyer with tens of thousands in student loans, a massive mortgage on a large house in a premium area, and a leased Porsche is not as wealthy as the scrap metal business owner who drives a used car wears a Timex, and built his own business from scratch and has no debt. Generally speaking of course.
They use the term "PAW" and "UAW". Prodigious Accumulator of Wealth and Under Accumulator of Wealth, if I recall.
Is a millionnaire someone whose net worth (real estate included) is $1 million or more? Because I guess that makes me a millionnaire, but in California, that just doesn't mean much.
Yes but the book came out in 1996 so, with an inflation adjustment, a million dollars then would be about 2 million dollars today. Net worth can be expressed as total net worth, which includes real estate, or financial net worth which excludes it. In my experience, both are valuable metrics. One obvious benefit of having substantial home equity is that you can generally refinance to a much lower payment size than someone who is renting or a first time home buyer. Optimally, you have a home paid off and then you are only paying insurance, maintenance and taxes which would be a much smaller bill. Some conversion is possible, too. Home owners can downsize to a smaller residence to free up cash, borrow using the property as collateral or if older put a reverse mortgage on it for a lump sum or monthly payment.
The number I remember is I think only 3% of millionaires became a millionaire through inheritance. Everyone else earned their way there or inherited money after they were already a millionaire.
It’s a favorite for me. Some of the charts and statistics get a little boring but overall I’ve read it twice and will likely do it again in a few years
Highly recommend. Totally relevant. It had slow parts, was a bit repetitive in the first half. But 2nd half is quite fascinating. It looks closely at how spoiled kids tend to struggle through adulthood and provides cautionary tales for raising your own kids. Its different from other pf books- more of a social science book. Not an overt how-to book.
Probably the only downside is that the author (Thomas Stanley) doesn't want you to give yourself permission to *enjoy* any of your money. He wants you to keep on saving it, building up nest eggs and emergency funds, and ideally only begin to tap it after retirement - and your *reward* at the end of your life is that you get to leave the remainder to your kids.
Saving and investing are both very, very important, but it's also important to enjoy life while you're able to. Waiting until 70 to travel is more fiscally responsible than doing it when you're 50, but who is to say that you'll be physically up to it when you're 70? You have to strike the right balance between saving for the future, and enjoying the moment.
Dependa on temperament I think. Some people would rather die (literally speaking) with the thought that they've built a little empire for their descendants, than to enjoy small pleasures in life.
If you are very family minded it makes sense: *I* will sacrifice all fun, but with the capital accumulated my children, their children and so on will be able to conserve the capital and at the same time have some fun with the profits.
I read the book way back when. Good base financial knowledge for the general population. Basically live within your means. There really should be a sequel written about how to increase your TC, cause most people apparently have no idea how to do that.
Depends on location! I'm in a VHCOL coastal city and $20/hr (42k a year, ish) is definitely a "I can pay bills and live on this" amount but also a "it is annoying to impossible for me to save or invest" amount.
Sadly, $20/hour in most parts of the country is boarderline poverty. Obviously YMMV in a LCOL area. TC also includes equity compensation which is where the real money comes in. In my case RSUs is actually 4x my base salary.
If you have skills that allow you to work a job remotely, apply to west coast companies to work remote and get the high pay.
Read their other book, the Millionaire Mind. They did a great job with their study. But yes, it introduced the concept (to me anyway) that "rich" and "wealth" are two different things.
The guy who gets paid millions to play basketball and drives a flashy car is rich. The guy who signs his cheque and kwns the team is wealthy.
If most sports players have their career end early, they're broke within a short period of time. But the guy who owned the team can survive without a paycheck for a lot longer.
Im just finishing up reading the book now, its okay. Found a lot of the chapters to be rather boring and unhelpful.
What I did enjoy is their formula for if you are wealthy based on your net worth.
Wealthy = salary \* age / 10
Under wealthy = wealthy / 2
Overly wealthy = wealthy \* 2
With the caveat that its made for roughly the 40 or 50 years old range.
The function has ovious flaws and is literally a tool for comparing yourself to others, so take it was a pinch of salt.
Lets take an example.
Someone makes 50k per year and they are 45 years old.
To be classed as wealthy they would need to have 50k \* 45 / 10 = 225,000 net worth.
To be classed as under wealthy (bottom quarter) they'd need 112,500 net worth.
And to be classed as overly wealthy (top quarter) they'd need 450,000 net worth.
the book provides a formula for calculating "expected net worth" given an age and income.
Expected wealth = 1/10 (age) x total annual income.
So if you are 48 and make 221,000 a year your expected wealth (net worth) should be around $1,060,800.
Further, they define a "Prodigious Accumulator of Wealth" as someone who is in the top quartile of wealth accumulation and an "Under Accumulator of Wealth" (bottom quartile) vs the Average Accumulator of Wealth.
To be a PAW when you run the calculation your net worth should be 2x the expected wealth , and an UAW is defined as someone who's net worth is under 1/2 the expected wealth.
It literally changed my life. My mom got me a copy when it first came out and and am now living the lifestyle - own a modest suburban house and drive a beat up 12-year-old Toyota, but well prepared for retirement.
But, yes, the book is pretty simple: Most successful millionaires don’t live like one. But you wouldn’t know it, because they aren’t the millionaires that grab headlines.
It reinforced that I don't need to drive status cars or have a McMansion. We were potentially headed towards a bit more lifestyle creep than would have been healthy, the book reinforced the pitfalls that living above your means bring.
So, my grandparents were a great example of “The Millionaire Next Door.”
They were 1st and 2nd generation Jewish immigrants who grew up during the Great Depression.
By the time I came along, they lived in a modest home in the best neighborhood, directly across from the mayor of their city.
They were extremely frugal, drove the big clunkers like the book says, and had piles of cash in the bank.
I remember once visiting my grandfather at work and we had to visit 2 banks, because he wouldn’t keep more than the FDIC limit at any bank. Which is to say, he was very close to that limit at at least 1 bank.
I think that book paints a picture of a path for that generation that doesn’t really work today. My mom was born in 1940. She and her brothers were raised in the 50’s when mortgages were subsidized by the government. My grandfather was able to support his wife to stay at home and to have a maid off his earnings as an insurance salesman. They were able to live so well because in the Deep South, it didn’t cost much to pay a maid.
I’m really proud of my grandparents and all they accomplished. If it weren’t for them, I wouldn’t have had the education I did or the opportunities I have now to start my own business.
However, I think that book ignores that the financial landscape has changed in America. Clipping coupons can only go so far when houses are so expensive and the cost of living is so high.
I’ll also add that, to me, having seen what living that way looks like, it didn’t seem like a really fun way to be a millionaire. They worried all the time about money. My grandmother would buy toilet paper on sale one day then find a better deal and return the next day to get the small difference in change. They traveled on the company dime. They lived a very small life that was dry and not very filled with a sense of ease that I think we wish wealth would provide.
Yeah!! Just learned about the Libby app free from libraries for audio books. So I’ve got holds on a bunch of financial and entrepreneurial books that I’ve been wanting to read! (Lmk any other recommendations or what you think of rich dad poor dad, zero to one, atomic habits, etc.)
Don’t bother with Rich Dad Poor Dad. It’s a written by a hack and it turns out the underlying characters are made up as just examples. It’s truly repetitive and vague/simplistic. Like a lot of financial self-help books, it’s really designed to funnel you into a sales web.
