Book Report - Millionaire next door

[ats5g]

I have yet to read the book, but I had a question

Question(s): Did the authors take already existing millionares (sp) and see what similar characteristics/habits they had? Did the authors also look to see if people with same characteristics/habits did not become millionares? Or did they only look at the survivors?

Just curious,
- Alec

 

[Cut-Throat]

I have yet to read the book, but I had a question

Question(s): Did the authors take already existing millionares (sp) and see what similar characteristics/habits they had? Did the authors also look to see if people with same characteristics/habits did not become millionares? Or did they only look at the survivors?

Just curious,
- Alec

The book just looked at survivors. I think you have made a good point though. Life throws people plenty of curve balls. You can do everything right and have some medical job problems or others and not reach Financial Independence.

I really believe that people are not in as much control as they like to think. You always hear from the ones that succeded. They tout that everyone can do it, but it's just not true. It is gratifying to them that they made it and someone else didn't. But the luck of the draw has more to do with it than they'd like to think. Most of us were born into families in the U.S. that provided an education, health care and a standard of living to pursue a career.

The people that really know how to stretch a dollar live in the poorest sections of 3rd world countries.

I read the book and thought it was pretty marginal compared to other books out there.

 

[GTCharlie]

Better watch it there. This sounds like "Class Warfare" talk.

Cut-Throat

The book just looked at survivors. I think you have made a good point though. Life throws people plenty of curve balls. You can do everything right and have some medical job problems or others and not reach Financial Independence.

I really believe that people are not in as much control as they like to think. You always hear from the ones that succeded. They tout that everyone can do it, but it's just not true. It is gratifying to them that they made it and someone else didn't. But the luck of the draw has more to do with it than they'd like to think. Most of us were born into families in the U.S. that provided an education, health care and a standard of living to pursue a career.

The people that really know how to stretch a dollar live in the poorest sections of 3rd world countries.

I read the book and thought it was pretty marginal compared to other books out there.

 

[cute fuzzy bunny]

I really believe that people are not in as much control as they like to think.

Aint that the truth. My destination here is the result of a lot of fantastically unlikely events that were far more chance than direction. I guess the whole point is how well you take advantage of events, both exploiting the good and minimizing the bad.

 

[azanon]

Certainly "rich" is a relative term. But just ask anyone with the mean US household income (~$41K) if someone with $1-2M net worth is rich, and I am pretty certain I know what the answer will be.

First, the mean US household income today is actually in the mid 60s.  If you want a source, i can find you one.  That's not to be confused with the mean annual salary for one working individual.  

Back on point though, anyone means everyone and I told you my answer...... it wasnt "rich".  

Case in point:

My dad (59) is worth approximately 2 million right now.   I can assure you he isnt rich.  He is a typical TMND, makes about 150k per year.  Oh sure he has a nice house (3500square feet), and drives a relatively new car.  But rich?  That's a little overboard.   2 million is about what he needs to retire on and not work anymore given his and mom's annual expenditures of roughly 75-80K/year.  If he retired now, he'd probably maintain that standard of living give or take.  That being the case, 75k/year in spending, IMHO, certainly doesnt qualify one as being rich.   Upper-middle class would be the highest descriptor i'd use.

Now, if one were 25 years old and had 2 million;  ok i'm with ya there;  he's rich.  hehe

 

[John Galt]

Hello azanon. "Rich" is a pretty vague term at best,
but your dad is super rich in my dictionary. Although
I've hobnobbed with plenty of wealthy folk, nobody in
my family tree at any time was even close to a
million bucks. Take my granddad (either side). These
guys did about what they wanted their whole lives,
had a lot of fun and never left anything for their heirs.
Were they "rich"? Not in the coin of the realm maybe.

John Galt

 

[azanon]

Yeah but that's just the thing; he got that way because he's been frugal all his life, all while I was growing up, to even now. Heck, getting the man to spend money on any kind of pleasure is harder than pulling teeth. Case and point; i tried to get the man to get satellite internet (he lives in the country) and a LCD TV recently. But NOO.. his 27" regular tube is just fine (despite the fact he spends 3+ hours watching it at night), and as for the satellite internet, he'd have to pay an installer 100 bucks to come install necessary components and cut some trees downs that are blocking his signal. So there goes that!!!

