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Summary: Hello Again Dr. Camey!!
Review: A. The Millionaire Next Door is a book about the lifestyles and habits of America's wealthy. This book takes an objective look at the America's so-called "millionaires". Many people in America may live lifestyles like one would expect a millionaire to live according to American society, however, if you were to calculate those same people's net worth you would probably find that most are not millionaires and not all that wealthy. Many high income earning Americans are so caught up with trying to keep up with the Jones' that they are spending the majority of their money as they get it thus reducing their wealth. The authors of this book have come up with a good formula for calculating your expected net worth. It is simply "Multiply your age times your realized pretax annual household income from all sources except inheritances. Divide by ten. This, less any inherited wealth, is what your net worth should be."
The Millionaire Next Door classifies people into two categories, Prodigious Accumulators of Wealth (PAW's) and Under Accumulators of Wealth (UAW's). According to the book, most UAW's tend to spend frivolously and have no real regard for saving or investing. PAW's on the other hand are known to be extremely frugal thus always building their net worth. This concept can be related to business with the example of the ENRON Corporation. While Enron may have been doing it for other reasons than "keeping up with the Jones'", they were altering their financial statements to make their company look more profitable than it actually was. The same can be said for the executive who earns a decent six figure salary, has a five imported luxury automobiles, lives in an upscale neighborhood, owns a lake house with two boats, and belongs to at least one country club. While to the outside observer, this executive may look very wealthy but if you were to actually calculate his net worth, chances are he would definitely fall into the UAW category because rather than investing a large portion of his annual six figure salary, he's probably spending most of it on monthly payments to finance all of his assets that make him look wealthy. To the outside observer, Enron probably looked like a very appealing investment opportunity, however, take a close look at the day to day operations of the Enron accounting office and you might find that it is nothing but a bunch of smoke and mirrors to make the company look better, much like the tangible assets of the executive.
Another concept that I think is closely related to business is the concept of EOC otherwise known as "Economic Outpatient Care". Stanley and Danko refer to EOC as more less subsidies paid by the wealthy to parents to their grown children. EOC can range from payment of a grandchild's private school tuition to financial gifts of cash or stock. This EOC can have a significant impact on the children of the wealthy. While it may seem that this EOC will benefit them economically, the book suggests that it hinders the children economically in the long run because they become dependent on EOC payments from their parents thus they become used to living beyond their means. While I've never claimed to be an economist, the same principle can be applied to industries and businesses who receive government subsidies on a regular basis.
B. The Millionaire Next Door is a very enlightening book about the lifestyles and spending habits of America's wealthy. The book is packed full of useful information for those who want to someday become wealthy and financially independent. As a young person about to enter the so-called "real world" I feel that this book has given me some very valuable tips on becoming wealthy and the type of lifestyle one must lead in order to accumulate wealth. Due to my young age I feel that I will be at a huge advantage to apply these principles and ideas to hopefully someday become wealthy myself. One particular useful bit of information that I will be remembering not only in the near future but for several years is the advice that you should not buy a house valued at more than twice your annual household income. After recently witnessing a close friend and his wife nearly lose their house to foreclosure because they bought a home above their means, this advice really hit home for me.
C. While the book is informative and contains useful information, I sometimes found the book to somewhat boring. I think that this may be due to the subject matter of the book being of different interest than what I would typically read. The first chapter regarding the ancestry groups of millionaires can be summed up in one word: snore. I also thought that the authors tried to imply that in order to become wealthy you must be an entrepreneur and start your own business. While you may be much more likely to accumulate wealth this way, I definitely do not think that it is the one single way.
D. This book is a must read for anyone who wants to someday become wealthy and not have to worry about their financial situation in the event they lose their job or some other event. I especially think that this book is more valuable to young people just starting out in life than would be to someone who is about to retire simply because it would be easier to change their ways if need be and they would have longer to apply the principles discussed in the book. However, regardless of age I think that The Millionaire Next Door is a book that anyone can learn a thing or two from.
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Summary: Sage advice for the young that some parents fail to teach
Review: After reading the book, I became a lot more enlightened about the difference between having a high income versus a high level of wealth. I am a 1.5 generation Korean-American and my smalll business owning parents were PAWs who wanted they children to have a UAW lifestyle like some of their customers. Plus, having recently graduating from top five MBA school, I wanted the "good life" and believed that owning a luxury German import was an important visible symbol. However, after reading the book, I started listening to that nagging feeling and came to the quick realization that I wanted a lifestyle that I can control and not a lifestyle where I'm being controlled. So I reallocated my "car" money into some nice investments instead and will probably end up with a used SUV. Great read especially for somone like myself who is just starting to become a productive member of society and wants to retire early.