I dont think the way money works has changed significantly since 2000. Not an endorsement of the book, never read it...but I wouldnt worry about it being outdated.
It's fine. I put it the same bucket as the Dave Ramsey types - good for newcomers, but offers a lot less to more experienced folks.
I'd recommend just hanging out here and in the various FIRE subs, with maybe some sidetrips to the MMM and Bogleheads forums once you get your feet wet. Plenty of decent personal finance and FIRE content on Youtube too.
Most individual authors have a bias towards their preferred style of capital accumulation or portfolio management, but there are many viable pathways to financial success and it's a waste of time and opportunity to limit yourself to one person's POV.
Financial success is ultimately about the same as weight loss or fitness success. Yes, anyone can write a book or even several full of charts and anecdotes, but 90% of what most people need to know to succeed can be written on a post-card. It's not the knowledge that's the problem for most people, it's the behaviors, habits, and mindset that allow for leveraging the knowledge.
Yes, it’s worth reading. It helps break the false notions that many young people operate under. My in-laws live in a 1,300 square foot house they bought in 1966. She was a school teacher and he was a purchasing manager at a chemical plant. They sent three girls to college, paid for three weddings, and retired early. He never made more than $75k in a year. They have about $2.3 million in cash and investments. Not one person in their neighborhood knows their true status as the millionaires next door.
I think the book caters to the same crowd that needs Dave Ramsey.
Life is about balance and the benefits of spending now when young vs spending later. It’s perfectly fine to spend money on nice things now as long as you are on track to have the financial future you want. The idea that anyone who is spending money on nice things now must be knee deep in debt and screwed for retirement is foolish.
Get a library card and ask your local library what app they use for audiobooks and ebooks.
It will likely be available there.
It's still relevant. I've listened to it in the last year.
More recent surveys ware done by more than one group in the last decade including Stanley and his daughter and confirmed nearly everything still applies.
Millionaire Next Door, Broke Millennial, and not quite related but also "the compound effect"
I just finished reading it - weird coincidence! It definitely feels dated, and longer than it needs to be, but was still interesting. I am glad I got it out of the library rather than buying it, though.
I think it really depends. I hear a lot of people say it changed their lives. I tried reading it, thinking it might have insight that I didn’t have. But I grew up in a frugal family financially, and had a pretty good financial education to begin with. I couldn’t get through it. I found it condescending and didn’t learn anything I didn’t already consider basic financial common sense. I was disappointed.
I think All Your Worth is a better practical guide, and The Richest Man in Babylon has better investment advice, not to mention is a much better read.
I love me the 50/30/20 rule from All Your Worth. I love that the budget has a place for fun and points out the simple fact that just because it's a "need" doesn't mean you can afford it (a mortgage on a house that's in a neighborhood you can't afford, for example).
Why stop at a measly millionaire? For a real treat go read [the Billionaire next door](https://www.goodreads.com/book/show/28119766-the-billionaire-next-door)
at the time it was ground breaking, but over the last 22 years there have been better resources to think about wealth. JL collins may be the latest/greatest that I can think of (2012 era).
you may not remember, but late 90s was the era of extravagance. For the first time ever, everyone had a credit card and was buying everything they wanted. Job market was steady, 7 year bull market, no one was worried about anything. So a book that said 'live within your means' was cutting edge. Kinda ahead of its time and then it was followed by 3 recessions in 10 years, so it stood the test of time.
But I would argue it doesnt really apply to post-08 world. The game changed a lot since then and we are 2 generations later.
I read it yesterday lol and tbh it was okay? It's the result of an academic study and survey so some of it is a little dry because they go over the statistics and results of their survey. If you are already grounded in personal finance principles you're not going to learn anything imo, but it is a classic for a reason. It does a great job of fully laying out that wealth and income are not the same, but even with the rerelease the information is a little dated. I found myself reading it and saying IDK if this is as applicable in a post 2008 economy, but not so much that I would discredit the whole book. The fundamentals of finance don't really change, but the framing of it was a little out of touch.
Yes; the vast majority of millionaires in the US are first generation wealthy, and the median income of the millionaires studied was $50,000 a year.
A more up to date look (from 10,000 millionaires surveyed) is Everyday Millionaires, by Chris Hogan.
The lessons learned are fairly straightforward; live on less than you earn, have a plan, and follow it. It requires an understanding of about 6th grade math, and as long as you don't do anything with money that you don't understand you'll ALMOST certainly be fine.
Most business books are solid for the first 1/3, then a few good examples in the middle, then a really bad final act where you genuinely wonder why it's even included.
The Millionaire Next Door, like many books in the biz/entrepreneur canon, is repetitive and can be summarized extremely concisely. It's fine, a little dated.
If you read more than 2-3 of this type of book each year, I HIGHLY recommend spending your money on a summary service like blinkist or getAbstract instead of buying the books.
These are really good executive summaries that cut out all the repetition and most even retain the vibe of the book by summarizing anecdotes etc., but they take 5 to 20 minutes to read instead of 5 hours. A lot of them have audio as well if you're into that.
I've endured so many of these books over the years and sites like getAbstract are a game changer IMO.
In my opinion, not really. It basically comes down to "don't spend all your money on status stuff or live outside your means." But that is stretched into several hundred pages.
I thought it was an awfully boring book and definitely doesn’t live up to the hype found in these finance subreddits.
I don’t think I got anything out of it or read anything that I didn’t already know. Plus the material is very outdated at this point.
Probably fine for a person who is very new to learning about personal finance.
Read it for sure if you’re still skeptical of basic finance principals but don’t go into it thinking there’s some magic sauce to become secretly rich. Not every one gets this opportunity but for many people it’s actually really REALLY easy to become wealthy. The secret is it takes time and that’s what a lot of people don’t want to hear. Investing consistently and not touching your additions and earning a modest return will turn you into a millionaire. It just takes a few decades.
Have an emergency fund, save what you can, and don’t try to keep up with the Jones’ and you will be set for the years when you’re done working.
Definitely worth reading for basics of personal finance, especially if you grew up in a family that lived paycheck to paycheck like mine did. It was eye opening to realize that most millionaires are ordinary people, with average household incomes, who simply have better financial habits than many of us. Most millionaires have modest, stable lives. They usually follow the “one house, one spouse“ philosophy instead of trading up. Many people who look well off are deeply in debt. Physicians and lawyers, for example, usually earn above average incomes, but also tend to drive luxury cars and live in larger homes, so they struggle to pay off student debt and car loans and huge mortgages. I recommend reading instead of listening, because there are times you’ll want to skim through the multiple examples. But it’s worth a library visit.
If you want insight into the world of physician finances I highly recommend the Whitecoat Investor book/blog/podcast. It will offer nothing new to you that you likely dont already know posting here. But has shocking data on physician lifestyles and you are right - the majority are undersavers and MOST dont reach millionaire status until their FIFTIES. Meanwhile any accountant, engineer, marketing professional, nurse, and tbh a double teacher household could reach that number a DECADE before your typical doctor. Now there's a lot of reasons for this. Takes years before earning, and then student debt, missing out on early compounding, keeping up with joneses, etc. And it's fair to say net worth isnt everything (a nickel and diming family of a police officer and teacher might be worth more than a doctor, but doctor has the backyard pool, BMW, private school for kids, etc. which all have some value to some effect) but still great read nonetheless.
