‘The Millionaire Next Door’ is a Myth to Most Millennials

[Amethyst]

It goes back to the Pyramids.I could cite examples told to me at work by "silent" members, whose PATA (Promotion and Training Agreements) were derided by older workers as "Potential, And That's All." The oldsters back then were jealous of the "college boys and girls."

I also wonder how many of the silent generation thought the same of the baby boomers, who thought the same of generation x, etc.

 

[griffithee]

It reminded me of the SNL sketch.

https://youtu.be/ATTMB4gH3sU

My favorite part: "I'm just playin. I'm Gen X. I just sit on the sidelines and watch."

 

[Andre1969]

Maybe you have and just don't know it, because they keep their mouth shut about it and don't flaunt their wealth.

I've pretty much been in the 40 hour work week routine from age 31 until now, age 49, and hit the $1M mark when I was 45. However, before that I worked two and sometimes three jobs to make ends meet. I was hired full time shortly before I turned 24, but kept a part time job I had working at a department store. When I was 26 I was going through a bad divorce, and picked up a third job delivering pizzas, which eventually replaced the retail job.

I got all the debt from the divorce paid off when I was 28, but kept the pizza job. Originally I wanted to keep it as long as I could, so I could sock away the extra money, but as time went by I kind of outgrew the job, and the money wasn't enough to offset the time and aggravation, so I quit at 31.

Now, I had a few other circumstances that helped me along the way. When I was 33, I moved into a second home that my grandmother owned, and she put me on the title as a part owner. I sold my condo at a pretty nice profit. I also took out an HELOC on the house, and invested a lot of that money. However, at the same time, I also built a 4 car garage, did some major HVAC renovations on the house, and put some serious money into restoring an antique car...all things I would not have spent money on if I hadn't gotten that "free" house.

Also, when the market tanked during the Great Recession, I put in some money while the market was down, and that helped me rebound better. also rented a room to a guy from 2004-2015, and that helped financially, although it was annoying from time to time. I rented another room, from 2008-2010. And, to this day, I still have one housemate, who buys most of the groceries, helps out with utilities, and other expenses.

Now, I'll admit, when my Dad passed away in 2017, I got a pretty big inheritance, and that really helped push me up. But, by that point, I was already a millionaire.

 

[CyclingInvestor]

Awesome sketch. Some truth to stereotypes of every generation. I have never met a person who only worked a 9-5 40 hour work week and became a millionaire. Every millionaire I know either worked 60 plus hours a week, mutiple jobs, real estate or some other type of deal.

I worked 6am-2pm most of my career (programmer), with overtime or comp time for anything over 40 hours. Hit $1m in 2002 thru LBMM and long-term investing in stocks.

 

[ziggy29]

In some sense, it's the same as ever -- pay yourself first from a fairly early working age, maybe 10-15% of your paycheck, and compound it for decades.

But in another sense, more and more young workers have to spend their first 10-20 years paying off student loan debt rather than investing. And they have the headwind of seeing the national debt and knowing much of it will be paid through their labors, paying back the borrowed prosperity we've been fueled on for most of the last 40 years.

 

[LarryMelman]

I worked 6am-2pm most of my career (programmer), with overtime or comp time for anything over 40 hours. Hit $1m in 2002 thru LBMM and long-term investing in stocks.

I have also worked 40 hour weeks in tech as the norm. More hours in short bursts but that's unusual. I remember hitting $100K at age 30, $1M in my mid 40's and sit around $3M now at 55. High saving and LBMM, investing (first in no-load funds, later in my own stocks).

 

[EarlyBirdly]

LBYM - means "Live Beyond Your Means" to most Americans.

 

[deserat]

I skimmed the original article - she makes assumptions regarding the 80s:

1) If you were frugal, you did not have a cell phone with apps and monthly 'leasing' lifestyle costs - cable TV, internet , etc. Now one could argue it is difficult to do without today, however, again, assumptions regarding lifestyle requireoums yents have changed. You could still get by using libraries (free wifi), pay as you go phone, OTA TV, etc.

