A Millionaire Next Door – Book Review (Last Part)

Millionaires believe that financial independence is more important than displaying high social status. You can do an enormous amount of good when you have the means. If you’re seriously in achieving financial security and freedom, this is a must read and must have book in your bookshelves because it claims to teach you how to join the ranks of America’s millionaires. Here are some keynotes that will help us achieve financial independence:

1. Live on less than you earn. The majority of individuals with a net-worth of over a million dollars     saves and invests – on average – 15% of their pre-tax income. This requires giving up some of a consumption-based lifestyle for one of saving and investing.
2. Budget, budget, budget. About 83% of millionaire households create a budget for their income and expenses; conversely only about 16% of non-millionaire households create a budget.
3. Invest in what you know. Everyone is knowledgeable about specific subject matter; take advantage of this knowledge when looking for investments!
4. Seek professional advice. Realize when you’re not the most qualified to create an action plan to achieve your goals. Millionaires seek out professional help from tax accountants, CPAs, and financial planners far more than non-millionaires.

The conclusions are simple and straightforward but go against some of our preconceptions that millionaires spend money lavishly. They are, simply, that millionaires, on average, spend less money than they earn, they live below their means, they save, and they are likely to spend more on their children’s education than their non-millionaire counterparts.

I highly recommend you to pickup this book “The Millionaire Next Door: the Surprising Secrets of America’s Wealthy by: Thomas J. Stanley and William D. Danko ”, and spend time reading it. It’s well written and refreshing because it doesn’t promise you “riches in 3 easy steps.” For me, this book is one of the most important books on becoming wealthy. It doesn’t provide specific approaches on how to invest or build a business or any number of things that you will find in other books about getting rich, but it provides an essential philosophy to work from. It had a significant impact on me in terms of convincing me of the relative importance of “playing good defense” (i.e. keeping my spending low) versus the importance of “playing good offense” (having a good income). While good offense will obviously help you win the game, always make sure that a strong defense remains a priority.

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