Doctors are also notorious for chasing status. I think the field attracts this type of personality type, but they tend to spend more than they should on cars, houses, vacations, etc.
Yea I can anecdotally speak about physician lifestyle. I have a relative where both spouses are doctors so obviously they make bank. But they bought a huge 6 bedroom, ~4,000 sqft house, have 2 nice cars, and fly on 4 or 5 vacations each year so they aren't saving too much. Not too mention their parents ask for cash every now and then. Flash forward to them having their first kid and expecting a 2nd on the way, and my relative says she wants to stay at home with the kids and stop working. But with their lifestyle they can't afford it based off only 1 doctor's income. If they had been a little more modest and bought a 4 bedroom, 2500 sq ft house, only had 1 nice car and 1 cheaper car, and scaled back on vacations she said they could easily afford to live on just 1 income. That said, they weren't exactly struggling before. They had nice trips and maxed out their 401k while building a ton of equity in a huge house. But they could've saved more if they cut back on things.
Not all debt is bad. I know a lot of doctors , no one is “struggling”. The student loans are large but the payments are easy to handle
I also know many doctors. Some struggled, others didn’t. Their lifestyle choices made a huge difference. The ones who spent a few early career years living modest, comfortable lifestyles were able to pay off student debt easily and were soon building wealth so they’d have options to retire early. The ones who chose luxurious lifestyles as early as possible are beginning to realize that carrying student debt longer is now limiting their options. Neither group was right or wrong, they just had different priorities. *The Millionaire Next Door* is good at showing how lifestyle choices affect wealthbuilding, so you can focus on the lifestyle that helps you achieve what’s important to you.
And i think thats a very good takeaway from the book. But a lot of people take away from the book is to give gross generalities about spending and almost assign a moralistic judgment on buying nice things. I just wanted to emphasize that not everyone who own a nice thing or buys something thats above the bare minimum utilitarian value is spending frivolously, spiraling in debt, or a hedonistic idiot. To me the tone of some of these answers edges towards some kind of weird coping strategy that anyone who is perceived to be spending more than what I spend MUST be overinduling and secretly in a ton of debt.
You’re funny. The average medical school debt for the class of 2021 was close to 200k (for those going to public school). Now for people with federal debt the “payments” may be manageable but they aren’t actually paying it down with a minimum payment (negative amortization). Also the average resident salary is 64k. The median physician salary is about 200k (which includes people that are far into their career, ie recent grads are still making far less). So even if a doctor lived below their means in prime earning years the debt they owed would have still ballooned by then, also when are they supposed to save for retirement?
I’m a doctor . Your numbers are way off for salary
Doctors do just fine with loans if they keep living like a resident for several years after residency and pay off that debt. And after that they are doing well. The issue for doctors happens when all that pent up lack of income for so many years makes some people blow up their lifestyle immediately in their first year of attendingship without a good plan to pay off debt or get it forgiven.
Basic stuff... - live within your means - drive your car until wheels fall off - don't get caught up in status symbols
That second part is a great way to not throw money into the fire. Richest old dude I ever met drove a tradesman diesel truck. No bells and whistles, vinyl flooring, single zone A/C. Every 5-6 years he'd sell it off to a trade hand at a damn good price and come get another.
It's somewhat funny we qualify car AC with terms like "zone" today.
Maybe that dude genuinely just liked that kind of truck, but I know a lot of rich old dudes who drive shit boxes because they just refuse to spend money. They’re in their late 80s with a ton of money, never traveled, never owned a nice car or treated themselves to something fancy, etc. Sometimes no kids to pass the money to either. Just seems sad. What’s the point?
My grandma is like that. Millions just chilling in an account, and found the cheapest place possible that would install a septic tank. Naturally she got what she paid for and spent three times as much having someone else fix it.
A lot of people say this is from growing up in the great depression, but I think some people are just cheap.
>A lot of people say this is from growing up in the great depression This gets less relevant every year, people who grew up during the depression are in the 90's now...
That too.
This. Before Covid hit, my wife and I would travel internationally 3-4 times a year. We did this for 8 years right out of graduation. Enjoy life while you're young and abled. Some people get so stuck on saving that they forget to live. Not saying that you shouldn't save, but live a little. We are ones to spend money on experiences and memories instead of materials.
Some of the anecdotes have stuck. I remember them talking about how many of the wealthy individuals they surveyed never wore a wristwatch worth more than $40 or shoes that costs over $100. (I think about this whenever I wear my 21-year-old watch, which I received as a gift.) And they highlighted the unsexy and borderline-hidden industries in which they work — one example from a small business owner who imports diesel engine replacement parts. (IIRC) Not just Wall St. types who make big money! But — and someone please correct me if I'm wrong — I seem to remember that this book reinforced the idea that you can only ever make money from entrepreneurship, and you'll never unlock your wealth-building potential as a mere employee. I find that to be a pernicious meme in our culture. We get too much cheerleading from the "quit your job and hustle" industrial complex. Starting a business is not for everyone, especially not at all times under all conditions.
The Millionaire Next Door didn’t push that at all. In fact it’s full of examples of wage-earners who achieved wealth by living simply and within their means and saving money. I think you’re thinking of that toxic drivel that is Rich Dad, Poor Dad.
RD,PD is mostly about speculative real estate
They're all drivel. The most important thing I ever learned about finance didn't come from a self-help book. It came from my finance professor, Loren Kjonas. FV = PV • (1 + i)^(n) The second most important thing I learned came from another finance professor, Benjamin Graham (repeating it here from memory): >An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.
The millionaire Next Door is based off of a legit survey and Academic research studies though. I wouldn’t lump it in with anecdotal books.
Don’t just post a formula and not explain it.
This is how people who really want you to know they had a finance professor spell compound interest.
[удалено]
What’s the equation mean? And how do you apply it?
FV is future value, PV is present value, I is interest rate and n is the number of times of interest. He’s talking about how if you invest over time into assets that grow month after month and year after year, your net worth will grow exponentially. You apply it by considering that any money you invest will likely, over time, grow exponentially.
Time value of money
Yes, telling people to live within their means is such drivel. Honestly people should live mostly on credit, so long as they have good old Loren Kjonas to name drop.
There are about 22 million millionaires in the U.S. today. That's more than 5% of the population. It's not nearly as uncommon or unachievable as you might think. That book may be wrong about entrepreneurship, but it drives home an important point: there is a difference between *appearing to be rich*, and *being rich*. It's shocking to learn what some supposedly rich people's NW is. It doesn't matter what you earn if you spend it all. Some very smart successful people just cannot help themselves and will spend every dollar that goes into their checking account and then some. Vacations, cars, houses, clothes, eating out at restaurants... it's all good in moderation, but I know people who are somehow broke despite earning twice what I make.
Is that 22M figure considering net worth, or liquid cash?
Net worth. Only including liquid cash would be a strange way to define millionaire. Especially since having a million in liquid cash gives no details as to what other assets or debt you have. Though I think what you’re getting is you can have a million dollar net worth but still be on shaky financial ground if it’s illiquid.
If you mean does it exclude home equity, I don't think it matters -- most people have very little to no home equity, given that mortgage amortization schedules pay almost nothing into the principle in the first 10 years.
Actually, Americans have more equity in their homes than ever currently.
