The Millionaire Next Door Lessons

I recently purchased a Kindle because my wife was reading so many books on her phone that she was borrowing from the library.  I used $80 of Staples credits I got from ink recycling and then spent $20 of my Discover rewards to get a $25 gift card.  The Kindle was on sale for $100, so now I have a sweet $20 Kindle.  Many months ago I started the Millionaire Next Door, but this weekend I went to Morocco, started an Instagram, and finished the book.  Here are some of the lessons I learned.

Lifestyles of the wealthy

When you think wealthy you may think of fancy cars and a big house.  However, this lifestyle is very expensive to maintain and is often financed.  Many of these people do not have much wealth, but have a high income and spend all of it. Wealthy people often live in neighborhoods with middle class people and don’t show off their wealth.

It’s about frugality

What being wealthy comes down to is frugality.  There are people who make $500,000 a year and struggle to make payments on their cars because they have so many expenses like country clubs, private schools, and timeshares.  Being frugal allows you to have a higher savings rate and retire earlier.  If you make $50,000 after taxes, spent $45,000, and save $5,000 (10%) then you need to work 9 years to save enough for one year of expenses.  However, if you can trim a bit and only spend $40,000 then you only have to work 4 years to save enough for one year of expenses.  Taken it even further if you could save 50%, each year you are saving enough to pay for another year.  Combine this with investments and you can see how growing your wealth and early retirement works.

Rules for affluence

So now you made it.  If you go about living like you are rich it is likely that your children will get addicted to the lifestyle and you will need to provide them with the money to support that sort of life.  In order to raise productive children here are some rules the book gathered from interviews with wealthy people that managed to have productive children.

  • Never tell children that you are wealthy.
  • Teach your children discipline and frugality.
  • Stay out of you adult children’s family matters.
  • Don’t compete with your children.

Conclusion

If you end up wealthy and I hope you are able to be content and generous.  Life is a journey, make sure you are enjoying the little moments as well.  Just the other day I was so amazed that I broke a Lifesaver mint in half and spoke Portuguese to get through customs.  I don’t know what the future holds for us, but the world is changing so rapidly.  The next book I’ll review will be Rise of the Robots.

 

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