“Building wealth takes discipline, sacrifice, and hard work” When Authors Tom Stanley and William Danko went to investigate on how people get wealthy, they found something odd. Many of the people who live in upscale neighborhoods and drive luxurious cars do not have extreme wealth. Many people who have great wealth do not even live in upscale neighborhoods. The book gives insights on what you can do to become wealthy and how wealth is not what you spend but what you accumulate. The millionaires discussed in this book are financially independent. They can live for years without receiving one month’s pay check. Are you wondering who becomes wealthy in our society? The businessman owns a small factory and has lived in the same town for multiple years. He is a compulsive saver and investor. And he has made his money on his own.
During the author’s investigation, they discovered seven common denominators among the people who become wealthy
1. They live well below their means
2. They allocate their time and money efficiently, in ways conducive to building wealth.
3. They believe that financial independence is more important than displaying high social status.
4. Their parents did not provide economic outpatient care.
5. Their adult children are economically self-sufficient.
6. They are proficient in targeting market opportunities.
7. They chose the right occupation.
In the “Millionaire Next Door” the authors will look into these seven characteristics of the wealthy.
Chapter 1: Meet the Millionaire Next Door
The first part of this chapter examines the prototypical millionaire in the American household. What would the prototypical millionaire in American tell you about himself? •
Many of the types of businesses we own are classified as dull-normal. We are welding contractors, auctioneers, rice farmers, pest controllers, and paving contractors.
About 80 percent of us are first-generation affluent.
We have accumulated enough wealth so we wouldn’t have to work for ten or more years.
About two-thirds of us work between forty-five and fifty-five hours per week. We are picky investors.
“I am my favorite charity.”
The authors define wealthy differently than most Americans. Most Americans describe wealthy as an abundance of material possessions. Those people whom the authors define as wealthy get mush more pleasure from owning substantial amounts of appreciable assets than from buying and owning many materials.
One way to define if a person is wealthy of not is by their net worth. Net worth is defined as the current value of one’s assets less liabilities. More than 90 percent of millionaires in America have a net worth between $1-10 million.
Another way to define if the household is wealthy or not is based on their expected level of net worth. The higher one’s income the higher their net worth is expected to be. The longer you are generating income the more wealthy you are likely to become. Chapter 2: Frugal Frugal Frugal
Frugal is defined as “behavior characterized by our reflecting economy in the use of resources.” The opposite of frugal is wasteful.
Being frugal is the cornerstone of being wealthy. Promoters often lavishly enhance the image of millionaires of lavish spender or wasteful people. Where in the real world most of the millionaires are frugal savers.
The lavish lifestyle sells in the entertainment business. People love to watch their peers win materials and money. People want immediate gratification. They don’t want scholarships or stocks. That is why the quiz shows do not offer them. The average lifestyle of the American millionaire is not what the public perceives it to be. The average millionaire is well into his fifties, has been married to the same woman, and lives in a middle-class neighborhood. The average millionaire is more likely to buy a $40 pair of shoes than a $500 pair of shoes although he has the money. Another aspects of the millionaires in...