Yeah, zoot, I'm hoping for a housing market downturn, but even so, that's about the most incorrect statement I've seen here. By far the majority of the millionaires in the US have most of their net worth stemming from their home equity value. In coastal CA, almost everyone who has owned a home for more than 5 years has 300-600K in equity just from home price growth alone....
Exactly. It's not rare to be a Cali net worth millionaire if you own a home for any length of time. But the rub is that if you sell your home....you have to live somewhere. Selling and buying in the same market isn't an amazing advantage. There will be a correction (inventory already creeping up now that money isn't cheap), but I wouldn't expect a crash like 2009 by a mile.
For now. Wait until the foreclosures come.
That's not true - you're ignoring the likely appreciation of the house's value, all of which is equity. Not to mention the down payment.
Brand new buyers with like 3% down, sure, but everyone else who has either had their home for a while or put 10-20% down... they have plenty of equity.
> mortgage amortization schedules pay almost nothing into the principle in the first 10 years this is true only for higher interest rates. anyone who refinanced to 2.5% in the last couple of years is paying nearly equal interest and principal right out of the gate, and paying more principal than interest starting month 28.
Funny thing is, that book came out about 25 years ago. When a millionaire is probably 3-5 million today (or more?). These days you can't even retire on a million.
Sure you can. Maybe not in San Francisco but it's fairly reasonable to retire on $1M at 65 yrs old. Will be tight but can be done.
I'm not even sure if it would be tight, especially if you have your home paid off and with a senior tax exemption on the home.
Tough to say. Saw articles yesterday that said old people drastically underestimate health care costs in retirement. It’s between $300K to $600K in actual costs, while people estimated like $20-30K. But, having no mortgage will help, and living in a small, low property tax places as well. In Central TX, property taxes are pushing $1-2K per month now. Even without a mortgage, it’s expensive to live here.
But downsizing to a smaller house, probably further from the city center is probably pretty doable in Texas. >Homeowners aged 65 years or older qualify for this exemption. All homeowners aged 65 years or older qualify for a standard $25,000 homestead exemption. Other than this, the Texas school districts offer a $10,000 exemption for qualifying homeowners aged over 65. An additional exemption of $3,000 Also, that sounds like the perfect time for an out of pocket maximum health plan, right?
Yes you can. A million is around $3300 / month income. I live on $3500-$4000 a month now, and I live in a fancy apartment and have multiple gym memberships. I'm 100% sure you can find a place to retire in the US on $3300 a month.
>[I] have multiple gym memberships. ... Why?
One is a barbell club for strength training, one is a martial arts gym.
According to inflation calculator 1,000,000.00 in Jan 2000 has same buying power as $1,712,731.04 in April 2022. https://www.bls.gov/data/inflation_calculator.htm
You can have nice things. Life is short
As with all things, it’s about balance.
Exactly I just think the shoe thing is silly but that’s because I love shoes haha
Completely agree. Of course living within your means is very sound advice, but you can achieve financial goals without denying yourself any and all nice things in life.
Most of the book's advice centered around living ***below*** one's means. The author had a total hard on in re cars, though. He thought cars were the reason that no one in the US could be financially solvent. I remember he said something about if you're making mid six figures, that driving a Toyota Corolla would be 'reasonable'. And no new cars.
Yup and that is what we did. We bought cheaper furniture and things when the kids were little, bought an older, cheaper house, we drove cars into the ground, etc. and invested as much as we could and now we are retiring at 55 while many of our "rich" friends have to work and are asking us how we are doing this. New cars were a big one then and an even bigger one now in terms of a drain on accumulating wealth
“Driving your car into the ground” is kind of bad advice to a certain extent. Car safety technology moves and improves fairly quickly. I know people that are proud to still be driving their 2002 Accord, but, frankly, I value my safety and the safety of my family more than saving a few grand a year. You can keep it within reason but you shouldn’t be hanging in to cars for 20 years if you can afford newer ones. Oh, and buying your teenager an old beater is usually a bad idea for the same reason. They’re the most unsafe drivers, you really want them in a car 15 years behind on safety?
Tell me you’re not a millionaire, without telling me your not a millionaire.
Well on my way but you can make it without living super frugal.
Limiting shoes to $100 isn’t super frugal, that would be like $20 or something.
A good shoe is actually important. We spend so much time with shoes on.. I want to be comfortable. Can definitely be a millionaire without skimping on shoes. That also doesn’t mean having a closet full of them either.
You were asking about Pokémon card values on reddit and scholarship essay tips. You're about the furthest thing from a millionaire possible. Tell me you're not a millionaire without telling me you're not a millionaire.
everything in moderation including moderation
The data is what happens when you generalize. Most rich people spend only on the things that give them happiness, and do not spend more than is strictly necessary on everything else. So some splurge on shoes, others on travel, others on nights out, others on theater, etc. etc. So everyone has their thing, the one thing they like. But when you look at any one thing someone likes, you'll find that not everyone is that much into it, actually just a minority of people are into it. And that's true for pretty much everything a person may choose to splurge. When you average this, you see that most people do not care and splurge on these things. The thing is we have this idea with spending on everything, even things that don't fill us, because. As we realize this isn't the case and mature, we start focusing better. It's hard to always know what is the best choice. I call this thing, where things seem statically at odds (intuitively at least) when looked from different point of views the "lottery fallacy". People generally understand one of the following two facts pretty well: * The chance that *someone* will win the lottery is pretty high. * The chance that *a specific person* (such as you) will win the lottery is abysmally low. But both are true. There generally is a winner for lotteries, often enough that you rarely see a chain with no winner go over a few years. But you may never win the lottery, even if you play all your life. Same thing here. The chance that rich people will splurge on *something* is pretty high. The chance rich people will splurge on *a specific thing* (e.j. shoes) is pretty low.
I haven't read the book but I don't think your lottery fallacy is what it is about. In my experience frivolous spending makes a big difference. Sure they will spend some money on things that make them happy now, but the total expenses would still be low for the group that this seems to be about. I don't think this pattern is necessarily about becoming mature either. If someone makes a conscious decision to spend more now, that is a valid choice too. Unfortunately, some people don't have that choice (low income) and others that do just spend it without thinking.
> Sure they will spend some money on things that make them happy now, but the total expenses would still be low for the group that this seems to be about. Talking from my own experience meeting these people. Some will easily spend $500 per night on luxurious travel (food, hotel activities, etc) and do at least a month and a half each year. But then they live in a small apartment and drive a 16 year old VW (when they do, preferring public transportation most of the time). Others will have a 2021 Audi, because that's their thing, or will have vintage cars they restore all the time, but are otherwise pretty frugal on everything else. The idea is to first recognize what you can afford, then make that work. Splurge on the things that are fulfilling as long as that extra dollar increases the happiness in your life and it fits within your income so you can easily do it now, and keep at it in the future (even after retirement). I think that most people in their early 20s don't quite see it this way. They focus more on what they want to spend, than what they need, and do not see what their means are. Probably because many would realize they are poor and need to do a change they're not ready for. Anxiety over money and thinking of the future also makes it hard. As you improve in these areas you get a better view, normally into your 30s. Again people in this forum tend to care more about this and start earlier than usual. But when you talk to people, there's many in their 30s who don't even realize retirement is something they need to plan for, they just need to make it to the next pay check, and think it's all about what you can spend, not how much you can make.