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Summary: This is how the rich become rich
Review: Creating wealth is sort of like dieting.Everybody wants the end result but the discipline to achieve that result is usually lacking.Oh, if only there were a magic pill that you could take to lose weight or to create wealth without changing your habits. We would all be rich.FRUGALITY...FRUGALITY...FRUGALITY. It takes discipline.Contrary to certain opinions i.e. revews posted here, you don't need "a wad" to do this.However, by following these concepts, you will soon have a wad.There is no level of income that you can't outspend and yet most of us feel that we have an unlimited supply of cash.You would think that considering the ever increasing number of bankruptcies and mortgage foreclosures not to mention company downsizings that people would have learned by now. Peer pressure...keeping up with the Jone's drives many people to live beyond their means. Remember this: when your outgo exceeds your income, your upkeep will become your downfall.DELAY GRATIFICATION. Pay yourself first. Invest and then buy toys with the profits.Another good book to read is Rich Dad Poor Dad and Cash Flow Quadrant. Robert . Kiyosaki has a different strategy than Stanley and Danko in certain areas but is in agreement in other areas. The authors work compliments each other and I highly recommend these books to all would be financial achievers.Another book that is popular right now and says some of the same things is The Automatic Millionaire by David Bach.Read and grow rich.
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Summary: Stop Everything! YOU ARE NOT RICH!
Review: How do you know if this book is for you? If you define "rich" as any of the following, then please read this book NOW!
- Driving expensive cars
- Living in a mansion
- Membership to the country club
- Owning lots of toys (boats, jet ski's, etc..)
- Taking frequent vacation on expensive cruises
- Wearing name brand clothing you bought at full retail...
- You get the idea
If I learned nothing else from this book, it's that the one-and-only TRUE test of wealth is how you answer this question:
If your income were to stop today, how long could you continue your current life style?
If you can honestly answer "decades" then congratulations! You are rich! If your like most people and would have to answer "about 3 weeks" then you had better purchase this book.
Enjoy!
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Summary: Great Book....Let's Add A Chapter.
Review: I highly recommend this book. By the authors' criteria, my wife an I are considered wealthy at age 36 and 33. We got that way by virtually mirroring the book's advice. It was great to read the book and find out that our approach to life and wealth has now been validated. I would add one more chapter, however: on the defensive side of wealth accumulation, one should do things around the home for themselves rather than calling professional repairmen (plumbers, electricians, painters) or other craftsman (deck builders, roofers, concrete guys) at every juncture. This type of work is not really all that hard or complicated once you understand the basics ( I knew nothing about any home improvement project when I bought my first home, but I've learned!)....but the cost savings, learning experience, and personal satisfaction from doing a project yourself are well worth the effort. I have saved a lot of money this way, and increased the value of and improved my home. In addition, I'm spending my spare time productively, teaching my son the value of hard work and to be self-reliant, and spending time with him....and that part is priceless!
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Summary: Interesting tips towards economic success
Review: I thought this was and interesting and well written book. Many of the topics that were covered in this book were repetitive, but showed many good examples. It was interesting to me to find out that income doesn't determine one's economic status, but rather one's net worth is what really counts. I found that some millionaires got to be millionaires because of their budgetting and investing. Overall, interesting facts about economic status and common misconceptions about millionaires. Even though it was repetitive, it was interesting and had good examples.
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Summary: Best book I've ever read.
Review: I'm not being melodramatic. This really is the best book I've ever read, in terms of personal enhancement. It was a gift to me. I looked at the title and thought "What a load of junk." Probably some silly book on how to get rich right? No!
This book is so darn simple that it's truly a crime against humanity that the elementary lessons in it are not ever learned by most of us. Yeah, we've all heard that if you put away such-and-such for so many years you'll end up with a big bunch of money, but most people hear that and forget it right away. I know that I always did. This book basically takes that lesson and actually encourages the learning of it.
The premise of this book is that you don't need to make that much money to become very wealthy. It's a practical approach to accumulating a great net worth. When I read it I knew little about such things. Like most other adults, who have no real plan for their financial future, I had some credit card debt. After reading this book I began to shun it, and 4.5 years later I still do. I'm so much better off than almost all of my friends (and it's not because I make more money). I have actual savings (truly how many people in their 20's do? Surprisingly a small minority have real savings. Most are blowing their money on junk), a retirement fund, and no credit card debt. I also, because I don't habitually borrow money I don't have for crap I don't need, have ended up with more in the way of "toys" than my friends, so yes you can have your cake and eat it too.
