The Millionaire Next Door

[COcheesehead]

the book doesn't say nobody can afford nice stuff. What it teaches is that the obvious presence of nice stuff is not an indicator of wealth. It is an indicator of consumption, which may well be counter-productive to the accumulation of wealth.

It may be counter productive for wealth accumulation, but it certainly makes life a little better to have or do a few nice things that you enjoy, like travel.

 

[Breedlove]

Ah , my parents ...remember my families first credit card . My mother kept it in her big jewelry box. Standard saying in our family was if you asked your dad for a quarter he would say. " I'm broke " carried on with me . My son never went with out but no foolishness. We always wondered how the kids in his high school got those BMW's . A few weeks ago we were watching the Meacham auto auctions on TV and they said 84% of all new BMW's in the U S are rented . Baaaaaaaaaa . This is why so many were coming through the auction .

 

[Danmar]

What I remember from that book is the idea that literally everybody who has nicer stuff than you do, must be in debt up to their eyeballs. True of many, but hardly all.

Agree. We often like to assume that people with nice things can't really afford them. Makes us feel better but obviously not always true. There is tremendous wealth in the US. Many, perhaps even most, can easily afford the things that others can see and then some.

As far as the book is concerned, there are many of these self help financial books out there. Basic advice is LBYM. Surprising how simple it really is and how hard it is for so many to accomplish. Also surprising that they can actually churn out so many books on such a basic theme. I guess lots of folksy anecdotes and heartwarming stories, Anyway, preaching to the choir around here. Merry Christmas.

 

[pb4uski]

Never read the book... but I lived it. Mom and Dad were good examples... Dad made good money and we lived well but never lived large... in retrospect much below their means.

 

[Redbugdave]

The book is a Classic. It confirms what most of us figured out on our own. It is a lifestyle that most people do not get. If you were born with a Silver Spoon in your bowl it does not matter.

 

[HFWR]

It's been a while since I read TMND, but I thought the premise of the book wasn't specifically about depravation to accumulate money for accumulation's sake, but more about turtle v. hare...

Many small business owners "end up" millionaires by building their businesses over the years, wherein eventually they own some commercial real estate, own the 60s vintage ranch they've lived in since the 60s, drive a (beater) pickup rather than a luxury car, etc.

One uncle fit that description. Owned real estate associated with his electrical supply business, of which there are now three stores. Aunt drove a nice US-built Caddy or Lincoln, but he drove an old Dodge pickup. Lived in a 60s-vintage home, long paid for.

A couple of my cousins also qualify. A g-uncle started small, in dairy and grain farming. The boys farmed, and also helped run a farm implement sales and service outlet. In the past year or two, they've sold a chunk of the old homestead for a significant profit, and still help sons from the next generation do the planting and harvesting, but have mostly retired as snowbirds. Still drive pickups.

It's easy to accumulate assets when you're making six/seven figures, or should be, but the takeaway for me was that many of the millionaires/wealthy aren't high-powered CEOs, lawyers, or celebrities, but relatively ordinary people, who, after a lifetime of work, now own a chunk of commercial real estate, or farmland, or a bunch or rentals...

 

[Huston55]

"Big hat, no cattle"....I first came across that saying while reading this book. The author did not claim it as his own, merely passing it along.

TMND is a classic; I still have my copy. That's one of the primary messages of this book; LBYM or "Big hat, no cattle". I grew up in a place where folks actually use that saying.

The other great LBYM classic, and the one which most influenced me, is "Your Money or Your Life." Suggest you give it a read.

PS: OP-just noticed you recently retired (2016) but, YMOYL is still a great book.

 

[6miths]

I took away that pretty much anyone with a modest income who was frugal and avoided the debt trap and the siren call of Madison Avenue's message that one should keep up with the fictional Jones's could become a millionaire over time. It certainly worked for my parents. I hope it will work for my children as well.

 

[RobbieB]

I never read the book, just the internet clips, but I lived the method and it worked for me.