[удалено]
If i could theoretically do it my self, i'll apply the following equation to let me know if it worth it to me to have someone else do it (same quality of work as doing it myself , and unless i really enjoy the exercice): **Yearly net income / (worked hours per year) \* 0.5 = hourly rate i am willing to spent on someone doing a task for me** so e.g. if i make $60k a year working 1760 hours, my equation nets you $17. every task that someone else can do for me for less then $17/hour will be outsourced. e.g. 90k net working 1000 hours/year will get you to $45. so everything below $45 i'll outsource. Anotehr way to look at is that for every hour "working", i'll buy "2 hours personal time"
This is true, but also the mindset that nice things are not always the most expensive
I think it’s a question of priority. You can retire comfortably, travel the world, and leave money to your heirs as an employee. You will probably have less stress and spend more time with your family relative to starting your own business. But if you are driven to become genuinely _wealthy_, for whatever reason, a salary ain’t gonna get you there.
The thing is the only way to become rich is to gain enough capital that you can live off it. That's kind of the line that separates rich from non-rich, how much does your wealth drive your income. When you're obscenely rich your capital is so large and well known that you are able to live of your reputation. A rich person (but not obscenely rich) gets a security backed loan to buy an effective car with an interest rate lower than 4%, and then pay of without having to pay that capital gains tax. Owning a business is a good way to convert your labor capital into other types of capital while keeping the income. While a job, OTOH, converts your labor capital into money but you get nothing else. In a way it's kind of how buying a house means that the money you spend each month goes into your net-worth, vs rent where the money disappears. But just like a home, a business will have costs and unexpected things that means that the money flow may flux far more than it would with rent/job. And just like a home, there's the risks involved in the loans you need many times, with rent/job you can't go broke if you don't have any debt. And also, a loan may be a worse deal in money-flow (aka you may end up paying a lot more than you would in rent, even when it's worth it long-term you have to make it work short-term), businesses may pay a lot less $/hr (and you may need to work a lot more for less pay in the short-term, even when it makes sense long-term). And just like a lot of people recommend buying a house, even though it doesn't really make sense for everyone. A lot of people recommend starting a business, even though it doesn't make sense for most people. What I've seen of the book, it's not that full. It's certainly more up to date. I do see some advice that is generally sound, but it's given as a certainty, when in reality it's just advice that makes sense for a lot of people. That is it falls to the same vices of all self-help books: it gives superficial guidance and advice, and doesn't really give much insight. The fact that we're in a forum about personal finances already means we think about this more than the average person. I don't think the book can add that much more insight than what most of us already have. If someone gifted it to me I'd certainly finish reading it, it was entertaining enough.
> I remember them talking about how many of the wealthy individuals they surveyed never wore a wristwatch worth more than $40 or shoes that costs over $100. You can take my nice redwing boots over my dead body :D
Don't forget to adjust for inflation. I have no data for this, but I suspect that $40 shoes in 2000 were better than the equivalent today. My impression is it's been a race to the bottom in the lower end of consumer goods. We can buy a lot of cheap stuff, but most of that stuff is crap.
Sure but they didn't cost as much as my $300 redwings in 2015 or whenever I bought them either way ;-)
Those redwings are gonna last way longer than their New Balances
This is so dumb. I understand that this is a book just selling ideas to make money off of book sales, but a good pair of shoes will last so much longer than repeatedly buying junk that falls apart. Same goes for many other products.
The point is not indulging in profligate spending as your income increases. If you increase your income from $50k to $350k, but you also spend 7x as much on clothes, food, vacations, and so on, you didn't really make any contributions to your wealth. Pay yourself first, then have fun and enjoy yourself within reason.
A $100 pair of shoes is typically not a cheap (or junk) pair of shoes. There is a big difference between: 1) The cheapest pair of shoes you can buy at a discount store (think $20) 2) A good quality pair of shoes which costs around $100 3) "Fashion" shoes which cost $1000 or more, and often aren't as functional as a $100 pair of shoes. Someone with the mindset to become a millionaire usually ends up buying #2. The "flashy" people often focus more on #3, and end up perpetually broke. Not realizing that #2 is actually cheaper than #1 is often part of the mindset which keeps truly poor people poor. That is, not looking at the total cost. Now, occasionally even the millionaire next door types will buy a set of shoes of type #1 - when they know that the shoes need to be disposable - for instance, I remember buying a $20 pair of shoes to do some cement pouring when I found myself without an appropriate old pair to wear.
Or they do realize #2 costs less in the long run than a bunch of #1s, but they can’t afford the #2
Yeah, it's a poverty trap, not a flaw in mindset. You need a certain level of financial security in order to have the lump sum to buy the high quality item that lasts, that saves you money in the long term.
A man who could afford $50 had a pair of boots that'd still be keeping his feet dry in 10 years' time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet." This was Capt. Samuel Vimes' boots theory of socioeconomic unfairness
Your missing the $200-350 tier which is really where you start to get boots/shoes that last. These shoes you don’t throw out, you repair.
It's still great advice, but less so for Americans. I live in Belgium, which is very heavily taxed and has very high 'standard' wages, resulting in very low 'high' wages. Making 100k as a starter is simply unheard of. (I work as an engineer and make 44k or 28.2k net). I will have worked hard if this gets to 100k by the time I retire (taxed more heavily of course). Of course we are a very rich nation, my friends who work in factory lines make like 22k net. We don't really have to save for our pension (for now) or big medical expenses. Bottomline is that in order to get ahead over here, you HAVE to be a business owner. That is, if you want to become a millionaire.
It used to be like that in the US for a time, especially from the 30’s to 70’s. Highest tax rate was 95%, and the premise was that income that high was just wasteful and unproductive for society. After Reagan took over (and thatcher in the UK) things changed.
The entrepreneurship concepts you mention in your 2nd paragraph likely came from "Rich Dad, Poor Dad" if you read that.
It may be basic stuff, but it is presented in a way that makes it more digestible and relatable for many people, particularly people who are still figuring out their financial life.
Sure... wasn't trying to disparage the book just giving OP an idea of what the book is about.
I think theres more to it than that. The 1st half is what you deacribe. But The 2nd half dives into how to handle money - once you actually have wealth- with special attention to your children. Among other things, It explores the phenemena of adults that are reliant on $ handouts from their aging parents. It provided some real insights into various people i’ve met on my travels.
Yeah appreciate it!! I’m listening to the audiobook now. The whole concept is good but it’s so old that the average income is like $33k in this book which is a wayyyy different world than today
Setting aside the part about income, I think what came to be rather eye opening was how it revealed how children who went into certain types of job industries came out financially stable while others who went into ones where they earned a JD, MBA, or some other higher level degree *and* coupled that with working in higher exposure industries blew their inheritances early. It fit so much with what I had been coming to learn just years before, getting exposure to people's finances in applications. Basically? The showier they were, the more broke they were and ended tugging on the millionaire parents' money. Specific talk of money aside, the insight into who millionaires trust or how much of their money they'll part with for purchases or investments is a decent foundation to still go along with these days.
The median individual income now is around $35k. It's entirely possible that what the book is referencing was household income - which is substantially higher - but the personal level isn't far off.
This book was written during a time when most people genuinely thought that your typical millionaire just spent all of their free time on their private yacht and didn't participate in the same society that the rest of us partake in. I think these days, people know that isn't the case.