What i'm getting at is that, is that he wouldnt have 2 million had he not always been frugal. Yes i agree rich is relative, but i just dont see how its very accurate to call someone that lives frugally all their life and middle class at best. To me, rich people have the means to both spend lavishly and have millions in the bank too.

Sam walton, for an extreme contrast, was truly rich, and only drove an old beat-up ford by choice. He could easily have what his heart desired, and still have millions in the bank. My dad could not afford both.

In the past, when i've described his financial position, i used the term "well-off". But i agree, its all relative.

 

[azanon]

I didnt find out about his position until just a few years ago.  It was pretty incredible how non-chilantly i found out.  I've always been good with pc's and apparently he was having trouble with his quicken program, so he asked me if i could help him integrate his files with ameritrade or whatever it was.

Well, we loaded it up, and then once quicken opened, there was the tally on the left hand column;  something near 2,000,000 at the bottom.  I couldnt restrain myself when i said holy cow dad, is that also wrong?  He said, no that part is right, while smiling.    

 

[Cut-Throat]

azanon,

I also use Quicken and they encourage you to input all of your assets (and it works better this way) Primary residence, other property, even Cars and Furniture. The bottom of the left hand colum of Quicken is total Net worth (which would include any asset that you put into Quicken - and what you valued it at.)

worth $2 Million and having $2 Million Liquid are miles apart.  Just something to keep in mind.

 

[azanon]

Unlike me, he's only tracking liquid assets with it.   He also doesnt bother with the small stuff, like say his month-to-month checkbook.   I guess like you, i use quicken to track everything.

If net worths the issue, he could be worth twice that.  He owns two pharmacies that bring in a god aweful amount of income, not to mention he's a pharmacist himself.  This is to say nothing of his other assets (the house, cars, other land/buildings, etc).  Still back on point, i'd call him well-off, not rich.

(edit)

worth $2 Million and having $2 Million Liquid are miles apart. Just something to keep in mind.

You did spark my curiosity though; how so? When i reflect on my hard assets (house, cars mainly) they arn't liquid but i could certainly get them that way if i needed to within a half year. Personally, i make sure my estimates of their worth are approximately what i could get for them.

IMHO, someone holding 2 mil in cash, is in the same shape as someone with 3 mil, and 1 mil in liabilities, provided that my math is serving me correctly.

 

[cute fuzzy bunny]

First, the mean US household income today is actually in the mid 60s. If you want a source, i can find you one. That's not to be confused with the mean annual salary for one working individual.

The mean US household income (mean third fifth, 2003 US census) is about 43k. Median is 41k. Thats household, not individual.

But as with any study, if you choose a particular one and take the data the way you want to, you can make this number say a lot of different things.

 

[azanon]

Got an actual source TH?  I just recall reading otherwise not long ago, and personally being shocked it was mid 60s, which is why I distinctly remember it.  I would have thought in the 50s. I'll see what i can find, but i don't remember where i saw that.

(edit) Ok confirmed what you're saying:  http://www.census.gov/hhes/income/income03/statemhi.html    Hmm, must have misread something then, my bad.     43K household seems low to me though;  sounds like the average household is knocking on poverty's door.

 

[Cut-Throat]

sounds like the average household is knocking on poverty's door.

Hence you proved the point. If your dad's not rich then these folks are in poverty.

So it's all relative. If I woke with a Billion Dollars, I'd have more than enough money to do anything I wanted forever. If Bill Gates woke up with only a Billion, he might jump out the window in an act of desperation.

 

[cute fuzzy bunny]

Sure...its worth a few minutes to ponder, the datas interesting

http://www.census.gov/hhes/income/histinc/inchhtoc.html#3

The 60-something figure is for the fourth fifth mean.

I'm sure you heard someone say that 60-something was the average, mean or median. In 5 minutes I could find 10 studies that say 10 different things. I also wouldnt count on the US census for 100% good data. But its probably better than most sources.

Whats interesting to note is all the segments (fifths) are moving upwards except for the bottom fifth...pretty much the poor are getting poorer but everyone else is stable and trending upwards.

Break it down into race though, and you see that most non-whites are losing ground year on year.

