The Millionaire Next Door is a book by Drs. Thomas Stanley and William Danko that strives to draw a portrait of millionaires, especially self-made ones. Let's look at some of their habits as we strive to improve our own financial status.
Essentially, the millionaire next door is usually a down-to-earth person who is relatively unpretentious and lives a relatively unglamorous, but abundant lifestyle. Drs. Stanley and Danko have identified seven traits of self-made millionaires. These are people who have gained financial freedom. Here they are...
They live well below their means.
People who become millionaires put more emphasis on building a strong financial base than on having all the showy toys. They might forgo a luxury car and buy a more ordinary one so they can put that extra $5000 into an investment that builds their net worth. They are more interested in being solid than stylish.
They allocate their time, energy, and money efficiently in ways conducive to building wealth.
This is another way of saying that they are very intentional about building wealth–they have a plan. While some millionaires are more obsessed with building wealth than I would recommend, one lesson we can learn from them is that it does take planning to work toward financial independence.
For most of us, that plan includes getting out of debt, having a reserve fund, owning a home, and becoming an investor. The millionaire next door started with a plan and did without some of the fancy toys to continue to work on it.
Following through on these plans often involve choices–some big some small–between consuming now or building a base. These choices can be as small as doing without a few dinners out a month to pay a little extra on the mortgage to delaying becoming a two-car family to stay out of debt.
They believe that financial independence is more important than displaying high social status.
Actually, the millionaire next door is secure enough about who (s)he is that (s)he doesn’t have to flaunt it. (S)he considers conspicuous display of wealth a true waste of money.
Their parents did not provide economic outpatient care.
Indiscriminate bailing out doesn’t often lead to financial success. Better to help a person learn to be self-sufficient than to bail a friend or relative out when (s)he is suffering the consequences of financial mistakes.
Their adult children are economically self-sufficient.
This is the mirror image of the above point. Receiving too much bailing out for financial mistakes keeps a person in financial adolescence. Neither the giver nor the receiver benefits.
They are proficient in targeting market opportunities.
They know the times. They study the environment. They figure out how to make the market work for them.
While some millionaire obsess on this to a level that many of us don’t want to, I think we can all learn something from them about stepping back, taking a look at opportunities, and using them to our benefit.
They chose the right occupation.
It is so difficult when you are a twenty something to choose a line of work that will serve you well for the rest of your life. Fortunately, we don’t have as much as we used to.
Remember the organization man of the 1950's? He stayed with his corporation with absolute lifetime loyalty. He depended on that corporation to outlive him and take care of him with pension and lifetime medical benefits.
Those days are gone. The world of work is much more change-friendly. If work isn’t working, you can look for something else.
I’m in the middle of that very process. My day job, an elementary teacher, doesn’t really work for me. I’m taking time off to assess the situation and hopefully to move on. This is not easy, but I know it is necessary.
Here are some points gleaned from the book:
| The millionaire next door has a budget, or spending strategy. They set limits on how much they will spend and employ the "pay yourself first" strategy. |
| The millionaire next door is more likely to shop at solid, but unpretentious stores than at boutiques or high-end chains (like the woman I met at the upscale closeout chain) |
| The millionaire next door researches major purchases. |
| The millionaire next door strives to buy what (s)he buys at the lowest possible price. Tools to get those low prices include use of coupons and sales and driving a hard bargain when they can. |
No comments:
Post a Comment