Blue field like crop rows and burgundy border, saying "Don't Just Survive - Thrive

The Millionaire Next Door, by Thomas J Stanley and William D. Danko

Thesis: A summary of an in-depth study involving the well-off and the wealthy. Basically, the people with the bling are not really secure and will regret it. Live below your means.

Specific Things to Remember:

  • Portrait of a millionaire
    • 57 year-old male, married with three children. 70% of us earn 80% or more of our household’s income.
    • One in five is retired. 2/3rds are self-imployed. 3/4 who are self employed consider ourselves to be entrepreneurs
    • Dull-normal business: welding contractors, pest controllers, etc.
    • Half of wives don’t work outside the home or have teacher jobs.
    • Total taxable income is $131,000 median, average is $247,000.
    • Average household net worth of $3.7 million
    • Annual realized income is less than 7 % of new worth
    • 97% are homeowners, with an average value of $320,000.
    • Did not receive inheritance and are first-gen affluent
    • Wear inexpensive suits and drive American-made cars.
    • Wives are planners and budgeters. Charity begins at home.
    • Have a “go-to-Hell fund” – can live without working for 10 years
    • Live in a non-affluent neighborhood
    • Fairly well educated with advanced degrees
    • Only 17% of us or our spouses attended private school, but 55% of our kids do
    • Education is imporant and we spend heavily
    • Work between 45-50 hours a week
    • Invest nearly 20% of income each year
    • 20% of wealth is in stocks and mutual funds
    • Daughters are financially handicapped compared to sons
    • Tightwad
  • Wealthy = mulitply age times salary (pretax), divide by ten. This is what your net worth should be.
  • How to be wealthy
    • Be frugal, frugal, frugal
    • Know exactly how much family spends each year on food, clothing, and shelter
    • Spend a lot of time planning your financial future
    • To build wealth, minimize your realized income (taxable) and maximize your unrealized income (wealth/capital appreciation without cash flow)
    • Never purchase a home that requires a mortgage that is more than twice your household’s total annual realized income.
  • Car value goes way down after three years on the road
  • Select a CPA by recommendation of a professor of accounting, and look for someone that hired out of college and then started their own accounting firm
  • Supporting your kids makes them dependent. Set up a trust fund for education and then give them the balance at 30-40 so it doesn’t set a lifestyle.
  • Rules for Affluent Parents and Productive Children
    • Never tell your children that their parents are wealthy
    • No matter how wealthy you are, teach your children discipline and frugality
    • Assure that your children won’t realize you’re affluent until after they have established a mature, disciplined, and adult lifestyle and profession
    • Minimize discussions of the items that each child and grandchild will inherit or receive as gifts
    • Never give cash or other significant gifts to adult children as part of a negotiation strategy
    • Stay out of your adult children’s family matters
    • Don’t try to compete with your children
    • Always remember that your children are individuals
    • Emphasize your children’s achievements, no matter how small, not their or your symbols of success
    • Tell your children that there are a lot of things more valuable than money