At my mother’s suggestion, I listened to the abridged version (144 minutes) of The Millionaire Next Door by Thomas Stanley and William D. Danko (published 1998) rather than the 18-hour version. In some ways, it still was too long. You get the main idea from the beginning.
Since, like most people, I wouldn’t mind being a millionaire, I found it interesting that those with million-dollar salaries (sports figures, etc.) are rarely millionaires: although they live a “high life,” they have very little “wealth.” In other words, millionaires don’t live the lifestyles we might think we’d want to live if we earned a high income.
The premise of this book is that lifestyle that makes a difference to whether or not one becomes a millionaire (one with lots of wealth), and anyone making $60,000 a year can become a millionaire by adjusting lifestyle.
Here are the common factors that millionaires (those who “successfully build wealth”) share (I’ve merged those that I think relate).
1 and 3: They live well below their means and they believe financial independence is more important than displaying social status.
Obviously, living well below one’s means is easier to do with a high income. But even with a high income, most millionaires function on a well-thought-out budget. Most millionaires also live in a house in an average neighborhood, drive a four-year-old used car, shop at Sears and Penney’s (not Saks Fifth Avenue and Nordstrom), and live unassuming lives. Most millionaires only wear suits they purchased at a discount and eat low-cost food (rather than expensive wine).
2: They allocate their time, energy, and money efficiently, in ways conducive to building wealth.
For example, they do not waste time “playing the stock market” but carefully figure out what they know about and invest in that. Here’s another example that they didn’t give but that I assume: they don’t waste their time and money with the lottery or gambling.
4: Their parents did not provide economic outpatient care (i.e., parents did not provide substantial cash gifts to their children).
Hmmm. No help from parents? Darn.
5: Their adult children are economically self-sufficient.
In other words, they know what they do to live frugally and were able to teach frugality; they’re kids don’t expect to live a high lifestyle, funded by their parents.
6 and 7: They are proficient in targeting market opportunities and they choose the right occupation.
I didn’t actually pay much attention to these sections—it was the end of two hours of listening and it was getting boring by now (like I said, an abridged version is enough). But obviously, some occupations have more promise than others (although I think it’s also important that one chooses an occupation that he or she enjoys).
In all, I enjoyed this reminder that a high income and winning the lottery are not guarantees to wealth: slow and steady wins the race. Maybe there is hope for the rest of us!