Rich is certainly a relative term but I think it may be worthwhile to consider ones position against the rest of the world, not just the unusually well to do US positions. Having a paid off house, a car and regular meals puts you ahead of the vast majority of people worldwide. Having financial security, whether that means you will or wont buy a bigger tv if you can afford it, makes you rich. By a few billion peoples metric anyhow.

 

[azanon]

True, true.  I was born into that family, so i'll admit my views of money are a little warped to the "spoiled" side.  

As for Bill Gates, my perception of him is he really doesnt do it for the money.  The man could have anything his heart desired, but he continues to work.  Folks like that do what they do because they're passoniate about it, not to get rich.   I saw him on Leno once (or some talk show), and he was like a little giddy kid that was so genuinely anxious and excited about his new upcoming products. Supposedly he's only going to leave a paltry 1 million or something like that to his offspring because of his strong belief in the work ethic.

 

[Marshac]

Supposedly he's only going to leave a paltry 1 million or something like that to his offspring because of his strong belief in the work ethic.

I feel sorry for his poor cash-straped child ... his daughter could always write a book about growing up with B.G. as a father..... i'm sure the book rights would be worth a ton of money.

 

[Pennhaven]

First, the mean US household income today is actually in the mid 60s. If you want a source, i can find you one. That's not to be confused with the mean annual salary for one working individual.

Back on point though, anyone means everyone and I told you my answer...... it wasnt "rich".

Sorry, I meant to say median household inome. The latest number for which is $43K, but thank you for your kind offer to find me a source.
http://www.epinet.org/content.cfm/webfeatures_econindicators_income20040826
http://www.whitehouse.gov/fsbr/income.html
http://www.census.gov/hhes/income/histinc/h06ar.html

BTW the mean household income is $59K. And I suspect most people making that income would also consider someone with a couple million as being rich, even if they are incorrect by your definition.

As to the "point"; I understand your point that the word "rich" may be misleading. I agree that what is rich to one person may not be to another, although it sounds like you feel that what is not rich to you must be not rich to everyone. :-/ But that really is beside the point of my original post.

My point was how difficult it is for some folks to accept the fact that many people who are relatively well off are frugal rather than extravagant. In my original post I was talking about middle management types I worked with who could not accept the concept that people richer than they were would chose not to spend more money on cars than they did. I think that this says something about our culture, and in my opinion it is not necessarily good.

Disputing what the word rich means, and what the correct figure for typical household income is, are not really germane to the point I was trying to make.

 

[cute fuzzy bunny]

I'm afraid I have to squash the bill gates "giddiness". I know him and have been in a large number of meetings with him. He continues to work because he likes the power. He definitely still has a lot of teenage nerdy technical interest in cool new stuff. He and I regularly talked about new technologies and programs my company was working on and I have to say it was enjoyable to feed a very absorbent mind. For the most part though, I didnt enjoy any meetings with him. I guess it was kinda fun watching him brutalize the senior management staff of both his own and my company.

Remember also that this guy got where he got on a pair of lynchpin events that he got lucky on. One was when Gary Kildall's wife was packing up for a vacation and elected to defer meeting with IBM on making CP/M the OS for their new PC (he did all the technical stuff, she did all the business stuff), and the other was when Microsoft decided to diverge with IBM on next generation OS (windows 3.1 vs OS/2) and IBM paradoxically produced a technical winner with no marketing program. Frankly CP/M was a better product, as was OS/2. Microsofts only other products at the time, programming languages, were awful.

This is a great example of how having all the information in the world can lead to bad investing. At the time, I would have all but assured you that CP/M would be the predominant OS for many years, for a huge array of reasons. Even when IBM chose DOS, I was certain that CPM-86 would run it over in the aftermarket.

And when Microsoft decided to fork roads with IBM on OS/2? I would have guaranteed that IBM would crush them within a year or two, relegating microsoft to a maker of bad interpreters and compilers.

Its all about chances and fate I guess, and taking advantage of those. Hell, I wouldnt be wealthy and ER'ed today except for a chance meeting in a parking lot 20 years ago and helping a guy I really didnt care much for get a job on the other side of the country.

