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Old 03-12-2015, 11:45 AM   #81
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The thing that has always fascinated me about books like the Millionaire Next Door, is how 2 people can read it and come away with entirely different things.

One person finds the meaning of life in a bubble gum wrapper and another person reads (insert holy book here) and finds nothing but poorly worded, inaccurate historical fiction.
+1

I also think that two keys to selling a self-help book are to be positive and to confirm the reader's biases. TMND is really a modern take on Calvinism, and those who believe that wealth is related to virtue are going to be drawn to it.
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Old 03-12-2015, 11:48 AM   #82
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so has everyone gone to the guy's fb page and flamed him?
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Old 03-12-2015, 12:23 PM   #83
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+1

I also think that two keys to selling a self-help book are to be positive and to confirm the reader's biases. TMND is really a modern take on Calvinism, and those who believe that wealth is related to virtue are going to be drawn to it.
I have no comment on TMND, I try not to criticize someone's holy book. But I believe that your analysis of how to do a popular non-fiction book is correct. Make it overly simple, have a clear positive image, don't stray into subtleties.

These things fit self help, early retirement and foreign living books and blogs extremely well.

How about an ER book that said: be born with at least average+ mathematical abilities, work extremely hard, bypass most of the pleasures of high school and college life, get really good grades, go to medical school, work extremely hard at pretty low pay for another 10 or so years, and if you have chosen your specialty for income you will start making money hand over fist. You will likely have graying temples and a 16 year sleep deficit, but after paying some horrendous income taxes and perhaps getting a divorce under your belt you should start amassing some fair amount of money

Woo-hoo! Sign me up!

Ha
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Old 03-12-2015, 05:50 PM   #84
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The thing that has always fascinated me about books like the Millionaire Next Door, is how 2 people can read it and come away with entirely different things.
.
Right. But, I'll still vote.

Put me in the camp that says the message of the book
wasn't "anyone can become a millionaire".
It was, "When we looked for millionaires, we found that most had well above average incomes, but spent like average earners."
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Old 03-12-2015, 05:55 PM   #85
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My two next door neighbors happen to live next to a MND and don't have a clue.
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Old 03-12-2015, 06:45 PM   #86
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The article criticizing Millionaire Next Door is frustrating because it focuses on only part of the message, and then twists what it finds. Sure, by studying Millionaires, the book does not also study people who did what the Millionaires did (start a business for example) but then didn't become Millionaires. But the study was to learn about Millionaires, not to prescribe how to become one. Likewise, the idea of LBYM doesn't mean that one never buys anything or never enjoys one's money. That might be the extreme version of LBYM taken well into miserliness, but again that's not the same as basic LBYM. If you don't save some of the means, then you won't have anything to accumulate. Draw the line where you feel comfortable.

Many of the LBYM habits I had already developed when I discovered the book, were happily reinforced and I delighted in identifying with the subjects who had no interest in caviar and fancy milionaire food, but just wanted to enjoy plain fare that they liked. They could afford anything they wanted. So they chose to actually eat what they wanted, not what someone else's idea of a millionaire should enjoy.

Recently I had to shop for a new (to me) car. I could afford a lot of different cars, but I didn't want to spend more than was needed for what I actually wanted in a car. Sound mechanical features, including safety, were very important and I would spend lavishly to insure I got them. Comfort and convenience were important and I would judge the value in how much I got for what price. Trendy and flashy features, such as extra gold trim or things I wouldn't use but would need to repair if they broke, actually have negative value and I would pay more to avoid them, I certainly had no interest in paying extra to get them. Naively, I assumed that many car buyers would have similar approach to buying a new car, but dealer behavior seemed to strongly indicate the opposite. Most attention was paid to flashy features and considerable attention was drawn to the "value" of such things in raising the prices of the cars.
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Old 03-12-2015, 07:21 PM   #87
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I have never read The Millionaire Next Door. When it came out in 1998, I was too busy working to have much time to read, though I heard of it. Now, from reviews and excerpts I get the gist of it, and do not need to read this book anymore.