2) It is a myth that everyone went to college. When I went (in the early 80s), there was not the federal government control of the loan machine. You either got a loan yourself, a scholarship or paid as you went. Have the prices for college gone up? Yes. However, there wasn't an assumption that you needed a college degree for a job and back then the people who went to college either showed the scholastic propensity or had family money.
3) It is still true if you are willing to hustle, you can become a millionaire. I love the show "Dirty Jobs" for that reason.
4) The idea that everyone should go on a cruise or have 'experiences' was not a common one either. Those usually were considered a once in a lifetime experience.

The above are just a few 'paradigm' window shifts that have happened in society that contribute to her perception TMND is a myth. It is still doable and probably easier now if you have self-discipline. Just the easy access to information via the internet as well as the easy access to markets for investing are a *huge* leg up compared to what I had available to me when I started this journey.

Oh, isn't it ironic she uses her blog as a side hustle for income generation (ads and recommended links)......sigh.

 

[marko]

. And they have the headwind of seeing the national debt and knowing much of it will be paid through their labors, paying back the borrowed prosperity we've been fueled on for most of the last 40 years.

Asking because I really dont know: How does that work? Is there some additional tax looming for them? Or indirectly through inflation? Or?

 

[kgtest]

A bunch of Directors in my last workplace got together and discovered that the one thing we had in common was the willingness to work massive weekly hours (65+) at one point in our career as necessary.
Not sure this is true today as much.

I've done it a couple times so far. And early in my career when I was like 26...then I started to feel like after 3 weekends of working straight through...it was management's problem and not mine. Then I got a new job. I quit my boss, it was awesome!

 

[ziggy29]

Asking because I really dont know: How does that work? Is there some additional tax looming for them? Or indirectly through inflation? Or?

Well, we can't just keep adding to the debt endlessly without it ending bad for some future generation. And as the debt grows, especially if it grows faster than GDP, the interest on the debt takes more and more of their taxes, paying for what their parents and grandparents borrowed rather than on things to help them and their own children. It's hard to imagine that this won't result in higher taxes and/or slashed services and entitlements down the road. The math feels inevitable, but it's like a fault line -- we don't know when the "big one" will hit, but we know it will at some undetermined point in the future.

I think this is part of the reason why the Fed has done all it can to keep interest rates low. If the rate the government had to pay rose by 50%, let alone doubled, it could cause a crisis because the interest on the debt would require a much larger percentage of the budget.

 

[kgtest]

I have also worked 40 hour weeks in tech as the norm. More hours in short bursts but that's unusual. I remember hitting $100K at age 30, $1M in my mid 40's and sit around $3M now at 55. High saving and LBMM, investing (first in no-load funds, later in my own stocks).

Super motivating. I am on this same trajectory!

 

[Senator]

Asking because I really dont know: How does that work? Is there some additional tax looming for them? Or indirectly through inflation? Or?

Here is how it works. The government needs money, so the Treasury holds a bond sale. Goldman Sachs buys the bonds. Then, the Fed buys the bonds from Goldman.

When the interest is paid by the Treasury, it is paid to the bondholder that is now the Fed. It's like owing yourself money. It can be cancelled at anytime.

It's a good thing that most people do not have the wherewithal to become millionaires. If everyone was a millionaire, it would not feel the same when you got there.

The advantage of being a millionaire is that most people are not.

Well, we can't just keep adding to the debt endlessly without it ending bad for some future generation. And as the debt grows, especially if it grows faster than GDP, the interest on the debt takes more and more of their taxes, paying for what their parents and grandparents borrowed rather than on things to help them and their own children.

Actually, we can. We print the money.

 

[daylatedollarshort]

There is an updated version, started by Dr. Stanley and his daughter, and finished by his daughter after his death, called The Next Millionaire Next Door, based on more recent surveys and they came to pretty much the same conclusions as the original book.