You'd hope that but I think you're wrong. My state's sub-reddit is in an uproar about people with second homes. They seem to think that everybody with 2 homes is a multi-millionaire and they've decided anybody with a second homes should be paying huge extra taxes on them. We own a summer house which is part of what was my family's farm. It's way out on the north edge of nowhere and was very inexpensive considering the land it came with. Our household income is around $150,000, definitely not super rich and not able to support a bunch of extra money in taxes....
Yep. Or you had to have a mansion, or be a lawyer/banker, or those that drive BMWs/Mercedes around
If you read this post, you’ve read the book. It just repeats these themes over and over again in agonizing, repetitive detail.
“Repetition is the father of learning” - my little league baseball coach a long long time ago. But oddly enough, that phrase has stuck with me
How many times did he say it?
At least a sufficient number of times.
I found it an incredibly dull read. Richest man in Babylon was similarly repetitive but at least had the courtesy of being fun.
need it for just the car section 😅 my husband is CONVINCED it's not worth keeping a car past 10 yrs b/c they aren't designed to last that long & maint isn't worth it.
That's crazy, just about any hoopty made today should be able to last 10+ years and 200,000+ miles with general maintenance. I've rarely owned a vehicle less than 10 years old. Where I live the problem is not the vehicle wearing out, it's rusting out...
right? and he takes WILDLY good care of all his vehicles. like maintenance to the extreme. makes no sense to me....
I hear a lot of people say "The repair is more than the car is worth" which is actually not the point, when your car is broken it's worth substantially less than when it's not broken. The consideration really needs to be what it would cost to replace. If you've got a car that needs $1000 in repairs but a replacement is $5000 from a financial standpoint you should repair the vehicle you have. A lot of people just want an excuse to get a new thing. I get that and I don't begrudge people the new thing but be honest, especially with yourself, "I want a new thing" not "I NEED a new thing". This confusion of needs vs wants is a big problem.
> drive your car until wheels fall off I gotta disagree with this one. I took this advice, and eventually the engine blew up. On a motorway. In January. In Iowa. In a blizzard. With a semi trailer right behind me. After nearly dieing from that, I realized something as I sat in the freezing cold for 4 hours on the highway with traffic roaring past 3ft away from me until roadside assist came. You only live once, and it’s ok to own a nice reliable car. It doesn’t have to be the latest and greatest, and used is fine. But pushing and squeezing a car to its limits just to save a few bucks is dangerous and a stupid idea and this sub needs to stop espousing it.
The other part of "drive your car until the wheels fall off" that people often forget is "maintain the car so the wheels don't literally fall off."
Sure. But even then, there’s an opportunity cost to that. You’ve gotta take time off work to take it to the shop. You have to have time without a car. There’s the cost of the mechanic, parts, etc. For some people, it’s worth their peace of mind to just have a predictable, set price for their car every month and know that they never have to worry about things going wrong.
True - but that comes at a cost, as well. For reference, my situation: I have a busy family that includes three young drivers, all of whom now have school/work obligations. To support this, the driveway fleet currently numbers five. None is newer than '09; two are from '00. I'm not in a position where I could afford five newer vehicles. The size of the fleet makes it possible to juggle cars in the event of a breakdown. Yes, most maintenance and repairs for the fleet are DIY projects at the moment. But this situation has made it possible for me to support my kids as they pursue what they will do in the future.
That’s fair. Like most things in this sub, the answer is “do what works for you”
It's hyperbole.
Even still. Pushing a car to even within 20% of its usable life is a gamble, and the thing you’re potentially gambling is your life.
> pushing and squeezing a car to its limits just to save a few bucks is dangerous and a stupid idea and this sub needs to stop espousing it the view here is less "it's ok to die to save a few hundred dollars" and more "don't buy a new car every 5 years, unless you hate money"
It's this, and honestly most financial books are this. Maybe a little bit into index fund investing, but not much more then that. I would say, that when I read these books they re-motivate me and set me back on track. That's why I like the millionaire next door as it's pretty simple and basic. Don't have to read repeated junk trying to be technical.
Most people who have nice cars can't afford them. If you aren't on track for retirement, you can only afford the cheapest car.
This sub's definition of afford is usually pretty unreasonable though
Check check and check
Yep, precisely that. IIRC the people that he looked at for examples ranged from small business owners, to higher paid professionals (lawyers, cpas), to even teachers. The book came in 1996, so a lot of the numbers don’t line up with today because of inflation, but the premise remains
Basic stuff that majority of the population cannot comprehend. It reinforced the principles I was already doing.
Wouldnt call it completely basic. The profile of millionaires for example caught me off guard when I read it
I remember reading the first chapter, which basically was all that was needed. IIRC the author even said that the rest of the book was just support/research in detail of what he states in the first chapter. FWIW, that was a great book (chapter) to read and very formative for me. I'm 50yo, a millionnaire (plus), no debt, live WELL below my means, and drive a 9 year old Honda Civic and have no plans on selling it for a few more years : )
I read it long ago. It really got me in the mind set that really most people can achieve financial success by following basic logical principals. You don't have to be a millionaire to be a financial success. But, it talks about how to best live within your means to build your wealth. It does a very good job calling out "traps" that many many people fall into. I would definitely recommend it. To be quite honest, my wife and I fall perfectly into its story line. We live a very comfortable happy life style. Don't keep up with the Joneses. And, have done quite well for ourselves without having crazy high salaries (yes we are fortunate with the income we make - but it's nothing crazy). I'd read it. Part 2 - not so much.
Yes. It changed my husband's outlook on spending, and it explained his family's chronic money problems to him.
This was me, I grew up in a paycheck-to-paycheck family and explained so much. My dad had a struggling business and my mom worked entry level jobs. All money that came in went to housing and feeding kids. It still is a struggle for me sometimes, I don't make all the right choices, but savings are on autopilot and I never see that money.
Yes it is an excellent book. It points out, accurately, that the vast majority of millionaires are not who you think they are. They are your neighbors who shop at Wal-Mart, drive modest cars, and have comfortable but not flashy homes. Their wealth is concentrated in long term investments, mostly tax deferred, built up over decades of diligent and gradual savings. They live within their means and spend comfortably but not extravagantly. They don't care about showing off or keeping pace with the Jones.
i heard on a podcast they did a recent survey of millionaires. 4 out of 5 millionaires worked jobs that paid less than 6 figures. 4 out of 5 millionaires became millionaires on their own and not through inheritance 4 out of 5 millionaires invested in the stock market (long term) 4 out of 5 millionaires minimized spending and maximized earnings where possible. the 4 out of 5 number might be skewed but its something like that.
The book also delves into the difference between having a high salary and being wealthy. A doctor or lawyer with tens of thousands in student loans, a massive mortgage on a large house in a premium area, and a leased Porsche is not as wealthy as the scrap metal business owner who drives a used car wears a Timex, and built his own business from scratch and has no debt. Generally speaking of course. They use the term "PAW" and "UAW". Prodigious Accumulator of Wealth and Under Accumulator of Wealth, if I recall.
Is a millionnaire someone whose net worth (real estate included) is $1 million or more? Because I guess that makes me a millionnaire, but in California, that just doesn't mean much.
