Tuesday, May 18, 2010
I had been meaning to read "The Millionaire Next Door" by Thomas Stanley and William Danko for the last few months, so I was really excited when it was finally available on my library list! Overall, I thought the book was pretty good - I'd give it a B. While I didn't take away any specific saving strategies, I did come away with some really great ideas and insights.
Points I loved from the book:
Wealth is not the same as income - if you make a decent amount of money every year but spend it all, you're not getting wealthier.
There are seven factors to being wealthy - living well below your means, allocating time and energy efficiently in ways to conducive to building wealth, believing financial stability is more important than displaying high social status, and choosing the right occupation are among them. The other 3? Millionaires did not have "economic outpatient care" given to them by their parents, their children (if applicable) are economically self-sufficient, and they are proficient in targeting marketing opportunities.
Saving takes discipline - just because you are a college graduate with a prestigious job does not guarantee you financial independence and a sizable retirement account. You must plan to save at least 10% of your take home pay and avoid typical spending traps, like new luxury cars, expensive wardrobes and a lavish lifestyle.
A budget is essential - the authors compared a household that operates without a budget to a business that operates without a plan, goals or directions. It won't work. You must know how much you spend and analyze how you could be saving more and spending less.
Know your spouse's money habits - most millionaires married someone frugal like them, or some married people even more frugal. If you're single now, make sure talking to your significant other about money is on your list of things to do. Spenders don't tend to be millionaires.
Don't give your children unlimited access to your money - this saying by the authors really resonated with me: the more dollars adult children receive, the fewer dollars they accumulate, while those who are given fewer dollars accumulate more. If your kids need help, give them the skills and tools they need to solve the problem instead of throwing money at it.
Did anyone else read this book? Are there any other personal finance books you'd recommend?