Can one really become the 'Millionaire Next Door'?

[World Traveler]

I think you can still become a millionaire. A lot is common sense. I think knowledge and acting on it is key. This forum is great and getting the different opinions helps form one's own strategy for the American dream.

As for the article. I question the author's reason why now and not when the two were alive to defend against the criticism. How many people were inspired by TMND? I think the dream is alive and well.

 

[Fred123]

Why are you waiting? Is it some sort of contest?

Because of the oft-repeated claim (including in, yes, TMND) that "ordinary" households can accumulate extra-ordinary nest eggs. It's no contest, I just like to see claims backed up by evidence. Blame it on my scientific education.

Ordinary to me means near median income households without significant luck (i.e. early employee of Google).

 

[growing_older]

I think it's hard to be a MND with a lower salary. If you have a higher salary, you can spend more and save more. A few with average or less salaries end up millionaires through savings. But a lot with above average salaries do not end up MND, even though they had a higher salary. Everyone seems to take away from the book a slightly different slant, but one of the messages I got was "even a high salary doesn't guarantee success or financial independence." Successful MND type also lived below their means, were less susceptible to living up to expectations that millionaires enjoyed expensive lifestyles and quietly enjoyed their financial success and security. Of course, that's the message that I wanted to hear

 

[World Traveler]

I like this article. 19 Things The Millionaire Next Door Won't Tell You

How To Act Like A Millionaire - Business Insider

 

[haha]

I guess there is a shortage of controversy in daily life?

Welcome to "Controversies a la carte."

Ha

 

[haha]

I like this article. 19 Things The Millionaire Next Door Won't Tell You

How To Act Like A Millionaire - Business Insider

A MND may not be impressed by the car, but it is hard not to be impressed with the woman in white pants standing next to it. Maybe she'd like a ride in the MNDs F-150 out to a barbeque at his 60 year old suburban ranch?

Sure, maybe.

Ha

 

[Gumby]

Because of the oft-repeated claim (including in, yes, TMND) that "ordinary" households can accumulate extra-ordinary nest eggs. It's no contest, I just like to see claims backed up by evidence. Blame it on my scientific education.

Ordinary to me means near median income households without significant luck (i.e. early employee of Google).

It has been many years since I read it, but as I recall TMND, they spoke about playing good offense (making money) as well as good defense (not spending money). They wrote that a fair number of people make sufficient money to become a millionaire, but they piss it away on buying stuff that they do not really need. As I recall, they really emphasized that "acting rich" was often a huge barrier to actually being rich. The one thing I do not recall is the authors saying that everyone, or even most people, could become millionaires. And I have never gotten the impression that people on this board believe that anyone, no matter what their income, can become a millionaire either.

I suppose you're entitled to construct whatever strawmen you want, but you shouldn't be surprised when others decline the opportunity to help you tear them down.


EDIT TO ADD:

Upon reflection, I think you're entitled to a better answer than that. So let's approach it this way. The Census Bureau says that the median household income in 2013 was $51,939 (source -- http://www.census.gov/content/dam/Census/library/publications/2014/demo/p60-249.pdf). Now, let's assume that the household really buckles down and saves 10% of their income, which would be savings of approximately $5194 per year or $433 per month. Let's assume that they earn a 4% real return on their investments. Using this calculator http://www.interestcalculator.org/savings.php we see that after 40 years (say, ages 22-62) of saving, they will have amassed only $511,789. They would either need to save 20% of their income to become millionaires, or earn 6.6% in real returns to amass a million, or some combination of greater savings and higher return (15% savings and 5.1% real return would work). It would indeed be difficult, but maybe possible for a few.

 

[daylatedollarshort]

Because of the oft-repeated claim (including in, yes, TMND) that "ordinary" households can accumulate extra-ordinary nest eggs. It's no contest, I just like to see claims backed up by evidence. Blame it on my scientific education.

Ordinary to me means near median income households without significant luck (i.e. early employee of Google).