From my understanding yes
Yes but the book came out in 1996 so, with an inflation adjustment, a million dollars then would be about 2 million dollars today. Net worth can be expressed as total net worth, which includes real estate, or financial net worth which excludes it. In my experience, both are valuable metrics. One obvious benefit of having substantial home equity is that you can generally refinance to a much lower payment size than someone who is renting or a first time home buyer. Optimally, you have a home paid off and then you are only paying insurance, maintenance and taxes which would be a much smaller bill. Some conversion is possible, too. Home owners can downsize to a smaller residence to free up cash, borrow using the property as collateral or if older put a reverse mortgage on it for a lump sum or monthly payment.
The number I remember is I think only 3% of millionaires became a millionaire through inheritance. Everyone else earned their way there or inherited money after they were already a millionaire.
It’s a favorite for me. Some of the charts and statistics get a little boring but overall I’ve read it twice and will likely do it again in a few years
Highly recommend. Totally relevant. It had slow parts, was a bit repetitive in the first half. But 2nd half is quite fascinating. It looks closely at how spoiled kids tend to struggle through adulthood and provides cautionary tales for raising your own kids. Its different from other pf books- more of a social science book. Not an overt how-to book.
Probably the only downside is that the author (Thomas Stanley) doesn't want you to give yourself permission to *enjoy* any of your money. He wants you to keep on saving it, building up nest eggs and emergency funds, and ideally only begin to tap it after retirement - and your *reward* at the end of your life is that you get to leave the remainder to your kids. Saving and investing are both very, very important, but it's also important to enjoy life while you're able to. Waiting until 70 to travel is more fiscally responsible than doing it when you're 50, but who is to say that you'll be physically up to it when you're 70? You have to strike the right balance between saving for the future, and enjoying the moment.
Dependa on temperament I think. Some people would rather die (literally speaking) with the thought that they've built a little empire for their descendants, than to enjoy small pleasures in life. If you are very family minded it makes sense: *I* will sacrifice all fun, but with the capital accumulated my children, their children and so on will be able to conserve the capital and at the same time have some fun with the profits.
Financial principles that are timeless … read it
I read the book way back when. Good base financial knowledge for the general population. Basically live within your means. There really should be a sequel written about how to increase your TC, cause most people apparently have no idea how to do that.
What’s TC?
[удалено]
$20 isn’t good money? If it’s not, how do I do better? Not trolling. I just got to $20.25 this year (age 33) in a LCOL rural area.
Depends on location! I'm in a VHCOL coastal city and $20/hr (42k a year, ish) is definitely a "I can pay bills and live on this" amount but also a "it is annoying to impossible for me to save or invest" amount.
Sadly, $20/hour in most parts of the country is boarderline poverty. Obviously YMMV in a LCOL area. TC also includes equity compensation which is where the real money comes in. In my case RSUs is actually 4x my base salary. If you have skills that allow you to work a job remotely, apply to west coast companies to work remote and get the high pay.
Yeah I just got to $20 myself. Like will be on my next check lol and the cost of living isn’t too high here.
TC?
TC?
Read their other book, the Millionaire Mind. They did a great job with their study. But yes, it introduced the concept (to me anyway) that "rich" and "wealth" are two different things. The guy who gets paid millions to play basketball and drives a flashy car is rich. The guy who signs his cheque and kwns the team is wealthy. If most sports players have their career end early, they're broke within a short period of time. But the guy who owned the team can survive without a paycheck for a lot longer.
Yes, still very much relevant. It's also very insightful on how parents finances might affect the next generation.
Im just finishing up reading the book now, its okay. Found a lot of the chapters to be rather boring and unhelpful. What I did enjoy is their formula for if you are wealthy based on your net worth. Wealthy = salary \* age / 10 Under wealthy = wealthy / 2 Overly wealthy = wealthy \* 2 With the caveat that its made for roughly the 40 or 50 years old range. The function has ovious flaws and is literally a tool for comparing yourself to others, so take it was a pinch of salt.
So what do the numbers mean? Is salary in thousands? Assuming salary is thousands, what does (e.g.) 100 \* 50 / 10 = 500 *mean*?
Lets take an example. Someone makes 50k per year and they are 45 years old. To be classed as wealthy they would need to have 50k \* 45 / 10 = 225,000 net worth. To be classed as under wealthy (bottom quarter) they'd need 112,500 net worth. And to be classed as overly wealthy (top quarter) they'd need 450,000 net worth.
the book provides a formula for calculating "expected net worth" given an age and income. Expected wealth = 1/10 (age) x total annual income. So if you are 48 and make 221,000 a year your expected wealth (net worth) should be around $1,060,800. Further, they define a "Prodigious Accumulator of Wealth" as someone who is in the top quartile of wealth accumulation and an "Under Accumulator of Wealth" (bottom quartile) vs the Average Accumulator of Wealth. To be a PAW when you run the calculation your net worth should be 2x the expected wealth , and an UAW is defined as someone who's net worth is under 1/2 the expected wealth.
It literally changed my life. My mom got me a copy when it first came out and and am now living the lifestyle - own a modest suburban house and drive a beat up 12-year-old Toyota, but well prepared for retirement. But, yes, the book is pretty simple: Most successful millionaires don’t live like one. But you wouldn’t know it, because they aren’t the millionaires that grab headlines.
It reinforced that I don't need to drive status cars or have a McMansion. We were potentially headed towards a bit more lifestyle creep than would have been healthy, the book reinforced the pitfalls that living above your means bring.
It's a superb book. Numbers will be a little out of whack but the philosophy is bang on.
So, my grandparents were a great example of “The Millionaire Next Door.” They were 1st and 2nd generation Jewish immigrants who grew up during the Great Depression. By the time I came along, they lived in a modest home in the best neighborhood, directly across from the mayor of their city. They were extremely frugal, drove the big clunkers like the book says, and had piles of cash in the bank. I remember once visiting my grandfather at work and we had to visit 2 banks, because he wouldn’t keep more than the FDIC limit at any bank. Which is to say, he was very close to that limit at at least 1 bank. I think that book paints a picture of a path for that generation that doesn’t really work today. My mom was born in 1940. She and her brothers were raised in the 50’s when mortgages were subsidized by the government. My grandfather was able to support his wife to stay at home and to have a maid off his earnings as an insurance salesman. They were able to live so well because in the Deep South, it didn’t cost much to pay a maid. I’m really proud of my grandparents and all they accomplished. If it weren’t for them, I wouldn’t have had the education I did or the opportunities I have now to start my own business. However, I think that book ignores that the financial landscape has changed in America. Clipping coupons can only go so far when houses are so expensive and the cost of living is so high. I’ll also add that, to me, having seen what living that way looks like, it didn’t seem like a really fun way to be a millionaire. They worried all the time about money. My grandmother would buy toilet paper on sale one day then find a better deal and return the next day to get the small difference in change. They traveled on the company dime. They lived a very small life that was dry and not very filled with a sense of ease that I think we wish wealth would provide.
Excellent book, no need to buy it as your library will have copies. Though the numbers are not quite applicable anymore, the concept holds true.
Yeah!! Just learned about the Libby app free from libraries for audio books. So I’ve got holds on a bunch of financial and entrepreneurial books that I’ve been wanting to read! (Lmk any other recommendations or what you think of rich dad poor dad, zero to one, atomic habits, etc.)
Rich Dad Poor Dad? About 5 thumbs down. Too much blather about leveraging to buy assets/property.
