The Millionaire Next Door

[Midpack]

I enjoyed YMOYL a lot! But if you haven't read it and are considering it now, the "punch line" might leave you very disappointed. It's recommendation of relying entirely on bond income, while still possible, isn't nearly as realistic today as it was when the book was written. Indeed if you followed YMOYL's recommendation and retired well before the financial meltdown, yields since then may be cause for great concern.

In the early 1980s, you could buy 30-year government bonds with a nominal yield of over 12%. Even in the surrounding time periods, yields were well over 7%. The YMOYL authors liked the guaranteed return and decided to use these bonds as a complete income source.

Due to our continued hangover from the financial crisis, the latest figure for the 30-year bonds is about 2.9%. While it is still possible to retire on bonds, I consider an over-50% reduction in investment returns in exchange for “safety” to be too high a price to pay. Safety is just an expensive illusion anyway.

 

[Huston55]

I enjoyed YMOYL a lot! But if you haven't read it and are considering it now, the "punch line" might leave you very disappointed. It's recommendation of relying entirely on bond income, while still possible, isn't nearly as realistic today as it was when the book was written. Indeed if you followed YMOYL's recommendation and retired well before the financial meltdown, yields since then may be cause for great concern.

True. But, you know, when I read it (mid-1990s) I didn't take away 'invest in bonds' as the primary message. My primary take away was "The Chart."

For me, the "Crossover Point" (known to us as FI) was then my goal; I understood the power of FI and was determined to get there early. How to get there (what AA) always seemed to me to be a more variable path based on personal choice.

It's funny, I still have a very visceral memory of [-]reading[/-] devouring that book and the empowering feeling it gave me.

 

[6miths]

Oddly, YMOYL never really resonated with me. Perhaps it was that I read it a bit late or perhaps it was because there was never really any question of what was the most important to me.

 

[Midpack]

True. But, you know, when I read it (mid-1990s) I didn't take away 'invest in bonds' as the primary message. My primary take away was "The Chart."

For me, the "Crossover Point" (known to us as FI) was then my goal; I understood the power of FI and was determined to get there early. How to get there (what AA) always seemed to me to be a more variable path based on personal choice.

It's funny, I still have a very visceral memory of [-]reading[/-] devouring that book and the empowering feeling it gave me.

Agreed. But the income line is a lot flatter today than anything the YMOYL authors had seen when they wrote it.

 

[CRLLS]

I picked up my copy of TMND this year (I'm 64). I found it interesting in that it reinforced what I had learned a long time ago. Time is your friend. Trying to make up for missed savings over the last 20 years, is not easy. I always kept an eye on retirement (at least starting about age 30), and planned our budget accordingly without having to totally do without.

I think that today, there is little appreciation for what money is or can do for us in the future. To many, money is just some intangible idea. IMO, this is partly due to many things that are different now than they were when I was growing up. Banks now charge for savings accounts. You don't get a "paycheck" on Fridays anymore that you had to physically take to the bank to get your money. Debit cards don't make you keep a checkbook balance every time you pay someone. Even US savings bonds aren't "paper issued" anymore. One needs an on-line account! We never "touch" real money anymore, either when earned or paid out. How can we expect the younger generations to learn the value of money? I know some of us here are much younger than I am and have managed to learn these lessons. But many others not on this site, not so much. I have seen this disassociation of money in both of my children. Both have had to learn respect for it the hard way. It wasn't easy to watch them during those learning years.

 

[Sunset]

Bought it used at Goodwill and read it.......

Me too !
And then I passed it on to DD hoping she could learn from it.

 

[Sunset]

We (our growing area) are infested with new BMW's. Most must be paid off as I see parents giving them to their high school children to drive rather than take the bus to school.

.....

Not necessarily, I know a couple who buy the kids cars, or pass down their Lexa's , take their kids on holidays (these kids are in their 20's) and pay for their education.
Then tell me they re-mortgaged their nice big house as the interest was cheaper than student loan interest (for their kids education).

They look rich, but they can't afford to retire, and are juggling credit cards to pass around the debt

 

[marko]

I'm guessing that 75% of the members here could've written that book.

 

[CaliKid]

I read it in 1996 or '97 and enjoyed it. I think it should be required reading for college students just before graduating. People today, by and large, don't understand that fancy car does not necessarily equate to a person being wealthy. The book did a nice job of cementing those concepts some of us take as basic and fundamental; in fact, maybe our parents even taught us those lessons. However, reading it in print is always better than our parents since our parents don't know anything.

 

[Onward]

Oddly, YMOYL never really resonated with me. Perhaps it was that I read it a bit late or perhaps it was because there was never really any question of what was the most important to me.

This is my situation exactly. I read it late and got very little out of it, other than the idea that wealthy people tend to be frugal.

Much higher on my list of books for aspiring FIRE-ees are Your Money or Your Life, Bogleheads' Guide to Investing, and the Terhorsts' Cashing in on the American Dream.

 

[socca]

... other than the idea that wealthy people tend to be frugal.

The Queen of Versailles (2012) is a documentary about some wealthy folks who somehow missed the frugal part.

 

[Music Lover]

The Queen of Versailles (2012) is a documentary about some wealthy folks who somehow missed the frugal part.

