Book Notes: The Millionaire Next Door by Thomas J. Stanley and William D. Danko

Why The Millionaire Next Door

Notes on the Millionaire Next door by Thomas Stanley and a book reviewYeah, “why did you read this one Ian?” -> This one is obvious.

When I picked up this book, I did it because to become a millionaire I figured I might as well know what millionaires are like.

Truth is I don’t know any millionaires.

I know people who are wealthy. Perhaps the sum total of the houses they own would amount to a million dollars. But when I think millionaires, I think people with yatchs and helicopters and people who donate lots of money to political parties and stuff like that.

When I examine this, I realized that this is not a very well founded perspective and if I was really to make a drive towards becoming a millionaire, I should really understand what a millionaire is.

Anyway, I got to rebuild a steel awning in the Gold Coast and listen to this book. Though my notes where sparse at times, when I wasn’t cutting giant pieces of steel and carrying around heavy, hot metal, I was taking notes and internalizing the lessons from this book….

Reading Notes for The Millionaire Next Door

Less than $15,000 is the median net worth of Americans

80% of America’s rich are first generation rich

7 common denominators of wealthy people 
1. they live way below their means
2. They allocate their time, energy and money efficiently in ways conducive to building wealth.
3. They believe that financial independence is more important than displaying high status
4. Their parents did not provide economic outpatient care
5. Their adult children are economically self-sufficient
6. They are proficient at targeting market opportunities
7. They chose the right occupation
UAW – Under Accumulators of wealth
AAW – Average Accumulators of wealth
PAW – Proficient Accumulators of Wealth

This book is the study of what distinguishes these people

Russian ancestry Americans make up 5 percent of American wealth. They are the highest per capital wealth holders in the USA by ancestry. Scottish to exhibit high levels of per capita ratio millionaires.

The higher population of an ancestry group, the lower the probability that they will have a high millionaire per capita ratio.

Self-employment is a major positive correlate to wealth

Immigrants are often hard working entrepreneurs who accumulate wealth. Their children are raised to have better lives than them. They are less productive as they down more time in college and come out with a sense of need for the finer things. This is why America needs more immigrants.

So funny. For the first Deca millionaire study, they brought out caviar and vintage wine. The Deca millionaires didn’t touch it. One said, in response to the offer of wine, “I drink scotch, and two types of beer; free and Budweiser”
The researchers liked the caviar an pâté, but the millionaires didn’t touch them.

There words that profile the affluent: frugal, frugal, frugal

Frugal – behavior characterized by or reflecting economy in the use of resources

Being frugal is the cornerstone of wealth building.

Millionaires understand:

The typical millionaire has less than 7% of his wealth in realized revenue

The more one spends, the more they must realize. The more they realize, the more they must allocate for income taxes. Millionaires and those heading that direction follow an important rule

To build wealth, minimize your realized income and maximize your unrealized income.

Income tax is the largest expense for many Americans.

Is your goal to be financially independent?

It takes planning and sacrificing.

Your plan should be to sacrifice consumption spending today for independence tomorrow.

Earning $100,000 is necessary for buying a $68,000 boat. Millionaires tend to think this way.

Another rule:
If you’re not yet wealthy, but want to be someday, never purchase a home that requires a mortgage that is more than twice your total annualized income. 

Operating a household without a budget is akin to operating a business without a plan or goals.

Most politicians don’t understand the difference between targeting those with high income and those with a large amount of wealth

Millionaires spend most of their investing time (which is often 8 hours per month) planning and studying their specific investment strategies

Dr. North vs. Dr. South

It’s easier to accumulate wealth if dont live in a high status neighborhood.

3:56:0 – going to sleep

You can’t tell a millionaire by the car they drive

Think about the price per pound of your car

The jeep grand Cherokee is the most common millionaire car

Seeds are like dollars, you can eat them or you can watch them grow

Intellect is what you sell when you’re in business. A wealthy Jewish man said who had fled Nazi Germany. They can take everything, but it is a persons intellect which is so powerful and will rebuild their wealth.

Many 1st gen millionaires are entrepreneurs. Their success stems from living very frugally and constantly working  on their businesses. Luck is often involved.

Dull normal businesses are the ones that most wealthy people own (sandblasting contractor, building material sales, specialty advertising distributor)

The most successful entrepreneurs that we have interviewed have one characteristic in common: they all enjoy what they do. All take pride in going at it alone.

Mind you 3/4ths of millionaires in the study owned their own business.

My overall take away from The Millionaire Next Door

First off… Frugality. Millionaires are frugal.

Secondly, millionaires are probably not even  perceptible. In fact, there is a good chance that I might know millionaires and not be aware of it because they act frugally.

Now, I’m not sure if this is correct or not. I perceive many people that have lots and lots of wealth but perhaps they are just big spenders. I think this is possible… but to me it’s about being frugal and saving money so that you can use it to create assets that earn income that isn’t subject to income tax.

Finally, I don’t know if being a millionaire is something to specifically strive for. I mean, If I had 40,000 I could live quite happily for a good amount of years in Bali or Panama. Many of these millionaires are crippled by what to do with all their money when they get old. Seems like a good problem to have, you might say…. Well, I’d rather have a beautiful orchard + ranch and spend on nice parties as I grow older rather than have to banter with lawyers over how to split up my fortune with a bunch of needy people trying to pick it to pieces.

The Millionaire Next Door was a Great Book and I Hope You Gleamed Value From the Above Notes

If you go to Audible  through this link you can get a free copy of this book and listen to it while you rip metal buildings apart.

Of course, Amazon will send a copy of the book to your door. All you have to do is order it by clicking through this link.

 

2 Replies to “Book Notes: The Millionaire Next Door by Thomas J. Stanley and William D. Danko”

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