This week's book discussion (+ giveaway): "The Millionaire Next Door"


#1

We’re starting a new series on Rockstar Finance where we dive into one of our favorite financial or business books each Friday, and we kick it off today with the quintessential personal finance book: “The Millionaire Next Door” by Thomas J Stanley and William D. Danko.

“The Millionaire Next Door” introduces us to the typical behaviours of millionaire households, these hard-working families who scrimp and save over decades to become financially secure (aka “wealthy”).

Their habits include: household goal setting, focusing on their finances & living frugally, a tendency toward working for themselves or as professionals (though “teacher” is a prominent profession), being value-focused in all their purchases—including cars (Toyota sedans), clothing (Sears suits) and accessories (Timex watches)—and establishing good money practices for their children and grand children.

Today’s topic discussion: Which one or more of these characteristics do you share with this group of successful wealth accumulators? Why do you think these traits matter (or don’t) in being successful with money over the long term?

Share your answers below and one lucky participant will win a copy of the book :slight_smile:


#2

I relate most with that one… As soon as I stumbled across those first $$ blogs back in the day (MyMoneyBlog.com, TheSimpleDollar.com) my finances have never been the same. Totally changed my thoughts, which totally changed my actions, which totally changed my money!!

It’s almost as if my wealth started growing simply through blog osmosis, haha… (blog-mosis? :))


#3

I would enter this but I already own the book - so don’t count this as an entry in the contest! I just wanted to drop a note to others who haven’t read it yet to echo what @J.Money mentioned.

When I first read it over 10 years ago it was one of a few books that changed my life and the way I viewed finances. I was lucky enough to read it in my early 20’s, but it’s never too late!

To answer the topic question-I agree with all of them (no surprise). I teach my kids about money, saving, investing, and wise purchasing all the time. Goal setting, focusing on finances, and living below your means are all key. I’d add that continuing this over the long term is another key to success (and is mentioned in the book). You can’t achieve the really big goals by only focusing on finances for a short time and then giving up. You have to keep it up over a long period of time to see real results. I believe most of the millionaires in the book were over 50 (and most were men, darn it).


#4

So nice of you to let others enter the contest. :innocent: The book is a classic turtle vs the hare, isn’t it?

You can’t achieve the really big goals by only focusing on finances for a short time and then giving up.

That says it all!

As for the millionaires highlighted in the book, yes, the default seems to be mostly families as opposed to individuals, with men being the majority of high income earners. T. Stanley mentions at the beginning of the book that that was the reality of the distribution of millionaires he interviewed (using a statistically representative sample). That said, we’ll always have the Sharon and Barbara example and table on pages 56 & 57. There’s a little girl power sprinkled in…I bet he made a point of doing that. :high_heel: If you like the late T. J. Stanley’s writing and you haven’t read it yet, you might like Millionaire Women Next Door, which he wrote to address this gap.

Thanks for wading in with your experience, advice, and of course, love of this book!


#5

That is key, isn’t it? Awareness and measurement! :moneybag:

…and blogmosis. Love that! And will steal (I mean borrow) it like an artist.


#6

Habits:

  • Goal setting: used to be 10-20% automated savings, which has evolved into more despite a lower income, just because we don’t “need” anything.

  • Working for themselves and/or professional: guilty as charged as a 3X entrepreneur

  • Car: Toyota Rav4 bought used (not exactly a “sedan”…works well for shlepping a few greyhounds though!)

  • Clothing: not Sears, but rarely spend more than $400 for a quality suit. I only went over that amount once to buy a suit for a black tie event I was emcee-ing

  • Timex, uh, don’t wear a watch but when I get an :iphone:, I don’t buy the newest one and I keep the thing until it stops working. Jewelry in general? I’ve been wearing the same stuff since my twenties, don’t own a diamond and Mr. F2P once bought me a necklace, which I love and wear often (and he knows I don’t want more).


#7

Okay, I’m not a money guy, but I am organized and diligent in my personal life, and I come from a poor family where we sometimes didn’t even have money for food, so my natural tendency is to think “hey, I’m doing pretty well” as long as I can pay the rent.

So let’s see where I land on this stuff:

  • Household goal setting: I do goal setting in most of my business and project-building life, but I don’t think I really do it for finances except for payment of accrued debt. Meaning, I don’t’ have any wealth-accumulation goals. I do track all my money (income and spending), have a detailed monthly budget that I stick to, and I’m aware of all my assets, bank accounts, and liabilities.