I saw that...they were building a 90,000 square foot house and ran out of money. There was one scene where the wife took a flight somewhere and had to rent a car. She asked the clerk at the rental counter "What's my driver's name?"

Sadly, their 18-year old daughter died of a drug overdose last year.

 

[unclemick]

Many of us have read it and approve. A bit dated now, but still very good.

Another you might find quite useful is "Millionaire Teacher" that gets into a little detail.

Ditto.

heh heh heh - And I don't read much.

 

[brucethebroker]

Great book.
I have bought some copies at garage sales for under a dollar, and given them to family & friends.

I would also rate it a top five book (for LBYM beginners). My impressions were how many Millionaires were still married to their "first" wife, how many purchased a nice house in a nice neighborhood early on (and resisted the temptation to move up) and how many were self employed/business owners.

 

[Choices]

I liked the stories, same reason I loved Money mag in the 70's. At our house, we each had more than one spouse, moved a bit and never been a small business owner. We have LBOM; however, and have done okay.
Had we been "Mustachian", we would really be rollin' in it.

 

[Danmar]

?.....but the author treated these traits like virtues in and of themselves.

I think you will generally find that many people do indeed believe LBYM is morally superior than the alternative. Certainly we would all agree that LBYM is usually a necessity to reach FI, which is the ultimate financial goal for most people. But once FI is achieved, that's when things get a little more interesting.

We sometimes have arguments here about whether spending less is still morally superior to spending more once the person can afford it. Ie big hat and lots of cattle. Everyone knows my view on this.

 

[Nemo2]

I don't know about 'morally superior', but LBYM allows us to do what we want to do, (which doesn't cost (that) much and doesn't involve any form of remunerated drudgery).

 

[Huston55]

I think you will generally find that many people do indeed believe LBYM is morally superior than the alternative. Certainly we would all agree that LBYM is usually a necessity to reach FI, which is the ultimate financial goal for most people. But once FI is achieved, that's when things get a little more interesting.

We sometimes have arguments here about whether spending less is still morally superior to spending more once the person can afford it. Ie big hat and lots of cattle. Everyone knows my view on this.

I don't. Can you summarize it?

 

[HFWR]

To each their own... I'm frugal, mostly because I've had to be to reach FIRE, and will continue to be in FIRE. I suppose I also subscribe to the "take nothing but pictures, leave nothing but footprints" school of thought, in that I think consumption for consumption's sake creates societal and environmental issues. But that's more about stewardship than any particular moral imperative not to drive a Beemer, or live in a "mansion". And for me personally, if I had gobs more money, I'd do more stuff, rather than own more stuff.

 

[Nemo2]

I'd do more stuff, rather than own more stuff.

+1

 

[Danmar]

I don't. Can you summarize it?

Spending money is not a sin as long as you can afford it. Nor is not spending money. Personal choices. LBYM is a means to an end, rather than an end in its own right. Driving a BMW doesn't necessarily mean you can't afford it.

 

[daylatedollarshort]

To each their own... I'm frugal, mostly because I've had to be to reach FIRE, and will continue to be in FIRE. I suppose I also subscribe to the "take nothing but pictures, leave nothing but footprints" school of thought, in that I think consumption for consumption's sake creates societal and environmental issues. But that's more about stewardship than any particular moral imperative not to drive a Beemer, or live in a "mansion". And for me personally, if I had gobs more money, I'd do more stuff, rather than own more stuff.

+1. I like the idea of sustainable living. Many of the ideas of sustainable living coincide nicely with frugal living, like solar lighting, reducing single use products and making my own cleaning products from nontoxic ingredients. We're trying to declutter so we are careful about buying more consumer goods, but we do tend to spend our "fun" money on experiences like play tickets and dining out, supporting local businesses and nonprofits in the process.

 

[RobbieB]

I like caviar, wagyu beef, lobster tails and XO cognac. And fancy pocket knives too. I buy this stuff because I like it and enjoy it and can afford it.

I'm not living above my means, I have a WR of 2% and I'm still stackin' dough (NW higher than ever)

But I do agree with the moral superiority thing. Some folks here would have me delete all those things I love and give the dough to charity instead.

Eat burger, drink beer and carry a plain pocket knife so I can give the rest away. If you want to live like that, fine. I don't.

 

[HillCountry]

Spending money is not a sin as long as you can afford it. Nor is not spending money. Personal choices. LBYM is a means to an end, rather than an end in its own right. Driving a BMW doesn't necessarily mean you can't afford it.

+1

 

[Meadbh]

Spending money is not a sin as long as you can afford it. Nor is not spending money. Personal choices. LBYM is a means to an end, rather than an end in its own right. Driving a BMW doesn't necessarily mean you can't afford it.

I quite agree. Unfortunately, some people become so invested in the LBYM process (the "means") that they are unable to loosen the purse strings when the "ends" have been achieved. They may rationalize this as a virtuous choice.

I struggle with this myself, though I believe my motivation to be risk aversion. (No pension here). Just now I am spending far too much time deciding whether to buy a $22 item on Amazon, or to splurge $33 for the one I prefer, or look for one in the thrift shop. Irrational, I know! But I didn't get where I am today by wasting money.......

Nevertheless, when contemplating what to do with a hypothetical $1m tax free windfall, I had no difficulty choosing to spend it. Hypothetically. (See the other thread).