Hey there everybody.
Phil Smy again, with a book review.
This week I am looking at a book that recently
seems to be gaining, regaining, popularity
again.
It's a book from 1996.
It's called 'The Millionaire Next Door'.
This book was written by Thomas Stanley and
Bill Danko and was based on a lot of surveys
they sent to people who were 'the hidden wealthy'
as I like to call them.
People who were financially secure or indeed
very secure or well off.
But weren't visibly so.
Some were of course.
It was supposedly the widest survey of it's
kind of wealth in America.
They went through the results and like good
little researchers they distilled it down
into seven points.
That they felt that the majority of these
hidden wealth shared in common.
Now of course not every millionaire shared
the same points but these were the points
that they felt were the key indicators that
you were going to be, or could be, wealthy
or not.
So I meant to just give you a quick summary
so you could stop watching, but I didn't do
that.I'm sorry.
So I'm going to do that now.
Here are the 7 traits, factors, that Stanley
and Danko believed led people to be wealthy.
First, they live well below their means.
In other words, they don't buy shit that they
don't need.
That's the number one thing that you can learn
from this book.
Don't spend money on pointless things.
And you'd be surprised how much is pointless.
So number 1, they live well below their means.
Number two, They allocate their time, energy,
and money efficiently, in ways conducive to
building wealth.
They learn about investing, they invest, and
they spend their time doing it.
Their hobby is building wealth.
Number three.
They believe that financial independence is
more important than displaying high social
status.
See point number 1.
Don't buy shit you don't need.
You don't need to have a McMansion in the
suburbs.
You don't need to have a flash car.
You don't need to have a TV in every room.
Gold plated toilet fixtures or whatever it
is you're into.
You don't need it.
You don't need to show other people you're
rich.
Number four: Their parents did not provide
economic outpatient care.
In other words, their parents were either
assholes, or poor, or both.
Or they just said to their kids, you stand
on your own two feet.
A surprising number of these hidden wealthy
did not get any assistance from their family.
Number five.
Their adult children are economically self-sufficient.
In otherwords they are assholes or poor or
both.
It trickled down.
Their parents didn't give them help so they
don't give help to their children.
And that seems to be the best things to do.
Number six.
They are proficient in targeting market opportunities.
What the hell does that mean?
It means, they get their money from people
who already have it.
So if you're going to be an accountant, be
an accountant to wealthy people.
If you're going to be a lawyer, be a kind
of lawyer that makes money.
If you're going to do, as Graeber says, bullshit
jobs, make sure you get the money from wealthy
people.
Or target the higher end.
Go somewhere where the profit margin is high.
You can be in any sector, and indeed the people
in this book are from A-Z for their occupation.
In fairness I don't there's someone who's
occupation starts with a Z.
But they're in every kind of occupation so
it's not about which occupation you choose,
it's about how you practice that occupation.
But number seven is They chose the right occupation.
They found something that makes money, but
doesn't require status.
An interesting thing is that there's not so
many doctors on this list.
Or dentists.
Because doctors and dentists tend to spend
their money on status.
So they don't have the money in the bank that
you probably think they do.
So those are the seven points.
I'm just going to whip over them again, without
any peanut gallery comments from me.
1.
They live well below their means.
2.
They allocate their time, energy, and money
efficiently, in ways conducive to building
wealth.
3.
They believe that financial independence is
more important than displaying high social
status.
4.
Their parents did not provide economic outpatient
care.
5.
Their adult children are economically self-sufficient.
6.
They are proficient in targeting market opportunities.
7.
They chose the right occupation.
Those are the seven things.
You do those seven things, you keep them in
mind, and you too can be wealthy.
I honestly believe that.
But what I did learn from this book is that
this methods works best if you start early.
If you think about this in your 20s or maybe,
maybe your 30s.
So, if you're my age, you're pretty much screwed
as far as 'The Millionaire Next Door' process
goes.
So, as I was reading this book, I was thinking
oh that's a good idea, too bad I didn't do
that 30 years ago.
That's a good idea, too bad I didn't do that
20 years ago.
This kind of thing.
And I think that, um, if I'm totally honest,
it was pretty depressing reading for me.
So, yeah, I hope you're young and I hope you
just follow these things and you too can be
wealthy.
Don't chase the easy money.
And don't buy the flash car.
But they come up with a couple other things
I want to chuck in here.
They came up with this idea of an accumulation
ratio.
Or wealth ratio.
How much money you should have.
And their formula is, you take your age, multiplied
by your realized annual pretax income for
all sources except inheritance, in other words,
you take your age, you multiply that by how
much money you make a year, and then you divide
it by ten.
This is what your net worth should be.
So take your age, let's say you're 20.
Let's say you make $30,000 a year.
So your net worth should be 60 grand.
Is that right?
Something like that.
And if you are under that if you've accumulated
less than that you are a UAW.
Which is not United Auto Worker.
You are an under accumulator of wealth.
If you have about that much you are an average
accumulator of wealth.
AAW.
And if you have more than that, double at
least, or more, you are a PAW.
A Prodigious Accumulator of Wealth.
And it's words like that that make you think
the book was written a lot earlier than 1996.
Prodigious.
You uses the word prodigious any more?
I would have said SAW.
Super accumulator of wealth!
But anyway.
Also this job talks about a good job being
a travel agent, which makes me wonder.
This book, one of the downsides of the book
apart from the fact that it's depressing if
you're old, is that the book is filled with
anecdotes.
Filled and filled and filled with people with
their pseudonyms and all the rest of it.
And a lot of them don't hold up over time.
And just unnecessary.
It felt like padding to me.
I think the goal of the book was really to
say to people that you can be wealthy.
Do these seven things and they're things that
are not genetic or hereditary, or based on
your circumstance, they are based on action.
And if you do these things you too can be
wealthy.
But other than that, my thing is, I would
say don't read the book.
I've given you the seven tips.
That's all you need.
I read it, so you don't have to.
You're welcome.
General idea is good, it's backed up by data.
I totally believe that those 7 things are
the key but don't read the book.
All right, that's all for now, see you soon.
Thanks.
