I have’nt read the book but let me give my take on this.

I am merely 24 y/o and I love doing charities, watches, women, boats, heritage houses, a pied e terre, history, travelling to view these historical sites, fast cars and track days..yet I do not aspire to be a millionaire.

I just want to move to a high wage country and work in a line I like so I can fuel my lifestyle.If I become a millionaire by encashing my ideas, good..else no problem!

I will save only enough to take care of me and my beloved ones in our old age and for a rainy day, god forbid it comes.

Most millionaires did’nt set out to be one, they are obssesive compulsive people or market manipulators who got they way.End of rant

Bob

Then I got to the next chapter. Turns out I was premature. Now I understand.

(I also wonder about their sample selection… someday maybe I’ll check out TMM to see if they can convince me in that book.)

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Terry–When I was supporting myself on a slightly above minimum wage job, I found that the best way to save money when you earn very little is to have roommates and share everything. Working at a restaurant also helped me because it can drastically decrease your grocery bill–that’s an added bonus that most minimum wage jobs do not have. On top of that, some restaurant jobs actually pay above minimum wage or have the possibility of tips.

In all fairness, I may be conflating my memories because I also read The Millionaire Mind, which expands on the statistics with stories from the people they interviewed. That follow up book paints a picture of people who are grounded in the way they value faith, family and community in such a way that wealth is a side effect of their habits. Because of reading both books I may be a bit too charitable in my handling of The Millionaire Next Door.

Come to think of it, TMND does send a strong message about fantasy versus reality and beats the reader over the head about the frugality of the typical millionaire, whereas TMM is more substantive about the whole lifestyle package.

I strongly recommend reading TMM, which can be skimmed rapidly if you have read TMND. Sorry if my response seemed obtuse.

I may need to re-read the book, but that was exactly the message I got from it when I read it. What was the message you picked up from it?

“Most of the millionaires were confident about their life purpose and wealth was a consequence of their habits, not a goal.”

I missed that part. (Not being facetious.) I’ll be looking for that in the re-read, but there didn’t seem to be anything about life purpose in the book when I first read it. Care to direct me to relevant passages?

True enough, what’s the point of having money if you’re not going to do something with it, but in fact wealth generates more wealth. And once you’ve built enough wealth to take care of your own needs, you can start giving away the rest, and that’s when things really get interesting. Bill Gates just gave away 35 percent of his fortune. That’s going to have a huge impact on children’s health and welfare in developing countries. My own plan for next year is to donate 10 percent of my income to charity, not that I’m a millionaire but my salary puts me in the top 10 percent of average US income and I can give away 10 percent of my income without too much belt-tightening. If you really want to change the world, building wealth is a great way to do it. There was an excellent article in this past Sunday’s New York Times magazine entitled “What Should a Billionaire Give — and What Should You? It’s worth reading. For me the only reason I’m even remotely interested in making serious money is to give it away to the people, projects, and causes I care about.

squished18 — While not immune from error I would need really compelling counter evidence to claim that the statistical methods used where in error, especially given that it was written by statisticians. As for the point of the book, it isn’t to glorify the behavior of the miserly. Most of the millionaires were confident about their life purpose and wealth was a consequence of their habits, not a goal.

Second point. The one eye-opening message there was for me after reading TMND was that I don’t want to be the millionaire next door. It now seems pointless to accumulate vast amounts of wealth relative to your income potential and not spend/use it. Not going bankrupt or not having to stress out about finances seem like worthy goals. However, this book seems to advocate an extreme level of saving that I feel is misguided. If I read the book correctly, I don’t want to be one of those millionaires. I don’t want to go bankrupt or have a divorce because of finances, but I don’t think I want to be on the other extreme either.

I’m not saying there isn’t good information in there. I just don’t think it would benefit me any more than reading reviews, and just following a few different PF blogs.

It is NOT a random sample. Obviously, if they are tracking millionaires specifically, that limits the universe of respondents. Fine. But the conclusions in this book were drawn from the sample of millionaires WHO ARE MOTIVATED BY $100 SURVEY PAYOFFS. That can’t possibly be representative of the millionaire population.

Don’t get me wrong; I found the book interesting, and it did make me rethink some frugality issues, especially the car chapter. But it is not up to most research standards.

Determining whether you’re a prodigious, average, or under-accumulator of wealth is calculated by multiplying your current age by your current salary divided by ten and then comparing that number to your net worth, less any inheritance. It has nothing to do with calculating net worth for any other purpose.

I should also note that I listened to the book on audio, which may have had an impact. If I were reading an actual book, I could have skipped the dull sections. When I actually re-read sections in my printed copy (the one from the thrift store), I was pleased to be able to skip parts I knew were tedious.

The formula for determining the net worth or wealth that one ought to have [AGE X INCOME, then DIVIDED BY TEN], and the procedure for evaluating the result (UAW, AAW, PAW), are useful in a global sort of way, but not for the specific circumstances of many people. It seems to me that a more realistic procedure would chart expected wealth-age relationships to account for non-linear circumstances in youth and old age. Also, if a person saves a lot of money but keeps getting pay raises, that person may continually be termed an UAW; the formula doesn’t account very well for flux in income.

Another issue is inheritance: the authors say that inheritance should not be included in one’s net worth. It’s a nice idea to emphasize responsibility of the income-earner, but there are too many possible circumstances. For example, if he/she later in life helps to support the parents financially (i.e., huge medical bills, care facilities, etc.), then couldn’t any inheritance (such as a house) rightly be considered a part of the inheritor’s net worth? Some situations are just too complicated for one-line rules.

Another issue may be #4 above. It’s true that supporting the kids may do more harm than good in some cases, but there are many cases when such support really is an “investment” and allows the children to ensure high earning power.

Other points and positions are quite credible, such as the central idea that millionaires can be found in modest neighborhoods and modest houses. This part of the study really does unmask a lot of the “upscale living” that abounds in the U.S.; many people really are good at making a lot of money and then spending it on visible/tangible stuff and services that deceive others into thinking that true wealth dwells therein.