Can one really become the 'Millionaire Next Door'?

[Options]

But, for most of us, the good fairy did not bonk us on the head and make us rich. We had to do many things over a long period of time to get to where we are.

This.

+1

One of the statistics quoted in the book “The Millionaire Next Door” states that the majority of millionaires are self-made. I believe the number was 80+ percent. So, yes it can be done , but it is not easy.

This too.

 

[Ronstar]

I read the book years ago and adopted most of the practices referenced in the book. I eventually retired early thanks in part to the lifestyle changes I made after reading the book. It is possible to save millions over an extended period of time. But it does take hard work. I really didn't get much from the article - there will always be those that chastise LBYM.


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[travelover]

.........We had to do many things over a long period of time to get to where we are.

Well, yea. The hardest part for me was being male, white, tall, middle class and American.

 

[Big_Hitter]

my mother has always said I should have been born rich instead of good looking

 

[Totoro]

my mother has always said I should have been born rich instead of good looking

Born poor, blame your parents. Married poor, blame yourself.

My dad also used to say "My daddy has more money than your daddy" to me. I could reply now though that "luckily, my daddy's son is more succesful than your daddy's son.", but that would be cruel (and we're not on speaking terms anyway).

 

[DJRR]

my mother has always said I should have been born rich instead of good looking

Nah, you can always get rich (see answers above). They will never be good looking

 

[Del Q]

I read The Millionaire next door fairly recently, long after I'd developed the saving & investing habits he describes in the book. I really appreciated how he described how humble and genuine many of the millionaires were that he met, very few phonies. I particularly liked the story of the multi-millionaire and his dog at the town home association - those of you who have read the book will remember how he handled their complaints and how the others (sn*bs) in the association caved into letting him keep the dog....I'd rather be around guys like him and his dog.


Another good book that I read when I was just getting started was The Wealthy Barber, it may have been over simplistic, but it helped me started planning. I just wish Vanguard Index Funds would have been easier to invest in when I first started nearly 30 years ago.


I also read somewhere a long time ago that if you save 30% of your income for 30 years you'd be FI, no matter what your income level is - it's relative. I've been doing this for 29 years and will pull the plug after year 30.

 

[Big_Hitter]

I agree there is a big difference between the FIRED "trust funders" and the FIRED "workers" at my golf club.

 

[sheehs1]

Some confusion there by Taleb I think. For many it's not heroism but about freedom.

I'd add in a little bit of "fear"!

We have all had our "lightbulb" moments. Mine was when I was able to view the holdings of a defined benefit/401k corporate plan. On paper it showed how much was earned thru investments each year, then showed what was added each year which together then totaled "X". Here in my hands was the proof and the motivation to do the same. I immediately sat down and wrote out projections and goals: What I could earn and what I could reasonably add each year. As of today I am 50% ahead of my initial projections. That whole process led me to incorporate the LBYM lifestyle and to learn more about investments, finance, etc.

For the record, I read "The Millionaire Next Door" also. The message I took from it was "you can do it too". I wanted to be that millionaire that didn't look like one.

 

[robnplunder]

We don't want everyone being able to do it. Somebody has to spend, so that the companies whose stocks I own make lots of money. Remember the Paradox of Thrift.

+1. Without spenders, there would be less millionaires next door.

Methinks, in a parallel universe, there is lateretire.org forum where they are dissing LBYMers as fools who save, save, save but never enjoy what they save.

 

[Totoro]

I also read somewhere a long time ago that if you save 30% of your income for 30 years you'd be FI, no matter what your income level is - it's relative. I've been doing this for 29 years and will pull the plug after year 30.

the graph from Jacob in this article is illuminating:
The Shockingly Simple Math Behind Early Retirement

 

[friar1610]

Of course this forum is where this message finds natural agreement. But look around and how people tend to handle money. I walk down the street, and except for the poor, people are stylishly dressed, and restaurants bars and bistros are full of exuberant crowds eating expensive food and drinking expensive drinks. I see my local son and his wife maybe monthly, and I am not sure I have ever seen them when they are not wearing new stylish clothing. And it is not like they didn't have a lot of knowledge and experience of inexpensive living growing up.

Ha

I notice the same thing on both fronts. In addition to the clothes (most of it with logos on the outside) it's the cars! I see lots of Mercedes, BMWs, Audis, Lexuses, etc. around here. All the luxury car dealers seem to be expanding and opening new dealerships or at least rebuilding/enlarging the ones they already have. I'm sure leases and 7 year car loans are behind many of the wheels people are driving. (And the dealers are no doubt "Millionaires Next Door!")

For me it's a daughter and her husband as well as a single daughter. Almost everything is the latest and the best. I'm sure they will both get something when we pass on just because we see no reason to pi$$ it away on things we don't want or need. But leaving a legacy to be spent that way sure isn't high on our must-do list either.

