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November 02, 2005


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You have to keep in mind that The Millionaire Next Door was written about ten years ago and much of it is outdated now. But it's still a great read.

I disagree that it's outdated (as I'm sure you can imagine). I think the principles are timeless. I was applying them before the book came out and have been ever since and I've seen my net worth skyrocket.

You were the one that said you wouldn't take investment advice from an accountant. I was merely agreeing with you.

My point is, much of the book relates to the demographics and psychographics of American millionaires in the early 90's and those traits have shifted a great deal. For example, in the 90s my wealthiest clients were self-employed, hard-working and frugal. Today, my wealthiest clients work for large corporations and often spend extravagantly. Things have changed.

Well that's what you get for agreeing with me! ;-)

Just to clarify (on this issue as well as the MND):

1. I don't take investment advice from "professionals" who don't seem to have a handle on their own money? (Why would I?) This includes financial advisors, accountants, etc.

2. I do use an accountant for taxes. To me, it's worth the cost for the time savings I get.

3. The Millionaire Next Door's stats may or may not have changed regarding demographics, etc., but the principles like spending less than you earn, not having to have every new gadget, needing a frugal spouse, etc. are still very much the road to wealth.

I agree that the principles of the book remain solid. I've also read _The Millionaire Mind_ by the same author and it goes into more detail about the ethical and personal persuasions of the wealthy, which is timeless in my opinion.

As for using accountants, the really good ones see opportunity and suggest ways for you to structure your accounts and legal entities better. Many accountants will add up the columns once a year and do it well, but the really good ones tell you how you can alter your habits slightly to avoid over paying taxes. Additionally, the good ones tend to make connections between their clients and help initiate deals, whether you are a business owner or an employee.

Most people treat their accountant like a glorified calculator, but these folks can often add more value if you talk to them about these things. That said, if they just want to do book keeping, find another accountant.

When I read "investment advice" in regard to accountants, I have a different picture in mind. The role I see from an accountant is
1) help in timing: calculating the tax impact on a stock I want to sell--does it make sense to do so at the end of this year or should I wait until next year?
2) changes to the tax code, this year, next year, and long term
3) calculating the net (after tax) impact of something you are considering
4) evaluating returns between taxable and tax-free alternatives

Yeah, these all revolve around taxes but a CPA can help tremendously on calculating the true return on an investment for those not well versed with tax law.

Again, just my interpretation.

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