 

[retire@40]

As for Bill Gates, my perception of him is he really doesnt do it for the money.  The man could have anything his heart desired, but he continues to work.  Folks like that do what they do because they're passoniate about it, not to get rich.   I saw him on Leno once (or some talk show), and he was like a little giddy kid that was so genuinely anxious and excited about his new upcoming products.

He might be in the same mentality a lot of people who just work their whole lives are in. Maybe all he enjoys is his work because that's all he has done his whole life. Does he have any hobbies or other interests besides Microsoft? I never remember hearing or seeing him surfing, para-sailing, or going to the Playboy mansion, for example. If all he does is put on a suit and tie and work in an office all day, then I wouldn't trade my life with his.

One major reason I decided when I was a teenager to ER by 40 or 50 is because I knew so many old people with a lot of money who just worked their whole lives to accumulate money and just died or got too old and sick without enjoying it. Life is too short not to retire early, but most people outside this forum don't get that and I feel sad for them. People like Bill Gates might be passionate about his work, but people like me are passionate about life.

The "Parable of the Cave" is the best example I can give to those who do not plan to ER.

 

[Nords]

Bill Gates' best friend...

... is Warren Buffett.

And it's not for their money or their job skills-- they like each other for their minds.

Both are good bridge players. Not professionally good, but capable of holding their own. They've even partnered together in at least one pro tournament. Maybe it's the only thing the two of them can compete at, because Buffett doesn't do tech and Gates certainly doesn't do finance. Perhaps the lack of overlap allows them to preserve their friendship without falling into competition.

Gates is also reported to enjoy jigsaw puzzles; he & Melinda work on designs made from rare hardwoods. (Insert your tech joke here.) Call me a party animal, but that's a wild & crazy life for a multi-billionaire.

A decade or so ago, "Psychology Today" ran an article profiling the symptoms of autism and Asperger's Syndrome. It covered behavior, perception of the world, social skills, and so on. Several months later they ran a profile of Bill Gates. The two articles weren't explicitly linked but they had the same format, layout, length, subject order, etc. It could have been a coincidence but that quickly caught fire with the tabloids. There was lawsuit talk but I don't think Gates wanted a bunch of lawyers debating the degree to which he's autistic.

Gates-bashing aside, we ERs should all consider that he's found his avocation-- not just a vocation or a great job, but the ONE THING he loves doing more than ANYTHING else. I think that one of the reasons we're all ER'd is because we decided that we couldn't hack it (or didn't want to) in a REAL job. Yet Gates gets to spend the entire day (and night), for the rest of his life, solving problems and lording his superiority over his "peers". Not only that, but he's rewarded for it! It's not so much about controlling people as it is forcing them to acknowledge how brilliant he is. Why in the world would he ever retire?!? C'mon, look at this photo and tell me this is a "normal" guy. http://www.ebaumsworld.com/mugshots.html

Same with Buffett. He spends all his time on finance-- reading, researching, debating, and living it. It's definitely not about the money or the power, but he sure gets a thrill out of making little pennies into big bucks. He's found his avocation and he'll never stop doing it. (Sorry, no Buffett mugshots available.)

While I'm on a roll here, consider rock & pop guitarists. VH-1's "Behind the Music" staff did a documentary a few years ago on their obsession. (I don't think BTM will ever knock "60 Minutes" off their pile of investigative-reporting Emmys, but due to a lack of competition VH-1 is the best at "popular music history". For whatever that's worth...) The world's top -- guys like Hendrix, Richards, Paige, Townshend, Perry, Van Halen, Prince, Vaughn, B.B. King, Berry-- just can't help themselves. Guitars are the first thing they pick up in the morning and the last thing they put down at night. Everything else in their lives is just a distraction from boredom until their fingers heal enough to let them go back to the guitar.

I don't any of these guys fumbled around with high-school counselors & college self-assessment tests trying to find their avocations. All of them were hard-wired from the moment they were born to do what they've been doing. They could no more stop doing it than the rest of us could decide to stop eating or drinking.

So don't feel sorry for them. Feel sorry for us ERs, still fumbling around on the outskirts of a working society hoping to find our life's passion. Because that's certainly how much of society sees us!

 

[Hyperborea]

I'm sure you heard someone say that 60-something was the average, mean or median.