  • Focusing on their finances: See above. I focus enough to know what’s up. Beyond that, once I’m in a place of growth rather than digging out, I’m sure I’ll just pay someone to help me monitor/manage, so I don’t have to think about it much.

  • Living frugally: This one’s easy. I think at some point in our friendship, @J.Money said something like “none of the frugal living stuff even applies to you, because you don’t spend any money!” I have very few things (a natural minimalist, not a quest), very low personal expenses, sensible everything, and this year I just doubled my monthly discretionary/entertainment spending to $20. Probably okay here.

  • Working for themselves as professionals: Yep, that’s me. For the past 7 years, at least, after a corporate career. My passion is for ideas and creation (see: Rockstar Finance in 2017 for my latest project work :wink: ). That’s what gets me out of bed in the morning, and I’m happy to say that after years of hard work and failures and successes, I now make a very good income from it.

So . . . Am I a millionaire next door right now? No. Am I trying to be? No. Will I be in a few years? Yes.

I think I’ve only ever read one finance-category book in my life, but I will be reading your book reviews, and if one look super interesting, I’ll pick it up from the library (which I still go to bi-weekly)!


#8

Nice! And I’ll pop in some non-$ books on a regular basis too (and I plan on adding a few works of fiction and biographies that provide some great lessons re the psychology of money but don’t tell @J.Money about that yet :smirk:).

The library is so underrated. I wouldn’t sustain my voracious reading without access to the library system (my last three years of reading would have cost me about $5,000!).

Sounds like you have your life set up the way you want it. And that puts you in the wealthy category in my books:

Needs < Means = Wealthy


#9

Well, that’s a super simple way to look at it. And there’s the nugget I’ll be taking away from this book review… Thank you!


#10

I just went back into my reading list this morning and realized that The Millionaire Next Door is the FIRST personal finance book I read back in 2013. It certainly whet my appetite for reading $$$ books. What a coincidence that this is the first book review on the RF Forum. Sweet!


#11

Yeah!! SO fun… .I have checked this book out of the library several times but never get a chance to finish it!! I learned long ago I can’t take library books on my work trips as I have left a few in the jumpseat. :slight_smile:

Anywho, I am a mixture of a few… [quote=“F2P, post:1, topic:889”]
focusing on their finances & living frugally
[/quote]

Yes - this is me. After I started tracking my expenses last November it was a big eye opener for me. This year I cut my overall costs by 31%… Aldi has been a huge saver but the best part was reducing my electric costs from 332 to 219! A win for me and the environment! :slight_smile:

And…

I dont have a Timex but I do have a crappy Walmart watch that works great! This baby has been with me since I started my job 15 years ago. :slight_smile: My car is a 2001 Honda CRV with a ton of miles and starting to rust but I :heart: her and refuse to give her up. I dont’ however, shop at sears because I don’t really shop at all. When I do it is Gap outlet (my standard “uniform” is Gap black skinny jeans). I haven’t been there in over a year but the last time I went it was with a 40% off coupon. I went straight to the shelf, got my size, and went straight to the counter. No looking for other things I might “need”.

I think these traits are important because consumption is out of control in this country! We focus on what we want and not what we need. We need more community interraction. More time outdoors away from the TV and computer (as I type from my computer). More family time and less overtime. By living frugally I don’t have to work as much or as hard just to financially survive. I can take time off to do the things that fulfill me and charge me up instead of drain me. Happy people spread joy. We all could use a bit more joy in our lives.

On a book related side note…

My main goal is helping other to learn about financial freedom. I don’t have any kids so I am focusing on my BF’s and nieces and nephews. I wrote about this before but have fine tuned it a bit - I am starting their financial education slow with a reading library for them. With each birthday or other gift related event they get $10 and a finance book to read. I give them a set time to read it by (usually 2 months). Once read we will do lunch or ice cream and have a little book discussion. If it was actually read, I will match their original gift of $10 with a 100% match. This way they get $20 and an education. Christmas will be the trial run…keep your fingers crossed!! Oh, and I am taking book recommendations for 10-16 year old range. I don’t want to hijack this post so If anyone has any suggestions please email me!! [email protected]


#12

Way to go on the reduced consumption front. Tracking is HUGE, right?

What a great idea to have a “book club” with kids who are near and dear to your heart.

I don’t think you’re hijacking anything BTW :relaxed:. I would recommend some easier reads: Rich Dad, Poor Dad by Robert Kiyosaki and The Wealthy Barber by David Chilton for teens. Richest Man in Babylon by George Clason is also fun as a fable or sorts.