I think the TMND focus was that people from middle class backgrounds, and not trust fund kids with millionaire parents, were able to become millionaires. Most did not have median household incomes. Most had 4 year college degrees and many had masters and doctorates. Most had high incomes or at least high income potential careers like business owners, physicians, farmers, ranchers, attorneys, middle managers or above or engineers. The book never claimed a household could have a median income and become a millionaire so I am not sure where you are getting that from. The first chapter is here and average household income was $247K in 1996, which would be $367K today.

There is a difference between saying ordinary people can go to school, earn a masters degree in engineering and become rich and ordinary people can get a job as a Walmart greeter and become rich. The book didn't ever claim the latter case to be true. That was covered well in the first chapter by the description of the typical MND household.

There are all sorts of charts and lists of common millionaire professions in TMND and follow up books. You can find them in Google books which is where I got the above list of common professions of millionaires (from the Stop Acting Rich book).

 

[NW-Bound]

I think most posters here have agreed that while frugality may be a necessary condition to become a millionaire, it is definitely not a sufficient condition. And that's that. We all know people who are our peers, and with our income, but do not have the money we do. I think that's what TMND book is about though I have not read it.

A MND may not be impressed by the car, but it is hard not to be impressed with the woman in white pants standing next to it. Maybe she'd like a ride in the MNDs F-150 out to a barbeque at his 60 year old suburban ranch?

Sure, maybe.

Ha

OK, you tickled my curiosity, so I had to click on the link to see the car, and the woman too, of course. And as the photo caption says, an overpriced luxury car does not impress me. As for the woman, well, she's too young and too high maintenance for me, so impressive or not, I would only look, as I always do.

 

[Chuckanut]

I think many of us take well thought out risks when we make some investments. We want to take this much risk *** for this much potential gain **********.

When we add to our stock index fund after a big market drop such as 2009, or buy 10 year treasuries when rates were near double digits. However, these opportunities don't occur very often. My 2 ¢.

 

[Fred123]

It has been many years since I read it, but as I recall TMND, they spoke about playing good offense (making money) as well as good defense (not spending money). They wrote that a fair number of people make sufficient money to become a millionaire, but they piss it away on buying stuff that they do not really need. As I recall, they really emphasized that "acting rich" was often a huge barrier to actually being rich. The one thing I do not recall is the authors saying that everyone, or even most people, could become millionaires. And I have never gotten the impression that people on this board believe that anyone, no matter what their income, can become a millionaire either.

I suppose you're entitled to construct whatever strawmen you want, but you shouldn't be surprised when others decline the opportunity to help you tear them down.

Not sure where you're going with this, but there have been several posts here that stated that one can become a millionaire on a modest income, and that if you just live a frugal lifestyle all would be well. I was responding to them -- no strawman there.

I also responded to the TMND statement that an ordinary person can become a millionaire (look it up -- it's in the book), at least if you consider ordinary to be a highly educated professional. He does bring up more mundane small business occupations as other possibilities, but then strongly recommends *against* them. Since perhaps 10% of the population fits into the highly educated professional category, I wouldn't consider that to be ordinary either. No strawman there either.

To some, TMND is clearly the Holy Book. To me, it's a collection of platitudes, badly conducted research, and anecdotes. To each his own. I now bow out and leave the discussion to those who wish to continue to beat this dead millionaire horse.

 

[Gumby]

Not sure where you're going with this, but there have been several posts here that stated that one can become a millionaire on a modest income, and that if you just live a frugal lifestyle all would be well. I was responding to them -- no strawman there.

I also responded to the TMND statement that an ordinary person can become a millionaire (look it up -- it's in the book), at least if you consider ordinary to be a highly educated professional. He does bring up more mundane small business occupations as other possibilities, but then strongly recommends *against* them. Since perhaps 10% of the population fits into the highly educated professional category, I wouldn't consider that to be ordinary either. No strawman there either.

To some, TMND is clearly the Holy Book. To me, it's a collection of platitudes, badly conducted research, and anecdotes. To each his own. I now bow out and leave the discussion to those who wish to continue to beat this dead millionaire horse.