We were always frugal and conservative with our spending. I did not set a savings goal, nor plan to retire early. I spent on what I thought I needed, not what I could. And I only started to spend time to look after our financial affair and think of investment choices when our net worth already surpassed the 2-comma figure. No, we had decent incomes, but it was not outrageous. Up until I was 45, I did not know our net worth. Too busy working to count money!

Perhaps we were lucky to be working, saving, and investing in the economic boom years, but man, I don't think that we did anything really special. No stock options, no lucky investment in Apple or Intel when they first went public. Nope. I was not even 100% in stock, because I was afraid and kept telling myself that I should spend more time to study investing before I put it all in. Never did learn much about investing until much later. Too busy working again.
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Old 03-12-2015, 08:00 PM   #88
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I read the book when it was released. It didn't tell me anything that I had not already figured out for myself. But to the extent it set off the light bulb for some, then it was a valuable public service.
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Old 03-12-2015, 09:11 PM   #89
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I agree that the book is useful for people starting out, to show them what is within realm of possibility. As many posters have stated, it discusses what common attributes being shared between your common millionaires, and does not promise a sure way to get your stash.

Of course, if you are working a lowly paid job, it is going to be hard, but you should still be able to take away the idea of thrift. Even without getting to a million, saving the money you spend drinking in a bar or getting that latest smartphone will help secure your financial future.
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Old 03-12-2015, 11:19 PM   #90
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A long time ago I vaguely remember reading part of a book that might have been this one. There was this equation connecting net worth to age multiplied by annual wages and divided by ten. If your net was more than double this value, you were doing well. If your net was less than half this value, you were doing poorly. I don't remember what percentiles these cutoffs represent, maybe plus and minus a standard deviation?

So the average 50 year old earning 200K should be a millionaire. But only 15% of 50 year olds earning 100K would reach this level. Yet the average 50 year old earning 200K who wants to retire early may not be impressed by the annuity payout that his stash will buy (somewhere between 40-50K per year?). Millionaire status would probably allow more of those who earn 100K to make a go of it. But even here it's probably not enough for most of even the small minority who reach it.

My takeaway was that reaching FI is hard at any income level unless one grows accustomed to spending far less than that income. The million dollar mark is arbitrary, it's really a matter of how many years your savings will buy that determines your wealth, and by this metric those who have high incomes do not necessarily have such a huge advantage.
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Old 03-13-2015, 07:19 AM   #91
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I've never read the book, but my guess is that it mainly preaches live below your means, always try to save/invest, even if it's only a little. Delay gratification as much as possible. Stuff that might seem common sense to those of us in this forum, but as Gumby said, it if set off the light bulb for other people, it's done a valuable public service.

In my case, I remember delaying a bit of gratification back when I graduated college in 1993. The phrase "SUV" hadn't made the mainstream yet, as I recall, but the market for compact SUVs like the Ford Explorer, Nissan Pathfinder, etc, was red hot at the time. I was working "part time" but up to 39 hours per week, for McDonnell-Douglas Space Systems, with the promise of full time in the near future, and thought I was living large on $10/hour. Plus, I had a second job in a department store.

Well, I went through a brief period where I wanted one of those compact SUVs, most likely a Pathfinder. I think the reality sunk in that I'd be paying $25K or more for something that was slower, clumsier, and more cramped than the '68 Dart V-8 I was driving at the time. And, got about the same fuel economy!

If I had gotten myself into that much debt that early on, who knows how it might have made my financial life turn out in later years? Plus, new cars wear out and, eventually, turn into old cars. And once you get used to a new car, I think it's easy to justify on trading on another new car once the current one doesn't feel or look "new" any more. So it could be easy to perpetuate that spending cycle.

FWIW, I hit "millionaire next door" status late last year sometime. Might not have been able to do that, if I had taken on all that debt when I was just 23. But then, who knows how things could have worked out. As it was, I bought a condo in late 1994, got married in July 1995, and then my life went into financial hell. If I had bought that Pathfinder, I probably wouldn't have qualified for the mortgage on the condo, so that might have kept me at home longer. That might have been bad, in and of itself. Or, it may have prompted me to push myself harder and go get a better job. I guess it really could have played out in any number of ways.