But enough of that. If you're interested in a no-nonsense, basic but very useful approach to dealing with money, give this book a try. I'm not saying it's the best book ever written, and it doesn't tell you all you need to know, but having spoken with others, I know that for many people this book is an "eye opener".
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Summary: Good in debunking the myth behind millionaires, but...
Review: It was interesting to learn that the people with high net worth were not generally those who look that way -- according to the surveys the authors conducted, wealthy people were most often those who didn't appear wealthy. The secret of their high net worth, the authors contend, is that they are PAWs ("Prodigious Accumulators of Wealth"), or in other words frugal, those who save or invest a much higher percentage of their income compared to the rate they consume. The authors even go ahead to redefine what it is to be wealthy. Congruent to the results of their study, "wealthy" people are exactly those who continue to accumulate no matter what their income, and are not those who currently possess much but do not accumulate. Though simple at first sight, I found their new definition to be useful, and this much I can say that I have gained from the book.
However the lesson I mentioned I learnt is just about everything the book offers. There is no so to say royal way to make money other than being frugal, evading tax as much as one can, and allocating as much time and energy to financial planning as possible, the authors claim. Perhaps this is the reason why the second chapters on appear redundant. The car example the authors quote repeatedly throughout the book is typical in this regard. It was indeed interesting to learn that the Ford pickup model was the most popular (and not some conspicuous foreign made high performance car) among the millionaires surveyed, but calculating the cost per pound of a good fraction of the cars currently available in the market? The very first time the authors wrote about "you aren't what you drive," I got the message. It would have been much more educational if the authors instead included a study on the distribution of the industries those millionaires worked in (there is a such list at the end of the book, but no distribution statistics).
Speaking of examples, I found some statistical results curious. For instance, in a early chapter of the book where the authors present a study on the ancestry groups of the millionaires surveyed (to ultimately claim that millionaires are mostly self-made) I could not find data for Afro Americans, Hispanics, or Asians. It is plausible that these ethnic groups (representing 28%+ of US population as of 2000) were not included because they did not have high percentage of millionaires per ethnic household and the table presented contained only the top ten in this measure. But recent studies of net worth stratified by ethnicity (for e.g. studies by L. Hao of Johns Hopkins Univ.) indicate Asian immigrants having higher median net worth compared to other US immigrant ethnic groups including Whites. Could it be that the majority of Asians are UAWs (the opposite of PAWs -- "Under Accumulators of Wealth")? As for a glaring omission. The authors assert that an overwhelming majority of millionaires they surveyed were self-employed. This much I am able to believe in good faith. But what exactly is the ratio between self-employed and not (for e.g. physicians, lawyers, engineers etc)? Wouldn't this ratio be more meaningful than including the types of credit cards those millionaires hold?
The strength of this book compared to others in the same category is in that the authors conducted real field work. Some results were revealing, but as noted earlier, many of them were redundant. It would be interesting to read a volume on the same subject that does not try too hard to appeal to the general public.
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Summary: Of sociological interest, but causality is not well explored
Review: Much of what is said in this book should be fairly intuitive to most.
The authors explain that millionaires tend to be first generation wealthy, very frugal, and self-employed. The book also goes on to describe where they live, what they drive, how much they spend on various consumer goods, whether they're married or not, the number of children they have, etc.
Although the data presented is interesting, it does not paint an entirely convincing picture of the factors that make a millionaire. The fact that millionaires are usually self-employed, or married, or drive chevys does not explain the millions of self-employed or married individuals, or those that drive chevys that are NOT millionaires.
It would have been interesting if the authors had gone into the data in more depth. That being said, I do think it's a worthwhile read, and do recommend it.
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Summary: An Entertaining, Insightful and Helpful Book
Review: The Millionaire Next Door is a book that will completely change a person's way of viewing the wealthy who reside in the US. It paints an accurate and indepth picture of the true millionaires of our country and how they became that way. The book is very straight forward with lots of statistics, which at times can be tedious, and anecdotes that help explain the different concepts presented in the book. Anyone who reads this book will take a lot away from it and will want to explore the area of affluency and economics in general in greater depth. There were times I could not and did not want to put the book down just because I wanted to learn more and see what it is was I could do to get myself on the path to financial independence. The book is wonderful in the sense that it is well-organized, repeats the most important ideas so that you do not forget them, and makes a very important note that anyone who is dedicated, hardworking, and plays both "offense and defense" has the ability to become financially independent and truely wealthy. Overall this book is brilliant and I recommend it to anyone who wants to learn what it takes to become an affluent member of our community. I would definitely recommend this book to teens and young adults since it will have the most influence on them and interest them greatly since they want to know how to make the most money possible. Anyone who reads this book will not be disappointed and will learn a lot from it.
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