The other day I ran into this piece. It's about a new book by Thomas J. Stanley, one of the authors of my all-time favorite money book, The Millionaire Next Door. It's titled Stop Acting Rich. Here's a summary:
If you think that having a 5,000-square-foot McMansion means you’ve arrived financially, think again. You may be fooling the neighbors. You may be fooling yourself. But you’re certainly not fooling Thomas J. Stanley, who aims to show readers the difference between how the really rich really spend and how wannabe millionaires jeopardize their financial security by focusing so much on the appearance of wealth.
What Stanley discovers (through a special survey he used to collect the information for "Stop Acting Rich") is that rich people in general are actually frugal, driving Toyotas instead of BMWs, owning only one home instead of several. They’re not cheap, but they’re also not concerned with showing off their wealth. That’s an attitude markedly different from that of the aspirational buyers in our spendthrift culture who fork over $60 for bottles of Grey Goose vodka, $3,000 for Chanel suits and $250 for haircuts. Most of these people are merely buying into a myth that looking the part will get them the gig, as Stanley observes.
Mainly, Stanley has the good sense to suggest that, as millionaires do, we live below our means, that happiness isn’t found in having a wine cellar, or a walk-in closet or a Maserati (hard to believe, but apparently true). It seems like an all-too-easy prescription for our society of debt-addled consumers. But after reading through Stanley’s engaging anecdotes about how the other America actually lives, you may come to feel that perhaps you don’t need to impress the other guy so much. This in itself is no small thing. Your wallet will thank you. And you may end up happier.
A few thoughts on this:
1. Of course, I simply HAD to read this book, so I contacted the publisher and they sent me a copy. I can't wait to read it!
2. From this summary the book sounds like it's a re-hash of the findings in The Millionaire Next Door. If so, I bet I'll LOVE it.
3. His ideas on how real people get rich sound very familiar. :-)
Anyone out there read this book yet? What was your take on it?
Nice book, however if you read Millionaire Next Door, I guess it's more of a part II. New facts into one book.
I enjoyed reading the book and adding it to my library
Posted by: Moneymonk | October 20, 2009 at 04:11 PM
I think I have the explanation.
I always wanted to have the normal things that most people aspire to, such as:--
A very nice new home, comfortably furnished, in a nice area.
A nice looking and dependable car.
Enough savings to be able to survive an unplanned break in my employment.
To raise a normal all American family.
To be able to afford an annual family vacation.
Eventually to have a home away from home for recreational purposes, in our case a ski cabin at Lake Tahoe.
I achieved all of that, early in my career by the age of 33, but I had two mortgages to pay and certainly was far from being rich.
My wife and I achieved these goals by living frugally, and saving hard.
My wife worked when the children were old enough and we both contributed the maximum into our 401K plans.
I retired when I was 58, in 1992, with a decent size 401K and with the help of a golden handshake was able to pay of both mortgages. We were still living frugally, well within our means, and still far from being rich.
After I retired I had time to teach myself about the technical analysis of investing in the stock market. After the very complicated technical analysis of rocket motor and re-entry vehicle structures that I had been doing I found that the analysis tools used to quantify trends and behaviors of investments were extremely simple by comparison and I soon had constructed a really nice program that helped me a lot with managing my own investments - however I was still far from being rich.
Then came the wonderful Clinton years with the Goldilocks economy, not too hot, not too cold, but just right. That led into the DOT.COM Bubble which started in 1998, expanded with irrational exuberance until it finally popped in March 2000. My hi-tech mutual funds peaked on 3/9/00 and 4 market days later, on 3/15/00 I was safely in money market funds. I had lost $350,000 in those 4 days but by then I was rich. If I had stayed invested I imagine that when the market hit bottom in October 2002 I would certainly have no longer been rich.
The bottom line is that I had been living frugally my whole life from my first job delivering papers while in high school right up until I was 65, and then in about 5 short months the stockmarket made me rich. After all those years of scrimping and saving and living frugally to achieve and maintain a nice lifestyle it's impossible to change your habits quickly and to suddenly start living like people that became rich at a very early age.
So here I am, very happy and living pretty much the way I have lived for the last few decades, only now I am a very frugal multi-millionaire and one of these days our three kids, two of which are already millionaires, will thanks us!
Posted by: Old Limey | October 20, 2009 at 09:26 PM
The Millionaire Next Door is one of the all time greatest books. I am looking forward to your review and getting a copy for myself.
When you run the numbers, I don't see how anyone can walk away without understanding that is always easier to save money than it is to make money?
If you want Proof, click on my name.
We focus too much on trying to make a million and not enough on trying to keep a million!
Posted by: Greg | October 20, 2009 at 10:58 PM
All good stories here. It reminds me of a banker friend of mine who was privy to bank accounts. He said the nicer the car the lower the account. He also said the biggest accounts were owned by guys driving old pickups. I was skeptical but it sounds like there may be some truth to this story.
Posted by: texashaze | October 20, 2009 at 11:30 PM
I have the Millionaire next door right on my coffee table! Great book full of insight.
I'll definitely check out his new book as well. Thnx for highlighting.