As for survivorship bias, it seems like in most of the series of books they looked at people with high incomes who were not millionaires, and noted the differences. We have no shortage of acquaintances with ample incomes who live pay check to pay check.

However, I don't think anyone can become a millionaire. Many people have disabilities, addictions, mental health issues, brain damage from lead poisoning, car accidents, aging parents that need help, grew up in foster care and became homeless when they aged out, war vets with PTSD, etc. where the deck is stacked against them from an early age.

Related Link -
What Drives Success, Luck or Hard Work?

"..not seeing the role that luck plays in our lives makes us less sympathetic to why others fail and blinds us to their disadvantages.."
https://greatergood.berkeley.edu/article/item/success_hard_work_luck

 

[dirtbiker]

Best point made in the article. I attended the University of Illinois C-U for $748. Lived at home in C-U. $15,000 today-in state.

"If you know the power of compounding then you know that starting out negative has massive ramifications. If I had not come out with -$20,000 in student loans and invested that $20,000 until I was old and gray, imagine much more money I could have?"

Investing in your education can net you a lot more in future earnings than you ever spend up front. HOWEVER, too many people get junk degrees that have almost no potential to make them a decent salary in the real world. Then they come out in debt working in a different field and cry 'woe is me.'

I also think that expensive private colleges, particularly for undergrad, are by and large a HUGE waste of money. The closest state university to me charges about $45,000 for tuition and fees for a four year degree. There is a community college that charges a third of that cost per credit for the first two years. There are also four private colleges within about a 30 minute drive of me that range from $35,000 to over $50,000 PER YEAR ($140,000 to $200,000 for a four year degree). And if you drive more than an hour outside of the area, nobody has ever heard of these colleges. I just don't understand how someone without a scholarship/college paid for would take on that kind of debt for an undergraduate degree. An Ivy League college? Well maybe, as you do get networking and the prestige that could land you a good out of college job. However, I think even this is overrated most of the time for most people, if they end up in heavy debt to go.

 

[davebarnes]

I think the book, The Millionaire Next Door, could have easily been a 20-page pamphlet.
I read it for the first/last time a month ago.
Stilted writing.
Way too much repetition.

 

[dirtbiker]

I think the book, The Millionaire Next Door, could have easily been a 20-page pamphlet.
I read it for the first/last time a month ago.
Stilted writing.
Way too much repetition.

Funny, I would have kept reading if it were 3 times longer than it was. And now that I know there is a new updated edition, I'll be reading that soon as well.

 

[Senator]

However, I don't think anyone can become a millionaire. Many people have disabilities, addictions, mental health issues, brain damage from lead poisoning, car accidents, aging parents that need help, grew up in foster care and became homeless when they aged out, war vets with PTSD, etc. where the deck is stacked against them from an early age.

You are 100% correct, the people you describe above will potentially have to work harder, and will have to have more determination to succeed.

If you are saying it is impossible for them to succeed, I disagree. If you are saying people use those as excuses why they cannot succeed, I 100% agree.

The most common issue that prevents success is the self-imposed logic that you cannot succeed, and the self-made choices that prevent it. The deck was stacked against me for a long time. In my teen years, I always thought I would wind up in prison.

 

[daylatedollarshort]

I also think that expensive private colleges, particularly for undergrad, are by and large a HUGE waste of money. The closest state university to me charges about $45,000 for tuition and fees for a four year degree. There is a community college that charges a third of that cost per credit for the first two years. There are also four private colleges within about a 30 minute drive of me that range from $35,000 to over $50,000 PER YEAR ($140,000 to $200,000 for a four year degree). And if you drive more than an hour outside of the area, nobody has ever heard of these colleges. I just don't understand how someone without a scholarship/college paid for would take on that kind of debt for an undergraduate degree. An Ivy League college? Well maybe, as you do get networking and the prestige that could land you a good out of college job. However, I think even this is overrated most of the time for most people, if they end up in heavy debt to go.

Community colleges in our area are an amazing value. Our kids have taken online courses at community colleges and didn't even have to spend time or gas money on commuting.

