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September 19, 2008


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"It could also be that by saving you can accumulate enough cash for when that awesome real estate deal shows up – there’s nothing worst than the feeling of: “I’d know exactly what to do if I had the money for it.”

That's precisely what I've been doing for the last 4+ years in California. I won't be waiting much longer. I was too young the last time to take advantage of the deals; not this time.

It's important to note that he didn't pay alot to the people he asked to take his surveys, nor to the millionaires that they interviewed. So that skews his data quite dramatically.

It's also good to remember correlation does not imply causation.

Great savers are great managers of cash-flow, which is absolutely essential in running a successful small business. Perhaps frugal savers are wealthier because that skill translates into a greater income in their working life.

I think Millionaire is a millionaire, regardless. So the data can't be that skewed after all. I agree, saving does give you great cash-flow managing skills and these are a must to have financial success.

I tend to lump both my savings and my automatic mutual fund investments into the same category. Obviously there's no guarantee that my investments will be productive, but I'd say its a pretty safe assumption. To me the real key to gaining wealth is to use your money towards appreciating assets instead of depreciating ones.

Thanks for the reminder. The Millionaire Next Door is a great book, and I love the idea of being frugal as a starting point. My favorite is the philosophy of John Wesley, the English preacher from the 1700s. He believed you should 1. Make as much as you can, 2. Save as much as you can (frugal), and 3. give away as much as you can.

A person earning $100K and a person earning $15K disagree on the operative definition of frugality. The latter can be far more frugal than the former yet die poor.

“I’d know exactly what to do if I had the money for it.”

That was the way I felt when Google had its IPO, heh.

I need to reread that book and get inspired to be a little more frugal. I don't have any debt (aside from a mortgage), but I've definitely noticed that as my income has increased over the last few years, my spending has to. I'm all for increasing one's income, but what's the point, if you don't increase your net worth as well? :)

The millionaire next door to me is one of the best book about personal finance. He talks about two things: 1. making money 2. saving money The people that can do both are PAW's (prodigious accumulators of wealth). Saving money is as important as earning money. It is when you can do both really well that you will get very wealthy. However, even if you don't make a lot if you can save very well for a long time eventually you will get wealthy also. It's not that saving is a better way to wealth than earning a lot but it helps to ensure you will be wealthy and it will be the path to wealth for most people.

I think the 2 key factors to becoming a self-made millionaire are

1) owning your own business

2) frugality and sensibility with money & investments

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