My Thoughts On The Millionaire Next Door

       Recently I read the book The Millionaire Next Door. In this book the two authors study millionaires, for example their do’s and don’ts. I definitely learned alot from this book.

       Many people get the definition of wealth wrong. Why is this? If you ask most people what they think wealth is, most people would say “A person who displays an abundance of materials and possessions is wealthy.” Prior to this I thought that wealth was all the stuff you had. That is not true, people who live a high consumption lifestyle often do not have any investments, common stocks or bonds. One way to determine if you are wealthy is your net worth. What is a net worth?

A net worth is determined by a person’s assets minus all of their  debts. Their definition of wealthy is having a net worth of over $1,000,000. With that definition as of 2019 only 15% of households are considered wealthy (11 million of 128 million households have a net worth of over $1 million). To find out how wealthy you should be multiply your age times your annual realized pretax household income from all sources except inheritances, then divide by ten. If your net worth is below that you are an Under Accumulator of Wealth( UAW). If your net worth is above this you are a Prodigious Accumulator of Wealth( PAW). I sure didn’t know the definition of wealth before reading this book. 

       Most millionaires are very frugal which means that they live well below their means, according to their budgets. They don’t spend extra money on extra things instead they save it. It is like an overweight individual who starts working out. Once he becomes fit he doesn’t need to workout as intensely. The same goes for millionaires once they reach their financial goal budgeting does not need to be as strict, but keep in mind that they had to work really hard to get that money. Most millionaires are very frugal and strict to their budget because it has become a habit of life for them.

       Millionaires allocate their time, money and energy in ways instrumental to building wealth. Did you know that PAW’s spend twice the amount of time budgeting and planning, or that UAW’s worry way more than PAW’s about not being wealthy enough to retire or accumulating significant wealth? This is a large reason I think budgeting is important.

       What I took from this book is that millionaires don’t spend a lot of money displaying wealth. Once millionaires find that they have all this money and they have everything they want the most fun thing to do is give it away. They don’t spend money buying expensive cars but they do spoil their grandchildren by putting them into private schools. For their adult children they give them many different kinds of gifts like a country club membership or  jewelry. Before reading this book I thought that all millionaires spent a ton of money, obviously this is not the case.

 I think I can be different by not getting money and spending it right away.  I will continue to put money into my bank account and build wealth.I hope I can be a millionaire like them. 

I would rate this book 5 stars because I loved all the facts they gave. I would recommend this book to anyone who likes finances. I really liked this book.