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The Millionaire Next Door

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As a general rule, I’m not a huge fan of most financial books. I find most to be sales books for the author or have content that I don’t agree with. However, there are some good books out there that I’ll point out sometimes in my posts as suggested reading.

As I was thinking about what to write for this week’s post, I remembered a book called The Millionaire Next Door.

It’s a book from 1996, but the content and what can be learned from the book is timeless.

From Amazon: The bestselling The Millionaire Next Door identifies seven common traits that show up again and again among those who have accumulated wealth.

What are the seven common traits?

  1. They live well below their means.
  2. They allocate their time, energy, 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.

What do you think of the above list?

I imagine the answer will depend on the age of the person reading this newsletter. I would suspect that the older readers of this newsletter will be saying to themselves, yeah, those make a lot of sense. To younger readers, they may say that many items on the list would take all the fun out of life.

A really interesting example in the book is when the author talks about shoes. The author tells a story about a multi-millionaire he interviewed who instead of buying new shoes when he had worn soles he simply had new soles put on. Can you imagine someone doing that today? Don’t we all just throw away shoes and go buy another pair, many times a $100 pair of shoes?

The other simple and understandable example is buying cars. Millionaires tend to buy used cars, not new cars, and tend to buy the less flashy/expensive models.

Another important but simple part of the book is on budgeting.

The author asks readers:

  1. Does your household operate on an annual budget?
  2. Do you know how much your family spends each year on food, clothing, and shelter?
  3. Do you have a clearly defined set of daily, weekly, monthly, yearly, and long-term goals?
  4. Do you spend a lot of time planning your financial future?

The idea is that if you don’t know what you are spending money on and if you don’t set clearly defined goals (spending and savings) the chances that you are going to get to retirement with significantly less than you want and probably need is significant.

Decisions have consequences!

The book is a great read and I recommend that everyone get a copy. You won’t agree with everything in the book, but the book may and hopefully will get you to critically think about how you spend money, what your goals are for retirement, and whether you are on the path currently to meet those goals.

My guess is that 95% of those reading this newsletter do not have a defined retirement plan that is mapped out and being followed.

If you do not have a mapped out retirement plan (one that includes tools that provide tax-free cash flow in retirement, protects you from stock market crashes, can potentially provide for you a guaranteed monthly income that can never be outlived), feel free to contact us or schedule an appointment with one of our advisors so we can talk.

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