BTW, does anybody know what Mr. Stanley's net worth was? Main reason I'm curious, is because that article pointed out what it called "neat irony" that Mr. Stanley met his death in a Corvette, something not normally associated with modesty and living below your means. But if, a guy can afford, say, a Lamborghini, but settles for a 'Vette, isn't that still living below your means?

Also, the guy was born in 1944, so that would make him 70-71 by now...so that 2013 Corvette could still fall into that "millionaire next door" mindset...delay your gratification until you can truly afford it.
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Old 03-13-2015, 09:06 AM   #92
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It's been a while since I read TMND, but my takeaway was that many (most?) "millionaires" are relatively normal folks, and not the Ferrari-driving, coke snorting, Wall Street types.

Had an uncle who was a good illustration. Built a HVAC and electrical supply business, lived in the same 1960s ranch for forty years, drove a beat-up pickup (though his wife drove a Town Car), and wore Dickies to work.
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Old 03-13-2015, 10:23 AM   #93
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I believe you can, if you can invest $10k-20k per year. Your income makes a big difference in achieving that goal.

Stuck making $30k per year? You probably will not become a millionaire (unless you live in your parent's basement and drive the same Toyota for 40 years).
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Old 03-13-2015, 10:38 AM   #94
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It's been a while since I read TMND, but my takeaway was that many (most?) "millionaires" are relatively normal folks, and not the Ferrari-driving, coke snorting, Wall Street types.

Had an uncle who was a good illustration. Built a HVAC and electrical supply business, lived in the same 1960s ranch for forty years, drove a beat-up pickup (though his wife drove a Town Car), and wore Dickies to work.
You must know my Dad. He is the epitome of the MND. He left a good flying career in 1973 to move South and start off on his own. Built a very modest home (that he still lives in) and started a small business doing commercial restaurant repair (HVAC, plumbing, hell...everything, really) and continued until 1989 when he retired. He hasn't financed a car since the 50's and I don't think has bought a new piece of clothing in 20 years. Even though he NEVER advertised his business and only had 2 employees, he retired a millionaire several times over. He was really my inspiration to be FIREd sooner than later.

I also find it quite entertaining to go out with his friends. Most have had very successful careers (one is a retired Congressman from Florida, but I knew him for over a year before I found that out!) but you would never guess it. They all drive older cars, live in 50's and 60's ranch homes and complain incessantly about the high cost of consumer goods. My Dad has coined a term when he refers to his group, "Threadbare Millionaires".
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Old 03-13-2015, 11:07 AM   #95
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At some point, one has to start enjoying his stash, else it's not delayed gratification but denied gratification. The latter is what Taleb talks about, as quoted by an earlier poster.

I am spending at about my means, if not a bit lower, according to FIRECalc. Boy, I never thought I would be cool spending so much money. You can't take it with you, and besides there are workers who need your money. Spend, spend, spend... Heh heh heh...

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... BTW, does anybody know what Mr. Stanley's net worth was? Main reason I'm curious, is because that article pointed out what it called "neat irony" that Mr. Stanley met his death in a Corvette, something not normally associated with modesty and living below your means. But if, a guy can afford, say, a Lamborghini, but settles for a 'Vette, isn't that still living below your means?

Also, the guy was born in 1944, so that would make him 70-71 by now...so that 2013 Corvette could still fall into that "millionaire next door" mindset...delay your gratification until you can truly afford it.
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Old 03-13-2015, 11:11 AM   #96
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+1 It should be easier today. But one might have to forgo the $500 iDevice, $200 North Face expedition quality fleece, and $200/mo cable package. But it's simply not fair that others can have those things and we can't, right? I mean, we work hard and have a right to enjoy life a little, too!

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I really reject the premise of the article that it is harder to become a millionaire now than it was in 1996. Even putting aside the opportunities to become a millionaire practically overnight working for internet companies, the mere existence of the internet makes frugal living far more plausible.

