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Book review: The Millionaire Next Door
gadgetmind
Posts: 11,130 Forumite
I've seen this book mentioned a few times over the years, but have always put off reading it as I thought it might be a bit "coo gosh!". My mistake.
It's very readable, very informative, very well-researched, and leaves you with a lot to take away and ponder. For me one of the most interesting sections was how they found their millionaires as it wasn't easy! Those who display high income as usually those who spend all of that income, and more, which means that wealth rarely follows. So, how do you find those with "stealth wealth"?
It was also interesting to see the occupations of the wealthy. Those running their own businesses were over-represented, but that business could be almost anything, and there were also enough references to salaried peeps like myself salting way a few bob to give me hope.
The most interesting (and worrying!) sections were those on how much/little support and advice to give your children, and again this was done fairly rigorously. They looked at people with certain occupations, looked at what financial support they got from parents, and looked at whether this made them more wealthy. It usually didn't.
There was also an interesting definition in there of a "prodigious accumulation of wealth": Take age, multiply by pre-tax income from all sources, divide by 10, and this should be your nominal net wealth.
So, if you're aged 50, earn £50kpa gross, then you should have 50*50000/10=£250k in net worth. Does this include house? Dunno, because if the book said so then I missed it, but I'd say no. If you're in the top quartile on the above test, you're a "prodigious accumulator of wealth", bottom quartile, then you're an "under accumulator of wealth".
I'm pleased to say that I'm at 2x nominal, so hopefully upper quartile. but being a "tight as a gnat's chuff" Yorkshireman helps!
Take away message? Be frugal, know your number, strike oil.
(Apologies for John Paul Getty misquote!)
It's very readable, very informative, very well-researched, and leaves you with a lot to take away and ponder. For me one of the most interesting sections was how they found their millionaires as it wasn't easy! Those who display high income as usually those who spend all of that income, and more, which means that wealth rarely follows. So, how do you find those with "stealth wealth"?
It was also interesting to see the occupations of the wealthy. Those running their own businesses were over-represented, but that business could be almost anything, and there were also enough references to salaried peeps like myself salting way a few bob to give me hope.
The most interesting (and worrying!) sections were those on how much/little support and advice to give your children, and again this was done fairly rigorously. They looked at people with certain occupations, looked at what financial support they got from parents, and looked at whether this made them more wealthy. It usually didn't.
There was also an interesting definition in there of a "prodigious accumulation of wealth": Take age, multiply by pre-tax income from all sources, divide by 10, and this should be your nominal net wealth.
So, if you're aged 50, earn £50kpa gross, then you should have 50*50000/10=£250k in net worth. Does this include house? Dunno, because if the book said so then I missed it, but I'd say no. If you're in the top quartile on the above test, you're a "prodigious accumulator of wealth", bottom quartile, then you're an "under accumulator of wealth".
I'm pleased to say that I'm at 2x nominal, so hopefully upper quartile. but being a "tight as a gnat's chuff" Yorkshireman helps!
Take away message? Be frugal, know your number, strike oil.
(Apologies for John Paul Getty misquote!)
I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
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Comments
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I enjoyed the book as well. The thing I took most from it was that the majority of millionaires are such because they value security over having nice things.
My net wealth is miiiiiles from age*income*0.1
“I could see that, if not actually disgruntled, he was far from being gruntled.” - P.G. Wodehouse0
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