 

[Elbata]

Honestly, looking back I was pretty much a screw-up. I've achieved that MM status but I think I have to give the biggest thanks to this great country--America. Second, third chances are a good thing.

Gave niece and nephew applications to open Roth along with starter money for Christmas. They're good kids. Hope one day they'll read that fine book too.

 

[Options]

I probably the only person who didn't like it, but that's because it was one of the last (as opposed to one of the first) books of its kind I read. By the time I got to it, I had been exposed to its concepts for a couple of decades so personally found it extremely simplistic.

 

[Souschef]

I found it on line as a PDF, and am about a third of the way through it. I find it a lttle dry, but the case studies are very interesting.

 

[Midpack]

LMBY is an exception in our society. Though we were already living an LBYM lifestyle, reaching for FI, the revelation to me from TMND was that there were LOTS of FI people who weren't into conspicuous consumption - it's was way more common than I suspected. That came as somewhat of a reassuring surprise.

 

[Amethyst]

A lot of nice cars are leased. I had a professor who taught us how to use spreadsheets to project costs, expenses, inflation etc. (Time value of money).

First, he asked us if we thought leasing a car could be a good deal. Most everyone said "No," the best deal comes from paying cash up front.

Then he produced a spreadsheet "proving" that he'd actually saved money, over time, by leasing cars instead of buying them. It was slightly cheaper than cash-up-front, and much cheaper than regular time payments.

I don't have his spreadsheet examples any more, but the idea stayed with me: Question assumptions and received wisdom!

Amethyst

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.

Great book! Like HadEnuff'a post, I was 49, in a California style divorce, and literally broke at 50. I read that book, and others, and somehow got it all back together again (but it was hard).

 

[Huston55]

A lot of nice cars are leased. I had a professor who taught us how to use spreadsheets to project costs, expenses, inflation etc. (Time value of money).

First, he asked us if we thought leasing a car could be a good deal. Most everyone said "No," the best deal comes from paying cash up front.

Then he produced a spreadsheet "proving" that he'd actually saved money, over time, by leasing cars instead of buying them. It was slightly cheaper than cash-up-front, and much cheaper than regular time payments.

I don't have his spreadsheet examples any more, but the idea stayed with me: Question assumptions and received wisdom!

Amethyst

I definitely agree with the quote. But, I think your Professor asked the wrong question (posed the wrong hypothetical). The question shouldn't be whether it's cheaper to lease or buy a NEW CAR (pretty much has to be a new car since that's almost always what's leased) but, how to acquire a dependable USED CAR & keep it a long time.

 

[nun]

for example like you, I grew up in the 60's and 70's. My parents did not have cc's. No one really did.

Yep I still find it hard to charge stuff to get the 1% or 2% cash rewards even though I will pay it all off at the end of the month.

In the 1960 and 70s where I grew up credit or buying on "hire purchase" was seen as almost a moral flaw. The only exception was a mortgage. I had a friend who's mum and dad had a color TV on hire purchase. My mum would not borrow to buy one or use hire purchase so we had black and white for another couple of years until the "TV fund" was enough to buy one. She eventually admitted that "The Sound of Music" was far better in color.

 

[Music Lover]

A few weeks ago we were watching the Meacham auto auctions on TV and they said 84% of all new BMW's in the U S are rented . Baaaaaaaaaa . This is why so many were coming through the auction .

Last year I was considering buying a new car and spent some time on auto forums looking for first hand information on vehicle reliability. On the BMW forum, it seemed that many BMW lovers deliberately chose to rent BMW's because even though they loved them, few of them wanted to own one after 100k miles due to reliability issues and expensive repairs, and they were hard to sell for that same reason. That, along with low lease rates and a lot of people decided that they preferred a monthly $350 - $400 payment "in perpetuity" and a new car every 3 years rather than outright ownership.

Of course, that doesn't explain all 84%...