Pre-internet your low cost entertainment options were limited, TV, radio, libraries, now for very modest cost you have practically the same experience that required going to the movies, concerts/buying CDs, and bookstores.
It is fair easier to get away with not owning cars, since you can work for home,and have many things delivered to you.
You no longer have to live near a big box retailer to get the best prices, which means its a lot easier to live in a lower cost part of the country.
The net makes it much easier to save money on everything.


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Old 03-13-2015, 11:13 AM   #97
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BTW, does anybody know what Mr. Stanley's net worth was? Main reason I'm curious, is because that article pointed out what it called "neat irony" that Mr. Stanley met his death in a Corvette, something not normally associated with modesty and living below your means. But if, a guy can afford, say, a Lamborghini, but settles for a 'Vette, isn't that still living below your means?

Also, the guy was born in 1944, so that would make him 70-71 by now...so that 2013 Corvette could still fall into that "millionaire next door" mindset...delay your gratification until you can truly afford it.
He lived up the road from me in a very nice neighborhood. Nothing really too extravagant, but enough to keep most of the hoodlums out of the neighborhood. He bought it in 2001 for $882,000 (appraised a little over $1M today) but it should be noted that he has NEVER had a mortgage on the property.

As a percentage of NW, I would guess it isn't too extravagant at all.
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Old 03-13-2015, 12:03 PM   #98
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Never read the book. Looking back, we weren't really focused on LBYM per se. The approach was more: save first and spend whatever's left. The goal was to have 6 month's pay in an emergency fund, no debt except the house, and max-out both 401Ks every year. We didn't actually achieve that until the kids were around 10 or 12. Then, as pay increased we started spending more freely for a few years, which yielded a BMW, several international vacations with the kids, and the "dream house." In our 40s, when the kids got to high school, we started to focus on building the taxable account, which curtailed some of the earlier spending. At the time, we were mainly concerned about college expenses. But we ended up funding that from normal cashflow, so the taxable account grew very quickly, ultimately enabling ER at 52. Long story short, it never occurred to us that we were LBYMing because we considered our "means" to be whatever was left after maxing the 401Ks, and we generally spent it all.
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Old 03-13-2015, 12:10 PM   #99
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Robert Shiller points out that cashing out for improved lifestyle at least some of the supposed profits on houses, stocks, and other investment assets is one form of test for how real this "wealth" is. How it has kept up with the things you wish to buy, and how well it withstands selling pressure from people who do not wish to carry it to the grave while still living in their 1950s ranch style in an old suburb.

Over the next decade we might get a demonstration of this test. Until then, all the MND types have is an internal awareness of their innate superiority to others with different ideas..

Ha
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Old 03-13-2015, 05:13 PM   #100
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It's been a while since I read TMND, but my takeaway was that many (most?) "millionaires" are relatively normal folks, and not the Ferrari-driving, coke snorting, Wall Street types.

Had an uncle who was a good illustration. Built a HVAC and electrical supply business, lived in the same 1960s ranch for forty years, drove a beat-up pickup (though his wife drove a Town Car), and wore Dickies to work.
Kinda like Sam Walton (founder of Walmart).

"Even though he was a billionaire many times over, you wouldn’t know it if you met him on the street. He drove [an] old pick-up truck, and he lived in a humble house in Bentonville that almost anyone with a job could have afforded (Michael Bergdahl, What I Learned From Sam Walton, (New York: John Wiley & Sons, 2004) p. 114) and he purchased many of his clothes from Wal-Mart. Bernard Marcus, chairman and co-founder of Home Depot, recalled going out to lunch with Walton after a meeting in Bentonville: I hopped into Sam’s red pickup truck. No air-conditioning. Seats stained by coffee. And by the time I got to the restaurant, my shirt was soaked through and through. And that was Sam Walton; no airs [attempts to impress others], no pomposity [arrogance] (Daniel Gross, Forbes Greatest Business Stories of All Times, (New York: John Wiley & Sons, 1996) p. 274)."

Oh wait, this is about the Millionairs Next Door, not the Billionaires.....
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