Posted by: Financial Samurai | October 21, 2009 at 12:49 AM
When I first read the book "The Millionaire Next Door", I started to believe that being frugal was a possible way to achieve wealth. Truly a great book, I hope this new one is as good.
Posted by: [email protected] | October 21, 2009 at 12:53 AM
A lot of this comes down to understanding the credit illusion. Credit = debt. If we walked around carrying "debt cards" in our wallets rather than "credit cards" i think we'd use them differently.
Posted by: JT | October 21, 2009 at 01:13 AM
FMF,
The best part of your post is the implication that you got a free copy of the book by contacting the publisher. Now that is frugality at its best!
-Mike
Posted by: Mike Hunt | October 21, 2009 at 02:01 AM
Mike --
Yes, that's a nice side benefit of being a blogger. :-)
Posted by: FMF | October 21, 2009 at 07:45 AM
If you've got to flash it, you don't have it. The millionaires I've known have been frugal people with old fashion values who came from nothing and know they could return to nothing tomorrow so they looked for bargains like everyone else.
Posted by: The Biz of Life | October 21, 2009 at 08:01 AM
I just got finished reading his book "the millionaire mind" and am hoping to receive my copy of this new book as well. Sounds good!
Posted by: Bible Money Matters | October 21, 2009 at 09:53 AM
The Millionaire Next door is a great read. It's amazing how many people spend years to graduate from college only to appear rich.
Posted by: Willie Long III | October 21, 2009 at 10:03 AM
It's such common sense, yet so few people follow this sage advice.
Posted by: Ben | October 21, 2009 at 10:09 AM
I aspire to a smug asceticism, where I have a lot of money and make anonymous donations, while continuing to live a poverty-level lifestyle.
Posted by: Terry | October 21, 2009 at 11:48 AM
"A very nice new home, comfortably furnished, in a nice area.
A nice looking and dependable car.
Enough savings to be able to survive an unplanned break in my employment.
To raise a normal all American family.
To be able to afford an annual family vacation.
Eventually to have a home away from home for recreational purposes, in our case a ski cabin at Lake Tahoe."
I had of that by the age of 31, except for the second home.
I hope to now stack money and build wealth for the second half of my life as you did.
Thanks Old Limey for the inspiration
Posted by: Moneymonk | October 21, 2009 at 12:16 PM
Posts in this vein might be more helpful to FMF readers if they focused on expensive "rich lifestyle" accoutremonts that aren't as obvious as McMansions. Because I'm sure everyone reading FMF just responds to these posts with "oh, I'm so awesome because I'd *never* spend money like that!"
Some suggestions:
1. Your own brokerage account: I wish I had a nickle for every middle-aged stoner IT guy I've met who is convinced they're going to make it rich by day-trading. When all they're doing is pissing away $ with fees.
2. Do you really need that iphone/blackberry and it's expensive service plan? Can't you possibly wait until you get home/to work to send that email? Maybe a regular phone at a fraction of the cost would work just as well?
3. Major league sports season tickets. Couldn't you just buy tickets when you'll actually have time to go, or sometimes watch the game on cable?
4. You don't need the brand new iMac or a netbook every year. Get yourself a middle-of-the-road Dell and keep it for 5 years. Or just use your work laptop for everything.
5. Don't take "destination" vacations. The kids don't *have* to go to Disneyworld. Just take a week off work and take the family camping and to your local waterpark or 6 flags or science/children's museum every day. Just because it's spring break doesn't mean you have to go to a resort. Maybe just drive to the nearest big city and go to a show. Similarly, spending your vacation time in the Caribbean at an all-expenses paid resort or taking a cruise is way overrated and incredibly overpriced--you'd probably have just as much fun renting a cheap little place on the beach in South Carolina or California and cooking for yourself.
6. ??
Posted by: MC | October 21, 2009 at 12:38 PM
I not only want to read this book, I want Old Limey to write a book too!
Posted by: Dar | October 21, 2009 at 01:23 PM
"Similarly, spending your vacation time in the Caribbean at an all-expenses paid resort or taking a cruise is way overrated and incredibly overpriced--you'd probably have just as much fun renting a cheap little place on the beach in South Carolina or California and cooking for yourself."
Actually, a cruise can be a whole lot more economical than a vacation in California... Especially if you live near a port and don't need to fly. Keep in mind that you are getting transportation, lodging and excellent food. A package to the Caribbean can be reasonable too, though usually all-inclusive ones are more expensive. Just need to shop around, maybe get cheapest stateroom on a ship, maybe choose the season wisely: for example first week of January is just as nice as last week of December, but is a whole lot cheaper. Late November -early December still have summer prices but are fairly nice. October is very cheap, but a bit risky in the Caribbean. Also - start looking several months in advance and check prices every week. BTW -- and neither South Carolina nor California (with its freezing water) is anywhere close to the Caribbean: the water in the Caribbean is warm and crystal clear; you see a wave coming at you and it looks like it is from glass... And there are palm trees on the beach that provide shade. But if you haven't been there you wouldn't understand.
Posted by: kitty | October 21, 2009 at 11:08 PM