It appears we cross-posted, so I'm reposting the edit to my last post

Upon reflection, I think you're entitled to a better answer than that. So let's approach it this way. The Census Bureau says that the median household income in 2013 was $51,939 (source -- http://www.census.gov/content/dam/Ce...mo/p60-249.pdf). Now, let's assume that the household really buckles down and saves 10% of their income, which would be savings of approximately $5194 per year or $433 per month. Let's assume that they earn a 4% real return on their investments. Using this calculator Savings Calculator we see that after 40 years (say, ages 22-62) of saving, they will have amassed only $511,789. They would either need to save 20% of their income to become millionaires, or earn 6.6% in real returns to amass a million, or some combination of greater savings and higher return (15% savings and 5.1% real return would work). It would indeed be difficult, but maybe possible for a few.

 

[razztazz]

Anyway, about "no can lose", I did lose financially relative to staying at megacorp,

Then you didn't lose hence no real risk. You just did one thing vs another. If you define risk that way everybody always loses vs something else. The biggest winner of all time is a loser if you compare him to something else that would have (See? "risk") made him the biggest winner of all time but a little bit more so.

 

[NW-Bound]

Ah, but over such a long time as 4 decades, inflation will help our median household get to millionaire status with ease.

Let's assume that they earn a 4% real return on their investments. Using this calculator Savings Calculator we see that after 40 years (say, ages 22-62) of saving, they will have amassed only $511,789.

At 3% inflation, the cumulative inflation in 40 years is huge, in fact a factor of 3.26X. So, that $511,789 would become $1.67M!

Now, this allows our household to save only $433/1.67 = $259/month in today's dollars. That is easier to do by cutting out some expenses such as eating out, movie tickets, new cars, etc... They may not feel so wealthy in the year of 2055 with their millionaire status though.

Seriously, a household with two incomes can reach millionaire status a lot easier than with one bread winner. But I am sure that many people in that financial condition still think it is beyond their reach, if it is not pointed out to them.

I have kept telling my children that they can become millionaire on their own, if they save. Perhaps I should buy them this book.

 

[Gumby]

Ah, but over such a long time as 4 decades, inflation will help our median household get to millionaire status with ease.



At 3% inflation, the cumulative inflation in 40 years is huge, in fact a factor of 3.26X. So, that $511,789 would become $1.67M!

Now, this allows our household to save only $433/1.67 = $259/month in today's dollars. That is easier to do by cutting out some expenses such as eating out, movie tickets, new cars, etc...

Yes, but I thought that sticking to an inflation adjusted amount would avoid the criticism that a million dollars of purchasing power today should be the measuring point.

 

[utrecht]

Police officers make a pretty good salary, at least in urban areas. Here in Seattle, police officers make $90K/yr after 5 years. For the two of you, that would be 180k, 3x the King County median of 60k household income. And that doesn't include overtime. I'm still waiting for an example of someone with near median income who accumulated $1M without a significant amount of investing luck.

My wife and I both worked in an urban area. Dallas to be exact. Even after 24 years we never got close to making $90,000. Yes we had dual income which helps but we also raised a son at the same time that I was paying child support for 15 years on another son. I hope this doesnt sound like a braggart but since Fred123 is trying to make his point, I'll say that we saved not just a million but almost 2 million on our relatively average salaries. Just because Fred apparently cant or doesn't want to do it, doesn't mean it cant be done. It takes sacrifice, delayed gratification and dedication to a long term goal.

 

[NW-Bound]

The millionaire status is just an eye catching term anyway to denote some measure of wealth. If instead of using an absolute number as a benchmark and just talking about financial peace of mind (hence happiness), a person can live quite comfortably with less.

My mother's net worth is far below the $1M mark, yet she has everything she needs. And she gets there by being frugal, along with my late father. And there are people her peers who are not doing as well.

 

[NW-Bound]

My point was that instead of fixation on the $1M mark (in today's purchasing power as Gumby noted), if our median worker just tries to save 10%, he will be OK in his older age.

