The Millionaire Next Door

Surprisingly enough, the lifestyle of today’s millionaire is probably not much different than the family living next door, according to Thomas J. Stanley, Ph.D., and William D. Danko, Ph.D., co-authors of the aptly named The Millionaire Next Door.

The authors’ research produced data demonstrating that the commonly held perception of high living and big spending is more applicable to the plumbing supply owner down your street than it is to the average millionaire.

We can definitely forget the old-time image of a rich fat cat, lighting cigars with $10 bills.  On the contrary, the standard profile of a millionaire could be described as a 57-year-old, married male with three kids and a wife who doesn’t work outside the home, with a house valued at about $300,000, driving a late-model domestic car (the Ford F150 pickup being the auto of choice).

Needless to say, The Millionaire Next Door is a fascinating book.

Stanley and Danko have written a data-rich, research-based work.  Even more importantly, they went beyond surface lifestyle observations and have delved into why and how the rich got that way.  And guess what?

They did it the old-fashioned way. Common factors cited:

    * Living below your means.
    * Allocating time, energy and resources to building wealth.
    * The belief that financial independence is of more importance than the social status of your lifestyle expenditures.

Living what the authors call the lavish lifestyle is not consistent or practical in the Prodigious Accumulation of Wealth model they propose.  Few of us have accumulated wealth of more than $1 million, yet many of us make enough money to become financially independent.  The lavish lifestyle sells TV time and newspaper ads, but the immediate gratification of make more/spend more does not build wealth.  In fact, many people (dubbed “under-accumulators of wealth” by the authors) tend to spend tomorrow’s money today.  For example, less than 50 percent of the millionaires studied have spent more than $399 for their most expensive suit.  Half have never spent more than $140 for a pair of shoes.  Most tell time with a wristwatch that set them back less than $235.  They are first-generation rich, rather than heirs, and their parents demonstrated frugality as an honorable trait.

The Millionaire Next Door holds a valuable lesson.  We, as a whole, have incomes that would allow us to accumulate wealth at an accelerated pace.  Yet many of us fall into a trap, because making money is easier than accumulating wealth.

Read this book.  It will help you celebrate frugality and living within your means as steps toward financial independence.  As the authors indicate, building wealth takes discipline and sacrifice.

If you truly value financial independence more than living a lavish, conspicuous-consumption lifestyle, you can set realistic goals and achieve real freedom.

Hey - anybody want to buy my Rolex?