 

[Senator]

I also think that expensive private colleges, particularly for undergrad, are by and large a HUGE waste of money. The closest state university to me charges about $45,000 for tuition and fees for a four year degree. There is a community college that charges a third of that cost per credit for the first two years. There are also four private colleges within about a 30 minute drive of me that range from $35,000 to over $50,000 PER YEAR ($140,000 to $200,000 for a four year degree). And if you drive more than an hour outside of the area, nobody has ever heard of these colleges. I just don't understand how someone without a scholarship/college paid for would take on that kind of debt for an undergraduate degree.

An Ivy League college? Well maybe, as you do get networking and the prestige that could land you a good out of college job. However, I think even this is overrated most of the time for most people, if they end up in heavy debt to go.

My Friend's kids passed on a 4-year ~$80K full-ride scholarship at Georgia Tech and instead went to Cornell without any scholarship.

Luckily his parent can afford it.

 

[dirtbiker]

Community colleges in are area are an amazing value. Our kids have taken online courses at community colleges and didn't even have to spend time or gas money on commuting.

There is no better value in education than many community colleges. The one near us has agreements with all of the state universities in state that all credits transfer. So, depending upon the major, a kid does a year or two of gen eds for a bargain, then transfers into the still-reasonably priced state university to finish his/her bachelor's degree.

My Friend's kids passed on a 4-year ~$80K full-ride scholarship at Georgia Tech and instead went to Cornell without any scholarship.

Luckily his parent can afford it.

Both are good names... But Cornell is obviously the bigger of the names in terms of academics. If the kid was paying out of pocket, I'd say he/she was a fool. If the parents are paying... Well, can't say I'd blame the kid from going that route.

 

[daylatedollarshort]

You are 100% correct, the people you describe above will potentially have to work harder, and will have to have more determination to succeed.

If you are saying it is impossible for them to succeed, I disagree. If you are saying people use those as excuses why they cannot succeed, I 100% agree.

The most common issue that prevents success is the self-imposed logic that you cannot succeed, and the self-made choices that prevent it. The deck was stacked against me for a long time. In my teen years, I always thought I would wind up in prison.

Telling someone with Down's Syndrome or traumatic brain injury from a car accident to work harder is going work for them?

 

[cyber888]

I would say the opportunity for millenials are the same, but the methods to be a millionaire in today's culture is different. There are many millenials who are millionaires by being popular in Youtube, Instagram and other social media sites, and they monetize that. These opportunities was not available for boomers. If you are a millenial and you learn to monetize what your generation likes, you could tap that to be rich.

 

[Senator]

Telling someone with Down's Syndrome or traumatic brain injury from a car accident to work harder is going work for them?

Yes, it will work better than the alternative that they cannot succeed, so they may as well not try.

Far too many people use some excuse why they cannot succeed, and then give up.

 

[RAE]

......more and more young workers have to spend their first 10-20 years paying off student loan debt rather than investing. And they have the headwind of seeing the national debt and knowing much of it will be paid through their labors, paying back the borrowed prosperity we've been fueled on for most of the last 40 years.

+1. I was able to go to college for nearly 6 years (got my MS back in the late 70s), and come out with no debt (I got a few scholarships and the rest was covered either by my parents or by my summer earnings). My parents were certainly not wealthy, but college costs were reasonable back then, so doing what I did was possible for a lot of families. There is no way I would be able to do that today..........not even close. I feel for kids from families like mine (middle class, not wealthy) who are just entering college today.



Also, if you look at wages since the late 70s, they are basically flat, when considering inflation. That means it takes these young people (a lot of them, anyway) even longer to pay back their college loans. Having to pay back college loans over the first 10-20 years of your working life obviously does not put you on a fast track for financial independence, even if you are frugal and do everything else right.


So, sure, it is still possible for young people to do well and retire at a reasonable age, but I'd argue that it's a lot more difficult than it used to be for boomers like me.