A couple of years ago, I came across an admirable review of the often-lauded personal finance book The Millionaire Next Door. First published in 1996, the book has held a consistently high level of popularity for more than a decade. What valuable insights does this book contain! That was the all important question I had as I perused through the book review.
Apparently, the general premise of the book is that the showy expectations we have of millionaires is quite false. Actually, most real millionaires live a very simple lifestyle. The authors, Stanley and Danko, did extensive profiling of people whose net worth defined them as millionaires along with those whose salaries and age defined them as likely millionaires and, using this data, created a detailed profile of who exactly a typical millionaire is. From there, extensive interviews with these ‘typical’ millionaires created a much more detailed picture of what it actually means to be a millionaire in today’s society.
What does this have to do with personal finance? Most of the people that are millionaires today got there through strong individual financial planning. They are frugal people with a head on their shoulders and are often indistinguishable on the street from anyone else.
In the introduction to the book, Stanley and Danko break these traits of millionaires down into seven basic factors: They live well below their means; they allocate their time, energy, and money efficiently, they do not believe in displaying high social status; they come from strict disciplinarian parents; their adult children are usually educated and economically self-sufficient; they are proficient in targeting market opportunities; they chose the right occupation.
For me personally, evaluating my life as a snapshot through these factors made it clear how different the old, crazy spending me was different from the newer, financially sound me.
For a long time, the biggest hurdle for me has been living well within my means and not worrying about displaying social status. I have lived to believe that the appearance of affluence (type of cars I drive, class of clothes I put on, location I stay, etc) are of vital importance, when what really matters is the money in the bank, the investments one has, and the quality of life one’s family enjoys—these offer peace of mind.
Ever wondered why your neighbour is richer than you—they may have discovered some of these rules of wealth!
Blessed week-end to you and yours as you trouble your mind into action!