Can one really become the 'Millionaire Next Door'?

[Walt34]

Quote:

Originally Posted by Sunset Like this guy, an ordinary fellow who educated himself on how to save while working a regular job in St. Louis: Saved $1 million and living my dream retirement - Mar. 9, 2015 Heck, he might even be on this forum !!

At the other extreme is this guy - made 4.4 million before taxes in one year and is now literally asking people "You want fries with that?"

Former NBA Player David Harrison Admits He Worked at McDonald's After Retirement | Bleacher Report

[utrecht]

This thread has kind of gotten off course. Back to basics. The title of the thread is "can one really become the millionaire next door?"

My wife and I just retired. We were both police officers. We are also millionaires. We also have generous pensions, but I'm talking about liquid investments that we were able to save by living below our means for many years and saving and investing the rest. So I would say, "Yes", one can really become a millionaire next door. We never made excessive salaries. We never had stock options, worked at start-ups, got signing bonuses, got severance packages. None of that. There's no secret to doing it. Spend less than you make and invest as much as possible and properly. Not in a million years would any of our friends, neighbors or relatives think we are millionaires.

[Fred123]

Quote:

Originally Posted by utrecht This thread has kind of gotten off course. Back to basics. The title of the thread is "can one really become the millionaire next door?" My wife and I just retired. We were both police officers. We are also millionaires. We also have generous pensions, but I'm talking about liquid investments that we were able to save by living below our means for many years and saving and investing the rest. So I would say, "Yes", one can really become a millionaire next door. We never made excessive salaries. We never had stock options, worked at start-ups, got signing bonuses, got severance packages. None of that. There's no secret to doing it. Spend less than you make and invest as much as possible and properly. Not in a million years would any of our friends, neighbors or relatives think we are millionaires.

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.

[Walt34]

Quote:

Originally Posted by Fred123 Police officers make a pretty good salary, at least in urban areas.

It varies wildly. Here in WV most make less than $20k/year to start and top out well below $$50k/year unless they make very senior rank.

I understand (but do not know for sure) that in some New York City suburbs starting pay can be at or near six figures.

COL in the local area figures heavily in police salaries.

[Gumby]

Quote:

Originally Posted by Fred123 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.

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

[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]

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Originally Posted by Gumby 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]

Quote:

Originally Posted by World Traveler 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]

Quote:

Originally Posted by Fred123 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/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 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]

Quote:

Originally Posted by Fred123 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.

Quote:

Originally Posted by haha 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]

Quote:

Originally Posted by Gumby 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]

Quote:

Originally Posted by Fred123 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]

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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.

Quote:

Originally Posted by Gumby 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]

Quote:

Originally Posted by NW-Bound 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.