The Millionaire Next Door by Thomas J. Stanley and William D. Danko

 12/∞

Rating: ⭐️⭐️⭐️⭐️⭐️

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I’m going to boldly state that this book is one of the most influential books on accumulating wealth I have read so far. Readin’ it sent my mind through the fuc*** roof… Literally! It all started a couple of weeks ago with Rich dad poor dad by Robert Kyiosaki. By all means, Kyiosaki’s book has become a foundation stone for me on how to become affluent. But as every smart guy there is out there, I knew there is more to know and as expected, one book was not enough for me.

Since I’m quite handy person let’s compare the book reading to coats of paint. Rich dad, poor dad was in my case a primer, without no question. But those of you who would read one book and thought you are all done would be mistaken. The second coat of paint were Gladwell’s Outliers. Outliers helped me to understand the law of success and its unpredictable circumstances. Finally, I have moved on the third coat of paint: The Millionaire Next Door. 

I was astonished. This book was like to look in the mirror and see the ultimate truth. Suddenly, I realised many past mistakes I have made on my journey of accumulating wealth. It appeared to me as I could have done better. But since there is no time-machine, the second best opportunity is to apply all the knowledge in this book is now.

Now, is also a moment when I’m going to share the most important lessons I have learnt in this book with you. I hope it will help you to see what I saw. I hope that my review will get you inspired and fires you up to do all necessary improvements you could to improve your finances and to become financially independent.

You are probably asking, Aleš, after this book, are you going to be all done? My answer is hell no! Since the schools in general failed to teach me about many vital areas of life I have decided to take the matter in my own hands and educate myself in areas I consider as the most important ones. But I do not want to be selfish and keep all this knowledge just for myself. I take a great pride and pleasure in teaching others and the biggest reward for me would be, if you dear readers, would be able to improve your lives with is.

Can I become a millionaire?

Yes, you can. 🇺🇸 🦅 According to this book, overwhelming majority of of US millionaires managed to accumulate their wealth in one generation. To be more precise, only 14% of US millionaires inherited their wealth. Your next question is probably going to be: How the hell am I suppose to do it?

Frugality, Frugality and Frugality

One of the biggest surprises this book gave is that overwhelming majority of US millionaire are frugal with money. In the other words, they do not buy expensive shit…

There is an interesting survey in the book asking US millionaires on how much do they spend on garnet accessories. Typical US self-millionaire paid about 360 USD for a suit. In comparison a millionaire who have inherited his wealth paid more than 600 USD. Do you start to see the difference? Inherited vs. Self-made?

My favourite entrepreneur is Elon Musk. When Elon was in Joe Rogan’s show. Joe asked him, why do you not have any wrist watch? Elon said, because I have phone. Now, that makes sense to me. Why Elon does not own insane amount of houses? Because it does not make sense… 

In the other words, even the richest people in the world are not buying things they do not need. Kyiosaki said: “It is not about how much you earn, it is about how much you keep.”

Who are US millionaires?

According to this book 2/3 of US millionaires are self-employed, but they represent only 20% of a total workforce. In general, most of the US millionaires are small business owners.

Do you see where am I going? You are less likely to become affluent if you are an employee…

 

“Big Hat No Cattle”

One paragraph got me, in particular. Big hat no cattle refers to people who spend more money on their appearance than on theirs assets, investments and businesses. They appear rich, but they are cash and assets poor. They drive luxurious cars, travel abroad each year, drink vintage wines and own luxurious homes. 

The information of how much is your realised income and how much you should have in assets is called NET WORTH.* 

I certainly think it is better to have a small hat, but loads of cattle.

PAW vs. UAW

The shortcut refers to “Prodigious accumulators of wealth” (in the other words those who are in reality wealthy but might not look like it) and “Under accumulator of wealth” (those who look wealthy but aren’t in reality).

Where you fall in this category is based on your net worth.  

If you are a high income earner it means you are doing great in terms of your offence. But let’s say you are not investing any money in stocks, cryptos and bonds. That makes your defence ultimately weak. The win win situation is when you are equally strong on offence as on your defence. High income earners have to keep in mind that their jobs might be eliminated in the future. What they are going to do, if they do not have any savings? I will leave you to answer this question for yourself. 😉

Buying motor vehicles

This is another chapter I enjoyed in particular. It explained how millionaires do buy their vehicles. New or used? You would be surprised how many millionaires enjoy to shop for used vehicles.

Personally I am a particular fan of used vehicles.

Lesson: Always haggle new or used, it does not matter. Also take your time to buy, do not rush.

Hours allocated

Study case of Dr. South and Dr. North. These two are both doctors with similar income. One owns less, saves, invests and lives in lower income neighbourhood. The other owns yachts, houses and spends all his money. How do you think has more money and needs to work less? 🙃

Economic Outpatient care

The study case of Lamar and Mary made a particular impression on me. Did you know there are people who receive annual cash gifts (e.g. 50.000 USD) from their affluent parents even in their 50s? Are you aware that those people live way above their means and literally “know nothing about money”? Great example is when Lamar and Mary receive socks from their parent’s portfolios and instead of holding them, they sell them immediately and buy a new car.

