Here are some interesting thoughts from the preface of Stop Acting Rich: ...And Start Living Like A Real Millionaire:
The reason why so many homeowners today are having a difficult time making ends meet goes way beyond mortgage payments. When you trade up to a more expensive home, there is pressure for you to spend more on every conceivable product and service. Nothing has a greater impact on your wealth and your consumption than your choice of house and neighborhood. If you live in a pricey home in an exclusive community, you will spend more than you should and your ability to save and build wealth will be compromised.
My research has found that most people who live in million-dollar homes are not millionaires. They may be high-income producers but, by trying to emulate glittering rich millionaires, they are living a treadmill existence. In the United States, there are three times more millionaires living in homes that have a market value of under $300,000 than there are living in homes valued at $1 million or more.
My thoughts here:
1. I understand completely what he's saying. When we were looking to move, I had estimated that the upgrades we needed to the new (bigger, more expensive) place would have cost us at least $20k initially (that doesn't count moving costs or fees to sell our home) and another $5k per year more in maintenance/on-going expenses. And we were looking at a home in the $350,000 range. Imagine what the costs would be on a million-dollar place!
2. Following that thought, just think what happens to the people who get Extreme Makeover homes. It's no wonder that many of them go into foreclosure or have to be sold -- even though they aren't in a new/more expensive neighborhood, costs for home maintenance are now way, way more than they were before.
3. We saw several high-priced homes on a recent tour of model houses. Some of our thoughts were along the lines of "boy, I'd hate to have their gas and electricity payments."
4. In the above, there's more keep-up-with-the-Joneses stuff going on.
5. The "treadmill existence" here is what The Difference: How Anyone Can Prosper in Even The Toughest Times called living "paycheck to paycheck." Again we see this from another set of research.
6. Wow. That fact on three times more millionaires living in homes under $300k than million-dollar homes is very interesting. BTW, our home is well under $300,000 in value.
7. I would be remiss if I didn't mention my formula for buying a house. Seems like the statements above bear out that this is good advice. :-)













Praise for The Millionaire Next Door
It was over a year ago that I started my series on one of my favorite money books of all time The Millionaire Next Door. However, I continue to get comments on the series such as this one from another fan of this book:
TMND is one of the five best books I've ever read. The only one on finance. Probably only one of ten books I've ever finished reading since I get bored with just about every other book.
I loved TMND because I could identify with it, word by word, page by page. It seemed to describe my life. My investment and spending behavior as well as my family (one wife and three children), is so similar to that described on the book that it was almost like looking into a mirror and understanding myself better.
On the wealth formula, at age 40 I've achieved 6.25 times the suggested net worth to be wealthy, 95% of it created in the last 10 years. I did not realize I was financially wealthy, I just thought I was doing good. The only difference that I have experienced with respect to the book is that it describes wealthy people's habits as being rather boring. I have achieved my economic success while developing four very different companies, investing in different opportunities and enjoying every minute. But the book is not just a mirror to make me feel good about myself or make those who are "being left behind" feel bad. I found it extremely insightful as to how to bring up your children to be economically self-sufficient. I believe my thoughts were heading in the general direction, but the book gives very clear and concise examples making a very strong case not to subsidize your children. It also gave me very good suggestions on how to work on my Will. At my age I had just handwritten a long itemized letter to make sure if I died my wife would know all the properties, company participations, and various investments that we have... but I was sure lacking the depth suggested by the book.
For those who do not find themselves in this book and probably choose to criticize it instead of changing their own habits, I'd suggest you try to meet some wealthy people and ask them a few questions. You may start to believe that the book is onto something and that might help you change your attitude. I myself am buying several copies of the book and lending it to several family members and friends.
For those who don't believe in the book because it does not give you investment advice and financial formulas, I would say it gives you a lot more. It gives you an insight into the right attitude to achieve wealth. I have not made my money on the stock market, nor a dot-com company. I didn't make it because of a masters in this or that, nor did I win the lottery. I saved, invested, reinvested, left my job and took a drastic change in lifestyle to start my own business from scratch. My parents are wealthy, and so were my grandparents. Each self-made. Each not giving a penny nor subsidizing the next generation other than helping to pay for the first four years of college. One may think it is genetic; it's not, it's a matter of learned behavior and attitude, becoming good habits over time. I'm lending the book to my brothers and sisters... I hope I can convince them to read it without the apathy or disdain they might develop. I hope they keep an open mind.
Truly a great book.
A pretty glowing endorsement, wouldn't you say?
As for me, The Millionaire Next Door is a must-read for anyone serious about growing their net worth. (If you want to see other books I really like, review my list of must-read money books.) To see a list of my best posts from The Millionaire Next Door series, visit Best of Free Money Finance: Millionaire Next Door.
Posted on August 23, 2006 at 10:24 AM in Comments, MND | Permalink | Comments (3) | TrackBack (0)
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