Financial Book Review: The Millionaire Next Door - Money Tip Tuesday

What does being wealthy truly look like? We imagine having big fancy houses, exotic vacations, and high status jobs. But what if I told you that most millionaires, even decamillionaires today, might not look quite like the famous person on your tv or phone screen, but more like your average Joe, living in a house down the street? That scenario is more than norm than you may realize, and that’s good news for everyone.  

Links:

• The Millionaire Next Door by Thomas J. Stanley and William D. Danko
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Transcript:

Welcome to Money Tip Tuesday from the Making Money Personal podcast.  

Today’s Money Tip is proudly sponsored by New England Royal Service. A local NH business offering commercial cleaning and property maintenance trusted for its exceptional service. Visit neroyal.com to learn more and show us a little love by mentioning this podcast when you reach out! 

Now back to today’s tip. 

Reading books is a powerful way to shift your mindset about money and finance, along with gaining practical techniques to achieve your desired financial life. One notable book is The Millionaire Next Door by Thomas J. Stanley and William D. Danko. First published in 1996, the book delves into the habits of the wealthy, challenging many common misconceptions about wealth. 

The authors break down key concepts that question the stereotypical views of wealthy individuals. For instance, wealth isn't always visible, and attaining it isn't solely dependent on income or profession; anyone can adopt wealth-building practices. This idea is fundamental, as many believe wealth is an exclusive domain, locked away by a hidden secret known only to a select few. However, the book demonstrates that with intentionality, focus, and cultivated habits, anyone can build wealth. 

Stanley and Danko conducted thorough research across various demographics to uncover what distinguishes wealthy individuals from those who are not. The findings are often surprising. The common belief that a high salary guarantees wealth is swiftly debunked; while income does play a role, how individuals manage their finances holds greater significance.  

Another revelation from the book is that appearances can be misleading. A person flaunting a large house, designer clothes, or a luxury car may not be financially secure. The pressure to project an image of wealth often incurs hidden costs. The authors shared, "many people tell us that you can judge a book by its cover, meaning that high-grade doctors, lawyers, accountants, and so on are expected to live in expensive homes. They also are expected to dress and drive in a style congruent with their ability to perform their professional duties."  

Interestingly, surveys discussed in the book indicated that many millionaires do not prioritize purchasing luxury items. They tend to be frugal, preferring utility over showmanship when it comes to their spending habits. For instance, their survey results showed that the average American millionaire never spent more than $399 on a suit, with a quarter spending $285 or less. Additionally, about half never spent more than $140 on shoes, and many did not exceed $235 on a wristwatch. Remember that the surveys were conducted in the 90s, so the actual dollar amounts may have shifted a little bit since then.  

The authors highlight a critical distinction between high wealth accumulation and the ostentatious display of wealth. They state, "...some people judge others by their choice in foods, beverages, suits, watches, motor vehicles, and such. To them, superior people have excellent tastes in consumer goods. But it is easier to purchase products that denote superiority than to be superior in economic achievement."  

Such insights highlight the significant role of frugality in wealth accumulation, which is often overlooked. The authors state, "Being frugal is the cornerstone of wealth-building. Yet far too often, the big spenders are promoted and sensationalized by the popular press. We are constantly barrag