I recently wrote a post about personal finance books you should read, and The Millionaire Next Door was on there. It was one of the first personal finance based books I ever read, and I really enjoyed it. It is based on years of research into the lives of millionaires, and is not a book to teach you how to become one. It also features a lot of case studies, which are particularly interesting.
At the start of the book, the common traits of millionaires are broken down into these 7:
- The live below their means
- They allocate their time, energy, and money efficiently, in ways conducive to building wealth.
- They believe that financial independence is more important than displaying high social status.
- Their parents did not provide economic outpatient care (they’re not supported financially by their parents)
- Their adult children are economically self-sufficient.
- They are proficient in targeting market opportunities.
- They chose the right occupation.
The book aims to crush the myths surrounding millionaires, and how many of them have these traits above. Living below their means is an interesting one, as the general perception of being a millionaire is to flash your cash, so to speak. The majority of people who keep their wealth do just the opposite, as this book explores. Although the entire chapter about driving an older car does drag a bit as the point is made quite early on.
It’s also interesting to read about how many of them are not from wealthy families, nor do they support their own families in financial terms. Most of them with adult children have ensured their children are money confident, without giving them lots of disposable cash. I always assumed that if you were a millionaire, you’d also give your children lots of money without them having to ask for it. Interesting that it doesn’t appear to be the case!
A lot of the case studies feature families, as apposed to individuals. Perhaps because it’s easier to become a millionaire in a multi-income household? However, it does focus on the point that you need to share your life with someone who shares the same values as you. If one person in your household wants to buy fancy cars, over priced material possessions and is more frivolous with money, then accumulating wealth will be much harder to do.
One of the downsides to The Millionaire Next Door, I feel, as a younger person, is that the sample households interviewed are all well into middle age. It almost dismisses the younger generation as a matter of fact. It focuses on people who have had quite a long time to put all of these ideals into practice, rather than focus on the immediate steps you could take to get there.
However, it is an interesting read and one that I keep going back to, for motivation and also to reaffirm that slow and steady does win the race. Living below your means and not buying in excess does pay dividends (literally!) in the years to come. If you want to look at real life examples and more about the path to accumulating wealth quietly, that I do recommend The Millionaire Next Door.
Have you read it? What did you think?
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