 

[brewer12345]

I notice the same thing on both fronts. In addition to the clothes (most of it with logos on the outside) it's the cars! I see lots of Mercedes, BMWs, Audis, Lexuses, etc. around here. All the luxury car dealers seem to be expanding and opening new dealerships or at least rebuilding/enlarging the ones they already have. I'm sure leases and 7 year car loans are behind many of the wheels people are driving. (And the dealers are no doubt "Millionaires Next Door!")

For me it's a daughter and her husband as well as a single daughter. Almost everything is the latest and the best. I'm sure they will both get something when we pass on just because we see no reason to pi$$ it away on things we don't want or need. But leaving a legacy to be spent that way sure isn't high on our must-do list either.

Subprime auto loans are getting frothy and the average new car loan is for 66 months. A high percentage are for 72 and 84 months.

 

[marko]

If it was easy, everybody would be doing it! (and they'd all be on this forum!)

 

[imoldernu]

Hmm...accepting failure... graciously.

 

[W2R]

I notice the same thing on both fronts. In addition to the clothes (most of it with logos on the outside) it's the cars! I see lots of Mercedes, BMWs, Audis, Lexuses, etc. around here. All the luxury car dealers seem to be expanding and opening new dealerships or at least rebuilding/enlarging the ones they already have.

In New Orleans it seems like most of the people driving luxury cars are big time drug dealers. Even though I suppose I could afford to buy a car like that, I don't like the image, at least not here, not now.

 

[Dog]

I read the book about 15 years ago and it resonated with me and validated DH and my lifestyle. It did open my eyes to the possibility that all the people driving expensive cars, buying big homes, shopping at Nordstrom and eating out at the trendy spots weren't necessarily "rich" like I assumed.
I felt the LA Times article missed the main point of the book and was a bit snarky.


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[ikubak]

One time, while drinking some wine with my next door neighbor and his wife, they told us that in private, they called DW and I the millionaire's next door. We got a chuckle out of that but didn't let it be known that we really were millionaires. We live in a modest neighborhood in a modest home built in the late 50's. We live in a relatively small college town and everyone knows everyone's business, so they knew we paid cash for our house and have spent some money to get it the way we want it.

Regarding the article, I think it is very feasible to become a millionaire next door. We have always lived on about the same amount $ 40K-50K a year. We always contributed a large amount to our retirement accounts and took a few calculated risks when the opportunities presented themselves. It was painless and I don't feel like we missed out on anything.

 

[Choices]

we have noticed many more Mercedes and Beemers on the roads this year. We attribute it to folks in the "growth industry" of legalized MJ. I drive an 11 yr old Toyota.

 

[clifp]

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.

 

[Mo Money]

Per Dog:

I read the book about 15 years ago and it resonated with me and validated DH and my lifestyle. It did open my eyes to the possibility that all the people driving expensive cars, buying big homes, shopping at Nordstrom and eating out at the trendy spots weren't necessarily "rich" like I assumed.
I felt the LA Times article missed the main point of the book and was a bit snarky.

+1

 

[NW-Bound]

... The hardest part for me was being male, white, tall, middle class and American.

Hey, doesn't smart trump all those attributes? Look at Yoda, for example.

OOPS! Yoda lives in a cave. And look at his robe! Never mind.

Well, at least Yoda retired early, I hope.

Did he?

 

[Philliefan33]

Well, at least Yoda retired early, I hope.

Did he?

I think Yoda was 900 years old when he was training Luke Skywalker. Maybe Yoda was retired, but accepted contract work for that? It doesn't sound like ER, but I don't know the typical lifespan for a Yoda.

 

[Golden sunsets]

"Luck is when preparation meets opportunity".

+1. I agree with this after reflection. DH gets so mad when I (small business owner) say that an angel has always sat on my shoulder.

 

[Fred123]

Disclaimer: I haven't read the book myself. But, my understanding of the basic premise is that an average earner can become a millionaire by living modestly, saving, and investing the savings.

It turns out that we have the perfect tool to test this: Firecalc! Even though I think it's over-optimistic, let's give it a shot. I ran it in reverse, starting with a 0 portfolio and using negative income, and it turns out that saving $15K/year for 30 years, invested in the default FC portfolio gives a 50% chance of saving about $1.2M. Now, the median household income in the US is $51K, and the taxes (SSI/Medicare + Fed) are about $6K, so that leaves about $45K for everything. So that leaves $30K/year for everything if you are going to become a millionaire in 30 years. And that assumes a 50% chance of "winning." If you want, say, a 75% chance it looks like you'd need to save $20K/year, leaving $25K/year.

No doubt there will be some here that say that they could raise a family on $25K/year, but I think most would agree that that would be pretty unpleasant. And, I think that the vast majority of participants here made much more than $50k/year (in 2014 household) dollars during the course of their career. So I have to disagree with most posters here and say that the article was actually right on. Sure, it helps (a lot) to be frugal, but it also helps to be lucky.