I know many people would love to have that $511,789 when they are 62, in addition to their SS. Does it have to be $1M or nothing? Indeed, I have seen many people taking the defeatist attitude that there's no way they can save that much, so they will not bother.

 

[RonBoyd]

I have seen many people taking the defeatist attitude that there's no way they can save that much, so they will not bother.

"most," in fact.

 

[CardsFan]

I think NW is right! The focus for any one should not be a million, but what will it take to retire living a life of comfort and enjoyment. This is different for everyone. It does not always require millions, but it does require discipline.

However, to answer the question " can a regular family become millionaires ", I will give a real world answer.
A union mechanic, working for a megacorp, lived frugally but comfortably. I do not know his actual salary, but do know it was in the range of the median. Raised a family, DW worked, but usually minimum wage jobs. Retired around 1992. Passed in 2001 at 75 with over a million of investments. His focus was to make sure he, and DW, never had to rely on family or handouts.
While not everyone can do it, there are many people that could, if they wanted.

Sent from my Nexus 7 using Early Retirement Forum mobile app

 

[NW-Bound]

Again, I have not read TMND but did the author say that it is easy to be a millionaire at 40 or even 50, like many posters here, who certainly are among the higher earners? I think many millionaires do not get there by retiring early. They work harder too. Not like the lucky ER's here who retire in their 30s and 40s.

... A union mechanic, working for a megacorp, lived frugally but comfortably. I do not know his actual salary, but do know it was in the range of the median. Raised a family, DW worked, but usually minimum wage jobs. Retired around 1992. Passed in 2001 at 75 with over a million of investments...

We have read from posters whose parents live off only pension and SS, and even save to add to their stash. So, they are not spending it down like some of us ER's do or plan to do. Perhaps your mechanic did the same. One cannot envy their stash.

 

[Fred123]

My wife and I both worked in an urban area. Dallas to be exact. Even after 24 years we never got close to making $90,000. Yes we had dual income which helps but we also raised a son at the same time that I was paying child support for 15 years on another son. I hope this doesnt sound like a braggart but since Fred123 is trying to make his point, I'll say that we saved not just a million but almost 2 million on our relatively average salaries. Just because Fred apparently cant or doesn't want to do it, doesn't mean it cant be done. It takes sacrifice, delayed gratification and dedication to a long term goal.

Breaking my own rule about no more postings on this, but I can't resist.

BTW, my disdain for TMND has nothing to do with sour grapes. We're retired and have a very comfortable nest egg. Some of it was frugality, some of it was periods of high income due to ... yes ... a combination of luck and hard work.

Are you willing to share more details? I'm assuming that your statement about not making close to $90K isn't total income, but individual income. So (and correct me if I'm wrong), I'll make a wild guess and assume that you each earned $65K for $130K total income. According to this calculator, that means you earned more than 85% of all households. And if you retired more than a few years ago, you were in an even higher percentile.

One of the interesting side effects of this conversation is discovering how many people think that their household income is typical when it is anything but. Perhaps that's because they rank themselves with their neighbors.

 

[mpeirce]

Yes, but I thought that sticking to an inflation adjusted amount would avoid the criticism that a million dollars of purchasing power today should be the measuring point.

Any bets on when the US poverty line hits $1,000,000?

 

[CardsFan]

We have read from posters whose parents live off only pension and SS, and even save to add to their stash. So, they are not spending it down like some of us ER's do or plan to do. Perhaps your mechanic did the same. One cannot envy their stash.

Not looking for envy, just pointing out it CAN be done, on a good, but not large, income. How you spend it, after you accumulate it, is your choice. As with many of his generation, my mechanic did not need to spend a lot of money to enjoy life.

 

[NW-Bound]

By envy I meant that some people might not appreciate what this man did to save that stash. One cannot spend it and still has it too.

Some of my peers might think that our income might be a lot higher than theirs, and would not think of any other reason we could retire early. If the expense spreadsheets were pulled out and put side by side for comparison, it might become clear to them, but would they be able to make do without the splurges they are so accustomed to? That's what I meant by "one cannot envy".