The Millionaire Next Door
Thomas Stanley was a professor who taught at the University of Albany, University of Tennessee, University of Georgia, and Georgia State University. During his lifetime he wrote seven books, most of which dealt with the wealthy in America. More than 3 million copies of his books were sold around the world before he passed away in 2015.
William Danko is now an emeritus professor at the University of Albany. He co-wrote The Millionaire Next Door, which has spent more than 3 years on the New York Times bestseller list. He also wrote a book, Richer Than A Millionaire, that was released in 2017. He lives in New York currently with his family.
My biggest takeaway from this book is that financial gifts aren’t as helpful as most people want to think. Parents generally think that those who are in trouble may benefit from financial help, but it can cause those who receive the gifts to depend on them, thus reducing the amount of income they focus on bringing in themselves since they count on the gifts as part of their income. Instead, the authors say to invest in their children’s learning. Whether that be through formal education or through coaches, etc. it is much better in the long run.
The numbers they used in this book were really fascinating, and they helped me get a rough idea of what I should be doing, more or less. For example, the authors said that everybody should be saving 15-20% of their paychecks to be able to invest. They also said to invest in non-liquid assets such as real estate with that money. Another interesting statistic that they shared is that most “millionaires” drive cars that are extremely frugal and aren’t necessarily the latest model. They focus on practicality, not on how things make them look.
The other main point is one that many of us need to be remind of: Live Within Your Means. The book talks about many cases where people go out and create situations that their future self will have to clean up, even though they currently know that they shouldn’t do it. Whether it be going into large amounts of debt for a nice car that will provide no value or investment or going on a family vacation that we cannot afford. I have fallen into that a couple of times, and every time I enjoy it in the present, but suffer long-term because of it.
I have been blessed to have parents who are able to help me financially, but who also have not done so frequently. They have made me realize the value of hard work and not looking for handouts, and this has really helped shape me as a person. As I have my own children in the future I will look to do the same for them. Everything that I have purchased or achieved with my own money I have valued MUCH more than anything I received as a gift. Using your own money helps you feel more gratitude, and it also reduces irrational spending.
This book helped me get back to my roots and remember how important saving some of our money is. I do it, not just so I have a line of defense, but so I can invest it in something that will provide future value as well (education, real estate, index funds, etc.). Growing up I used to save 10% of my money for small purchases I wanted in the future (the GameBoy was all the rage), as well as 10% for long-term goals such as college, a church mission, etc. By doing this I engrained the value of saving in my life and it has stuck with me.
One thing I believe that this book doesn’t is that sometimes I think going in debt is beneficial. In my business, for example, I have traditionally learned how to do everything myself. It took me four years to get to six-figures, but if I would have invested in hiring people earlier or outsourcing work, I would have cut that time in half. I had such a money-defensive attitude, instead of a money-offensive attitude. In other words, I was more worried about losing money than I was about making more money.
I am going to create a new budget where I implement a 20% savings plan so that I can invest in myself and in my future. I have created many in the past but I have not done a good job of referring back to them, so I am going to create one and carry it on me at all times.
I don’t share the same mentality as the authors, but I do appreciate and acknowledge that what they offer has value. The authors focus mainly on a savings strategy and how to make sure you use the money you have effectively. I think that’s very important, and I do use some of their strategies. However, my mindset is trying to be able to earn more money and increase the value of what I can offer, which means what I do can sometimes contradict what they say since I’m looking towards the future and they’re looking towards the present. Both strategies have value, and this book does a good job with their strategy. I give The Millionaire Next Door a 7/10.
Top 8 Quotes
“Whatever your income, always live below your means.”
“Wealth is more often the result of a lifestyle of hard work, perseverance, planning, and, most of all, self-discipline.”
“Money should never change one’s value. Making money is only a report card. It’s a way to tell you how you’re doing.”
“The real growth in the millionaire market continues to come from the entrepreneurial segment.”
“Operate your household like a productive business.”
“Millionaires typically indicate on our survey ‘business owner’ with ‘some college,’ ‘four-year college graduate,’ or ‘no college.’”
“It’s easier to make money honestly than dishonestly in this country. You will never exist in business if you rip people off! Life is the long run.”
“Courage is behaving in a way that conjures up fear.”
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