The Millionaire Next Door is a review of millionaires, and changed how they’re perceived. Most people see millionaires living in Beverly Hills or Park Avenue with nice cars and glamorous homes.
It turns out that the opposite is true. Most millionaires reject showing off their money – they live in sensible homes “next door”, bargain shop for used cars, and raise children who don’t realize how wealthy their families are.
One of the main points of the book is that “wealth is not the same as income…wealth is what you accumulate, not what you spend.”
Live Below Your Means
Very simple, spend less than what you earn. There are many ways to be frugal without looking cheap. Don’t succumb to lifestyle inflation, where you spend more money as your income goes up.
As you own more stuff, that stuff has a tendency own you. Expensive cars, condos, and jet skis can drain your time and money. Instead, learn and practice the art ofPractice and learn the art of stealth wealth.
During college, I met a guy who recently went through a divorce. He talked about how liberated he was after liquidating his assets. Once the excessive cars, boats, and lake homes were gone, he had a lot more free time. You don’t need to go through a divorce to learn this lesson.
Most millionaires do not drive nice cars
Allocate Time, Money, & Energy Towards Building Wealth
Everyone has 24 hours in a day, but not everyone is a millionaire. You can see why by lookin at how most people spend their time – watching television, social media, browsing the internet. The average person spends 27 minutes per day on Facebook.
The millionaires in this book regularly spend time on building businesses, as well as making investments. Investing is the most effective tool that millionaires have to become wealthy. They typically invest in: stocks, real estate, private businesses, and debt. Follow the hierarchy of savings so you can match them.
Financial Independence is More Important Than Social Status
There is no need to keep up with the joneses. New cars, boats, and large home are a drain on your time and resources. The Millionaire Next Door review found that most drive used cars and live in reasonable homes.
With that said, do not confuse this with cheap. Millionaires are shrewd at negotiating and buying products for discounts. With that said, they also open their wallet for value. The top two services that millionaires always spent more for were accountants and attorneys. When it comes to quality, you get what you pay for.
Parents Did Not Support Them
Many believe that most millionaires inherited their wealth from their parents. The Millionaire Next Door review found that supporting your children makes them dependent, and prevents them from maximizing their wages.
The more money you receive, the more strings are attached. You may have to live closer to home, spend more time with your parents, or do things for them that encumber your career and lifestyle. Furthermore, many people in the book assumed that the financial support they received was their income. They included that support in their lifestyle – once that support goes away, they will find themselves in debt.
Their Adult Children are Self-Sufficient
Same as the logic above, enable your children to live their own lives. Doing so will allow them to set out for the same market opportunities as you did.
Getting rich is hard work, and many parents would rather their children take an easier route that’s less stressful. While the intentions are notable, this logic could set their children back financially.
Target Market Opportunities
The key to generating wealth is to find opportunities and exploit them. Start businesses in niche markets you find, or invest in undervalued real estate and stocks.
Choose the Right Occupation
It doesn’t matter what you do for work, but it does matter that you enjoy what you do. Love what you do and work hard at it. If you are underpaid relative to the market, make sure you negotiate a maximum salary when you look for new jobs.
Millionaire Next Door Review – The Bottom Line
Building wealth takes discipline and hard work. The next time you see someone with an expensive car or big house, don’t automatically assume that they are wealthy. Instead, think about how much money is being wasted on these depreciating assets and how much time is spent maintaining them. By shifting your mindset, you’ll be able to follow the discipline of millionaires.