The Millionaire Next Door
I recently finished reading The Millionaire Next Door by Thomas J. Stanley and William G. Danko. The book provides interesting information learned from their study of America’s wealthy. The book reveals some facts that would seem alarming at first, but after some consideration seem pretty obvious. What is interesting, though, is that the authors actually back up their conclusions with data from the study.
Basically, they place people into two buckets – Prodigious Accumulators of Wealth (*PAW*) and Under Accumulators of Wealth (*UAW*). PAWs are the high-net-worth group – either millionaires or on the way to being millionaires. UAWs tend to live beyond their means – they buy expensive homes, cars, jewelery, and the like. The UAW’s net worth is generally less than their age times his annual income divided by 10. The people who are wealthy don’t necessarily look it, and those who look wealthy are not necessarily so.
The PAWs are the bulk of the discussion, and they examine their habits with regards to earning and saving. For example, PAWs tend to be more frugal, live below their means, are business owners or self-employed professionals, and don’t receive financial assistance from their wealthy parents. While they may go about purchasing a vehicle differently (new vs. used, etc), they usually don’t spend much on it and tend to hold onto it for a while. Likewise, not many have spent more than a couple hundred dollars on a suit, shoes, or watch.
So while much of the information in the book was not all that surprising or exciting, it was reassuring to read that becoming a millionaire is possible. But there is no “magic pill”; it’s a long, slow, disciplined journey. Near the end of the book, the authors describe how one could capitalize on the knowledge in the book – choose a profession whereby you cater to the wealthy. They need accountants, attorneys (especially those specializing in estate and tax law), and other professionals they can trust. It is not that they don’t spend money; it is that they are very discerning about how they do so.
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