The Next Millionaire Next Door: Enduring Strategies for Building Wealth by Thomas J. Stanley, PhD., and Sarah Stanley Fallow, PhD. is a follow-up to the groundbreaking book of almost the same name written by Dr. Stanley 20 years ago. It is a must-read for anyone interested in how the self-made become wealthy.
The authors use data-based conclusions and two decades of studying how the self-made affluent became wealthy to pinpoint the behaviors, decisions, and characteristics necessary to build wealth.
The “millionaire next door” describes the person who has quietly, diligently been living below their means and has amassed enough net worth to be considered wealthy. They are not necessarily the person who looks the wealthiest or earned the most, oftentimes it is just the opposite. How do they do it?
It is simple, but it isn’t easy. Here are some of the more intriguing findings:
1. Income is not wealth. Many people confuse the two. Income is how much you make, wealth is how much you accumulate. The wealthy’s income is only 8.2% of her wealth, her home is only 20% of her net worth and her debt is equivalent to less than 5% of net worth
2. Economic Independence belongs to those with the willingness to allocate time, money, energy and cognitive resources to achieve financial goals. In translation, those who build wealth spend their money wiser, spend time learning and focusing on goals, and less time with time wasters, like video games. They also take better care of themselves, generally.
3. Drive rich or be rich. Millionaires don’t drive expensive cars. The median price paid for their most recent car is $31,367. Even those with a net worth of over $10M only spent $41,000.
4. Modeling good behaviors for kids is HUGE. People who grew up seeing parents who modeled good financial behavior often have good financial behaviors. Encourage your children to save, require them to work, have them buy their own electronics and help save for college. Never tell them you are wealthy.
5. Critical tasks. Make financial decisions based on budgets, focus on becoming debt free, live below your means, create an emergency fund, budget, pay bills on time, work together with your spouse to make decisions, understand investments and investing
This merely scratches the surface of what is covered in the book. The bottom line is that choices matter. Choices of where you work, what your drive, who you marry, and how you spend your time all contribute to your financial outcome.
If you want to know the key to financial freedom and like a data-driven approach, this book might be for you!or