The mean is $59K so that might be what they heard. The mean though is a pretty bad measure because it can and is heavily skewed by a small number who make a very large amount.

http://www.census.gov/hhes/income/histinc/h06ar.html

Rich is certainly a relative term but I think it may be worthwhile to consider ones position against the rest of the world, not just the unusually well to do US positions.  Having a paid off house, a car and regular meals puts you ahead of the vast majority of people worldwide.  Having financial security, whether that means you will or wont buy a bigger tv if you can afford it, makes you rich.  By a few billion peoples metric anyhow.

This is worth looking at to put things into perspective.
http://www.worldrevolution.org/Projects/Features/Inequality/USInequality.htm

For azanon, if making $160K or more every year which places you solidly in the top 5% of income earners isn't rich then I'm not sure what objective measure you would use. On another financial discussion board there were folks suggesting that even $300K / year was only just "middle class". I think a lot of people have had their perception of "normal" thrown out of whack. Probably by TV programs showing all kinds of stuff as "normal" that can only be afforded by those with far above normal incomes like $160K / year.

 

[farmerEd]

For azanon, if making $160K or more every year which places you solidly in the top 5% of income earners isn't rich then I'm not sure what objective measure you would use. On another financial discussion board there were folks suggesting that even $300K / year was only just "middle class". I think a lot of people have had their perception of "normal" thrown out of whack. Probably by TV programs showing all kinds of stuff as "normal" that can only be afforded by those with far above normal incomes like $160K / year.

I have to suspect that anyone that thinks that $300K/year is only middle class, or even those that think $160K is only middle class, are destined to feel that they never have enough money and will always feel that if they could just get up to $xxxxx they will have enough.

 

[ESRBob]

Re: Bill Gates' best friend...

...So don't feel sorry for them.  Feel sorry for us ERs, still fumbling around on the outskirts of a working society hoping to find our life's passion.  Because that's certainly how much of society sees us!

Nords,
I don't disagree: I for one clearly see ER as an opportunity to discover my true 'avocation' and do it -- when I had to work I wasn't finding it, and I certainly wasn't doing things at work that I loved enough to want to do forever.

I am guessing, though, that most people are in the same boat, ie. not loving their work. They just put up with work in order to get the economic units to continue living the lifestyle they have grown accustomed to. So ER's are not alone in never having found their lifetime's passion in work, they are just lucky enough to have the time to try to find something better in earnest.

Somebody smarter than I said, "Most people live lives of quiet desperation". ERs have a shot at living a better kind of life.

Finding your passion/avocation and doing it,-- paid or unpaid -- is my definition of success.

btw anybody know how/why Bill Gates was in an Albuquerque mugshot (presumably during the early years of starting microsoft) -- got a little crazy after an office party? Bit of dope-smoking on the weekend? Riding too fast on his skateboard? He looks pretty calm in the picture...

ESRBob

 

[Hyperborea]

Re: Bill Gates' best friend...

btw anybody know how/why Bill Gates was in an Albuquerque mugshot (presumably during the early years of starting microsoft) -- got a little crazy after an office party?  Bit of dope-smoking on the weekend?  Riding too fast on his skateboard?  He looks pretty calm in the picture...

IIRC it was speeding so fast that it was careless (vehicular offence) or reckless (criminal offence) driving.

 

[Hyperborea]

Maybe No "Lifetime" Passion

I am guessing, though, that most people are in the same boat, ie. not loving their work.  They just put up with work in order to get the economic units to continue living the lifestyle they have grown accustomed to.  So ER's are not alone in never having found their lifetime's passion in work, they are just lucky enough to have the time to try to find something better in earnest.

It may also be that there is no "lifetime passion". There may only be a succession of approximations to it. I started out at one time wanting to be an astrophysicist/cosmologist but I wandered into software which I had been doing for spare cash since early high school. It was fun for a number of years and there were some pretty interesting challenges. Those challenges are all starting to look like repeats though and I'm wanting to do something different.

What I think I'd like to spend my time doing nobody is going to pay me for so I'm going to have to become financially independent and then do it. I can do some of it part time now but I'll have to keep doing the current day job to keep the economic units coming in until I'm FI.