Based on your comments on overconsumption, you might like the following for yourself: “The Overspent American” by Juliet B. Schor (and “Plenitude” by the same author re environmental considerations, but it’s a tougher book to get through.


#13

Oh definitely - Millionaire Next Door is all for me! :slight_smile: I remember reading Rich Dad Poor Dad but hadn’t thought about it for them - that is a truly fantastic idea because the 16 year old is struggling with trying to Keep up with the Jones’s kids…mind you , none of them work so it’s all their parents money! Going on Amazon now to get it for him. I haven’t read The Wealthy Barber but heard it is great…looks like I’ll be stopping by the library today. :slight_smile: Thanks for the suggestions and for throwing in a few for my own enjoyment!! Can I say again how much I LOVE this forum???


#14

Ha ha! Happy to be of assistance. :sunglasses:

Let us know how they turn out. Good luck.


#15

OMG I loooooove this book.

Here’s a snippet for a review I did on my site of The Millionaire Next Door…

What I liked:

The basics: There’s something inspiring about a book that sticks to the basics while delivering high-quality money advice. Sometimes a book that is too basic gets boring or isn’t very helpful. And some books that get too complex are boring in a different way because you can’t relate, understand, or implement its teachings. The Millionaire Next Door is a perfect blend of the basics with great advice that you can actually implement into your money plan. The next point will explain what I mean a little more…

Facts: Almost the entire book is based on case studies, polls, and interviews. The authors interview several self-made millionaires and then study the findings to explain how these people became millionaires. They use un-filtered facts to draw conclusions on how people accumulate (or don’t!) wealth. No guessing or personal opinions. The authors aren’t trying to sell you on anything, they just present the case studies, draw some conclusions and let the reader take it from there.

Anti-hyper-consumption: One of my favorite phrases in all the world. Say it out loud, it’s like a beautiful poem… Anti-hyper-consumption… I don’t think they use this actual phrase in the book, but one of the main points is that the difference between those who accumulate wealth and those that don’t has everything to do with how much materialistic crap they consume. Basically, it doesn’t matter how much you earn if you spend it all. What I really like about this part of the book is that it is again based on case studies (facts) and not on any anti-consumerist lifestyle philosophy propaganda. Or again, just someones personal preferences or opinions. The book simple states that the number one reason people become wealthy is because they don’t fall into the consumerism trap. I know, right!?

Hope: The book states that roughly 9 out of 10 millionaires are first generation rich. The idea that most rich people are born rich or inherit most of their wealth simply isn’t true. In fact, the authors warn against the dangers of receiving too much financial aid. Often, financial help isn’t helping at all, it’s hurting. When this sinks in you can see why I find this part of the book encouraging and full of hope.


#16

I relate to virtually all of the characteristics - I am an accountant, so a professional, and the focus on my finances probably ties to that a little bit, too. :wink: My partner and I are both pretty frugal naturally, but tend to focus more on the value of our purchases - is this worth what we’re spending for it? So yes to $7 craft beer tasting flights at our local breweries, no to $30,000 new cars. :stuck_out_tongue: No kids, so can’t comment on that one.

I would love to read this book as it’s one that I haven’t yet, since I can never find it at any of my local libraries! Even the e-book library I use doesn’t have it. :frowning: Can’t really complain though, as it has done great things overall to my ability to read books whenever, wherever, without having to have 5 random ones stashed in my bag at all times (what? No, I’ve never done that, who would be weird enough to do that…? >.>).


#17

Well now. That’s quite a take on the book. But…is this your way of avoiding answering some personal questions Derek? Hmmm. Squirrel!


#18

Ummmm, yeah, me neither…:blush:

I hope you get your hands on it. It’s a great read and the stats don’t lie. It’s nice to see empirical evidence that a given lifestyle pays off…in more ways than one.

BTW: Nice to see you have your spending in line with your priorities and are quite happy about it (very YMOYL of you).


#19

Ah I haven’t read this book yet but it was in my back burner for the longest time. We only have so much time to read in a day, right? :smiley:

Anyway, I’m doing the following wealth accumulators:

  1. Saving more than I earn - like 50%
  2. Side hustling and trying to build businesses on the side
  3. Portfolio Income

While my husband and I only started to take FI very seriously 2 years ago, we decided not to let go of our first love: Travel, hence our FI goal will not be as fast as most people will


#20

Sounds like you’re doing amazingly well. It might not be as fast as most people but you’re not forgetting to live for the present along the way. Looks like you’re more TMND than most! Congrats!