 

[template]

I found the book The Millionaire Next Door while visiting a book store shortly after I retired. I always had a bias towards saving instead of spending and had amassed substantial savings through LBYM.

The book interested me so much that I read the entire book while inside the store.

An online version of the book in PDF form may be found here: http://davidbeitler.com/temp/The%20Millionaire%20Next%20Door%20%5BBook%5D-MANTESH.PDF.pdf

 

[RE2Boys]

Primary lesson I learned from reading this book that when on the path to wealth not not make any purchase decisions that involve any element of a statement or to meet others expectations of you. Or to make a purchase decision to impress anyone, including yourself

 

[MissMolly]

I found the book The Millionaire Next Door while visiting a book store shortly after I retired. I always had a bias towards saving instead of spending and had amassed substantial savings through LBYM.

The book interested me so much that I read the entire book while inside the store.

An online version of the book in PDF form may be found here: http://davidbeitler.com/temp/The Millionaire Next Door [Book]-MANTESH.PDF.pdf

Thanks! Downloaded it. Put it in Calibre. Converted to MOBI and sent to my Kindle!

 

[HadEnuff]

There was another interesting point made in the book about "helping" your children get into a house in a neighborhood they wouldn't be able to afford otherwise. The point was that once in the neighborhood there would be social pressures to spend money to "keep up with the Joneses". Some were obvious, like not wanting to have the cheapest, oldest, nastiest cars in on the block,or joining the tennis club, or country club, but others were more insidious, like the pressure they might feel when their kids want to do things that the other kids in school, or in the neighborhood are doing. Things like expensive camps, expensive hobbies.
Good food for thought, IMO.

 

[meierlde]

Last year I was considering buying a new car and spent some time on auto forums looking for first hand information on vehicle reliability. On the BMW forum, it seemed that many BMW lovers deliberately chose to rent BMW's because even though they loved them, few of them wanted to own one after 100k miles due to reliability issues and expensive repairs, and they were hard to sell for that same reason. That, along with low lease rates and a lot of people decided that they preferred a monthly $350 - $400 payment "in perpetuity" and a new car every 3 years rather than outright ownership.

Of course, that doesn't explain all 84%...

Another issue if you lease a car is predicting the vehicles total miles when you turn it back in, In many cases if you exceed the mileage given in the lease you pay .15/mile over unless you buy the car. This does suggest that if taking a long trip it might be better rent a car and leave the leased car at home. (If commute only not as much of a problem)

 

[cooch96]

I did not like the book. I felt the author stressed miserliness over LBYM. He kept writing about his case studies and how they owned their own business, drove boring cars, and ate bland food. That's fine for folks who want to live like that, but the author treated these traits like virtues in and of themselves.

 

[Huston55]

I did not like the book. I felt the author stressed miserliness over LBYM. He kept writing about his case studies and how they owned their own business, drove boring cars, and ate bland food. That's fine for folks who want to live like that, but the author treated these traits like virtues in and of themselves.

Try "Your Money or Your Life" if you've not already read it. It might be more to your liking. It's more 'path to FI' oriented but, it also has a strong thread of LBYM.

 

[timemoveson]

Just an observation or two

People are pointing out what they took from the book and liked or disliked, all very subjective and personal of course.

I learned a lot from that book and it helped form some of my own wealth vision, which is different than Tom's (I played very good "offence" and just ok "defence" during my early prime earning years, unlike most of Tom's examples).

The additional point I'd make is to remember the timing of the book. It came out in 1996. Some of you are thinking "nothing new here, read it before". It sure was new! It is actually very early in the movement to really understand the psychology of money, wealth, spending and how to shape an attitude and behaviors for yourself. As such, I consider it unique and original, and "scientific" to some degree (at least based on well informed if perhaps slightly biased hypotheses).

It informed and guided A LOT of future thinkers on these topics, even if they don't acknowledge it. It came out just as the internet was gaining momentum, and long before the proliferation of information and sources available 10 years later. This was a massively read, best-selling book that endures through today.