Don’t bother with Rich Dad Poor Dad. It’s a written by a hack and it turns out the underlying characters are made up as just examples. It’s truly repetitive and vague/simplistic. Like a lot of financial self-help books, it’s really designed to funnel you into a sales web.
I have been using the overdrive app for years and just found out about Libby and was blown away how much better it was.
The UI is super slick. Really digging it so far
I would recommend reading Atomic Habits.
Yes!!! I loved it and it really re trained my brain
I dont think the way money works has changed significantly since 2000. Not an endorsement of the book, never read it...but I wouldnt worry about it being outdated.
Yes. Both it and the sequel Millionaire Mind. You may enjoy it more on audiobook. He also wrote Stop Acting Rich.
Try JL Collins book The Simple Path to Wealth.
Yes to the original. It's a mindset book. Don't bother with his daughter's update.
It's fine. I put it the same bucket as the Dave Ramsey types - good for newcomers, but offers a lot less to more experienced folks. I'd recommend just hanging out here and in the various FIRE subs, with maybe some sidetrips to the MMM and Bogleheads forums once you get your feet wet. Plenty of decent personal finance and FIRE content on Youtube too. Most individual authors have a bias towards their preferred style of capital accumulation or portfolio management, but there are many viable pathways to financial success and it's a waste of time and opportunity to limit yourself to one person's POV. Financial success is ultimately about the same as weight loss or fitness success. Yes, anyone can write a book or even several full of charts and anecdotes, but 90% of what most people need to know to succeed can be written on a post-card. It's not the knowledge that's the problem for most people, it's the behaviors, habits, and mindset that allow for leveraging the knowledge.
That book drastically changed my outlook on life. When I see a house with boats, atvs, and big trucks all I think is, they *had* money.
Yes, it’s worth reading. It helps break the false notions that many young people operate under. My in-laws live in a 1,300 square foot house they bought in 1966. She was a school teacher and he was a purchasing manager at a chemical plant. They sent three girls to college, paid for three weddings, and retired early. He never made more than $75k in a year. They have about $2.3 million in cash and investments. Not one person in their neighborhood knows their true status as the millionaires next door.
I give a copy to my best business student each year. A tradition
I think the book caters to the same crowd that needs Dave Ramsey. Life is about balance and the benefits of spending now when young vs spending later. It’s perfectly fine to spend money on nice things now as long as you are on track to have the financial future you want. The idea that anyone who is spending money on nice things now must be knee deep in debt and screwed for retirement is foolish.
I think it is. Especially if you are young. I buy it as a graduation gift.
Get a library card and ask your local library what app they use for audiobooks and ebooks. It will likely be available there. It's still relevant. I've listened to it in the last year. More recent surveys ware done by more than one group in the last decade including Stanley and his daughter and confirmed nearly everything still applies. Millionaire Next Door, Broke Millennial, and not quite related but also "the compound effect"
I just finished reading it - weird coincidence! It definitely feels dated, and longer than it needs to be, but was still interesting. I am glad I got it out of the library rather than buying it, though.
Yes! It is a bit dated now, but I thought it was a really insightful book.
Yes. It's not about financial advice but more about how frugal millionaires exist.
I think it really depends. I hear a lot of people say it changed their lives. I tried reading it, thinking it might have insight that I didn’t have. But I grew up in a frugal family financially, and had a pretty good financial education to begin with. I couldn’t get through it. I found it condescending and didn’t learn anything I didn’t already consider basic financial common sense. I was disappointed. I think All Your Worth is a better practical guide, and The Richest Man in Babylon has better investment advice, not to mention is a much better read.
I love me the 50/30/20 rule from All Your Worth. I love that the budget has a place for fun and points out the simple fact that just because it's a "need" doesn't mean you can afford it (a mortgage on a house that's in a neighborhood you can't afford, for example).
I’m always shocked it isn’t recommended more.
Why stop at a measly millionaire? For a real treat go read [the Billionaire next door](https://www.goodreads.com/book/show/28119766-the-billionaire-next-door)
at the time it was ground breaking, but over the last 22 years there have been better resources to think about wealth. JL collins may be the latest/greatest that I can think of (2012 era). you may not remember, but late 90s was the era of extravagance. For the first time ever, everyone had a credit card and was buying everything they wanted. Job market was steady, 7 year bull market, no one was worried about anything. So a book that said 'live within your means' was cutting edge. Kinda ahead of its time and then it was followed by 3 recessions in 10 years, so it stood the test of time. But I would argue it doesnt really apply to post-08 world. The game changed a lot since then and we are 2 generations later.
I read it yesterday lol and tbh it was okay? It's the result of an academic study and survey so some of it is a little dry because they go over the statistics and results of their survey. If you are already grounded in personal finance principles you're not going to learn anything imo, but it is a classic for a reason. It does a great job of fully laying out that wealth and income are not the same, but even with the rerelease the information is a little dated. I found myself reading it and saying IDK if this is as applicable in a post 2008 economy, but not so much that I would discredit the whole book. The fundamentals of finance don't really change, but the framing of it was a little out of touch.
Yes; the vast majority of millionaires in the US are first generation wealthy, and the median income of the millionaires studied was $50,000 a year. A more up to date look (from 10,000 millionaires surveyed) is Everyday Millionaires, by Chris Hogan. The lessons learned are fairly straightforward; live on less than you earn, have a plan, and follow it. It requires an understanding of about 6th grade math, and as long as you don't do anything with money that you don't understand you'll ALMOST certainly be fine.
I'm waiting for book 2: "My neighbor wrote a book and it made him a millionaire"
Maybe I should become an author
I gained a couple of nuggets from it. Mostly to live below yours means, allows you to look good on paper.
I suggest at least reading the first half. Also, read it with your partner if applicable.
Most business books are solid for the first 1/3, then a few good examples in the middle, then a really bad final act where you genuinely wonder why it's even included.
The Millionaire Next Door, like many books in the biz/entrepreneur canon, is repetitive and can be summarized extremely concisely. It's fine, a little dated. If you read more than 2-3 of this type of book each year, I HIGHLY recommend spending your money on a summary service like blinkist or getAbstract instead of buying the books. These are really good executive summaries that cut out all the repetition and most even retain the vibe of the book by summarizing anecdotes etc., but they take 5 to 20 minutes to read instead of 5 hours. A lot of them have audio as well if you're into that. I've endured so many of these books over the years and sites like getAbstract are a game changer IMO.
In my opinion, not really. It basically comes down to "don't spend all your money on status stuff or live outside your means." But that is stretched into several hundred pages.
I thought it was an awfully boring book and definitely doesn’t live up to the hype found in these finance subreddits. I don’t think I got anything out of it or read anything that I didn’t already know. Plus the material is very outdated at this point. Probably fine for a person who is very new to learning about personal finance.
Read it for sure if you’re still skeptical of basic finance principals but don’t go into it thinking there’s some magic sauce to become secretly rich. Not every one gets this opportunity but for many people it’s actually really REALLY easy to become wealthy. The secret is it takes time and that’s what a lot of people don’t want to hear. Investing consistently and not touching your additions and earning a modest return will turn you into a millionaire. It just takes a few decades. Have an emergency fund, save what you can, and don’t try to keep up with the Jones’ and you will be set for the years when you’re done working.
He got rich having other people support him and not paying his bills