It reminds me when Elon Musk wanted to give some stocks to his employees as a compensation for “something”. Majority of employees said they do not want any stock in companies (such as Tesla and SpaceX), they wanted cash. Elon thought they are daft as the price of stocks goes up every years. Elon wanted to be at service to his employees. But employees wanted only useless cash… To be honest, I have encountered the same situation in my life. There are some people out there who really know nothing about money…

Are stock brokers affluent?

The answer is no. They trade daily, but they scarcely hold to their buys long enough to harvest any profits. If you are about to invest. Buy and hold, for at least a year or longer. Just DO NOT SELL! 😃 Not even a fucking Doge coin! 😂

Daughters vs. Sons 

There is a trend I continue to see throughout my life. I have noticed that affluent families tend to support their daughters significantly more than sons. Why is that? Simply, because sons can make wealth on their own. 😁😁😁

Now, you know my stance on gender equality. Women are saying how bad are they having it, but based on this evidence I do not believe it. Women are significantly more financially supported by their families throughout their lifetime as their male counterparts.

Gifts and inheritance

Let’s say there is a family with 4 children. When children are little, the thought is to give 1/4 of the inheritance to each. But as children get older, the proportionality changes. The weak tend to get lion’s share of family’s inheritance, because the strong are capable to take care of themselves without the assistance of others.

The process is also called: to weaken the weak and strengthen the strong. 

I have also learnt that the strongest usually walk away and do as they please. 

Taxing the rich

You all probably heard about those politicians. They want to tax the rich and give it to the poor. They could be perceived by public as modern Robin Hoods.

What politicians often do not realise is that they want to tax high-income earners, not the rich. The rich are smart enough to relocate their wealth and avoid taxes of all kinds (inheritance taxes, income taxes etc.).

Therefore beware of such politicians/preachers…

Ancestry groups

Shortly to the richest groups of the US millionaires in terms of antecedents. 

In terms of origin, the most millionaires are not English nor German. The highest ranked ancestry group are Russians, followed by Scotts, Hungarians and then by English.

“Russians-they are the best horse traders.”

I feel like this trend is likely to continue even today. Example is Gary Vaynerchuk. Also one of my role models and favourite entrepreneurs.

Many of you know I have experienced Brexit. Britons have suddenly came to conclusion that hardworking immigrants are bad for their country… Well, this book claims the opposite and says the USA needs constant flow of immigrants. Why? They work hard, they are frugal and they often want the best education and better life for their children. In the other words, they are fired up to succeed while natives are often not.

Conclusion:

I found the book extremely insightful. Remember, the press tends to sensationalise rare jackpots of those who are suddenly becoming wealthy (overnight successes). The overwhelming majority of US millionaires accumulated their wealth through hard work, patience, persistence, frugality and a bit of luck. In the other words, you won’t hear about those people in media. Do not mistake the freak show for the reality.

Another advice I took from this book is: No matter what your income, always live below your means.

Another set of principles I’m going to acquire from this book:

(1) Be tough ... life is.

(2) Never say "poor me" ... [or] feel sorry for yourself.

(3) Don't walk on the back of your shoes.... Waste not, want not. In other words, don't abuse your belongings. They will last longer.

(4) Always put things back where they belong.

(5) Say "yes" to those who need help before they ask.

I also would like to ask you a question. Who you think has less fears? An entrepreneur or an employee?

⭐️⭐️⭐️⭐️⭐️

Favourite quotes:

“Have you ever noticed those people whom you see jogging day after day? They are the ones who seem not to need to jog. But that's why they are fit. Those who are wealthy work at staying financially fit. But those who are not financially fit do little to change their status.”

“[My] business does not look pretty. I don’t play the part... don’t act it... When my British partners first met me, they thought I was one of our truck drivers. ... They looked all over my office, looked at everyone but me. Then the senior guy of the group said, “Oh, we forgot we were in Texas!" I don't own big hats, but I have a lot of cattle.”

“A hostile environment, even in an atmosphere of beautiful people, is not a good place for dogs-or for prodigious accumulators of wealth.” - To me this quote refers to pretentious middle class and UAW and how ruthless those people could be.

👉 Buy this book! 👈 through my link and help me build this website! 😊

Coming up next!

Think and Grow Rich by Napoleon Hill

Feel free to like, share and comment or recommend books you find inspirational yourself. I’m keen to hear about them.

Peace 🧘‍♂️✌️🌱

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* Net worth. You can calculate your net worth based on the following formula: “One way we determine whether someone is wealthy or not is based on net worth- "cattle," not "chattel." Net worth is defined as the current value of one's assets less liabilities (exclude the principle in trust accounts).”

“A person's income and age are strong determinants of how much that person should be worth. In other words, the higher one's income, the higher one's net worth is expected to be.”