Monday, August 8, 2011

Book Review: "The Millionaire Next Door" by Thomas Stanley and William Danko

            In a world where reality television dominates and hyperconsumption is the norm, this book gives me the peace of mind I need to continue on my journey, and reassures me that I am on the right track for achieving financial peace in my life. “The Millionaire Next Door” is one of my favorite non-fiction books of all time, and is a delight to read over and over. The authors, Stanley and Danko, have conducted decades upon decades of research on the affluent in America. This is the AFFLUENT, not hyperconsumer celebutards, politicians who can’t scratch two nickels together, or overnight dot com millionaires. The authors have studied and researched with individuals who have a net worth in the millions of dollars. Their findings in summation, is that 80% of America’s millionaires are first generation wealthy and live well below their means. This means that those who successfully build wealth and hold onto it over their lifetimes, look more like Bill Gates and Warren Buffet rather than Paris Hilton and Snooki.
            One piece of their findings that I find particularly inspiring is that high income earners, are more prone to be under accumulators of wealth and are more prone to live paycheck to paycheck. The reason: either through their job and/or lifestyle, are encouraged to embrace a lifestyle of being a hyperconsumer, essentially choosing to finance a jaguar before dropping a penny towards retirement savings. Do they look great and have lots of nice toys? Sure. But high income earners tend to catapult themselves onto being a hamster on a wheel. Clients, neighbors and family tend to expect them to look and act the part. To be honest, although in retrospect not fair, I place these same expectations on “high income” earners. Would I expect my lawyer, general physician or accountant to be dressed to the 9’s from Goodwill or Neiman Marcus? My maturity allows me to admit that this is a double standard in my life, and no I am not proud of it. But it does prove a point. If I, someone who has re-programmed himself to invest in mutual funds rather than nights out on the town, have this same expectation of perceived high income professionals, then all of us need to be that much more conscientious of not trying to keep up with the joneses regarding lifestyle.
            The book, though in parts can become tedious regarding statistics, emphasizes and re-emphasizes one main point, that to become wealthy and stay wealthy, the most successful have lived below their means. For me this meant completely re-examining the way I live my life, and the way that I enjoy it. Gone are the days of attending professional sports games, going out to places with outrageous cover charges, meat heavy meals, owning the latest gadgets and paying retail and “advertised” sales prices at clothing stores. And a funny thing has happened along the way, I love every minute of where I am now and feel more fulfilled in my life than five years ago. You see, I traded the previously mentioned things for: having a healthy diet, free movies in the park, tossing Frisbee by the lake with my wife, seeing more of this amazing city by exploring the summer street festivals, listening to live music at my local tea lounge, working out and reading more, renting movies for free from the library, cutting cable from my life (and btw, I don’t get regular channels either J), and the list goes on and on.
            Getting away from wanting to please other people has lifted a burden from my shoulders, one that weighed as much as an elephant. In living on a budget and below my means, I’ve re-examined what I value in my life. For me, that is a loving list that includes my wife, learning and new experiences. At the end of the day, this book inspired me to not look to my closet or the approval of others for validation that I am succeeding in life. But rather, to look internally at what I value (which also includes financial independence) and pursue it with an unrelenting fury.  

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