Being frugal is the cornerstone of wealth-building. Correct! Try explaining that to my wife. To her frugal is a four letter word and she is not having it. But like it or not that is what a popular book, The Millionaire Next Door: The Surprising Secrets of America’s Wealthy, teaches. This book sold millions of copies but how many average people read it? For goodness sake it’s 272 pages long. And I will be honest; I am reading it only because I found it online in a pdf format. Yes, I feel guilty – but. Oddly enough, I am having a hard time reading it and I would feel much worse if I had purchased the book and then failed to read it. (just saying – gotta be frugal…)
Cornerstone of wealth-building: Being frugal
I love reading, so I do feel bad about reading it online for free. Well, I promise, if I get to chapter four and feel like it keeps me interested – I will purchase a copy. I hope it does because I’ve heard so many good stories (excerpts) about this book. But if not, I will stop reading it and you will never hear me mention this book again. Not even in reference.
Read PDF: The Millionaire Next Door: The Surprising Secrets of America’s Wealthy
Excerpt: Millionaire Next Door
Being frugal is the cornerstone of wealth-building. Yet far too often the big spenders are promoted and sensationalized by the popular press. We are constantly barraged with media hype about so-called millionaire athletes, for example. Yes, some of the members of this small population are millionaires. But if a highly skilled ball player makes $5 million a year, having $1 million in net worth is no big deal. According to our wealth equation, a $5 million earner who is thirty years of age should be worth $15 million or more. How many highly paid ball players have a level of wealth in this range? We believe only a tiny fraction. Why? Because most have a lavish lifestyle-and they can support such a lifestyle as long as they are earning a very high income. Technically, they may be millionaires (have a minimum net worth of $1 million or more), but they are typically low on the prodigious accumulator of wealth (PAW) scale.
How many households in America earn $5 million in one year? Fewer than five thousand of the nearly 100 million households. That’s about one in twenty thousand. Most millionaires never earn one-tenth of $5 million in a year. Most never become millionaires until they are fifty years of age or older. Most are frugal. And few could have ever supported a high-consumption lifestyle and become millionaires in the same lifetime.
But the lavish lifestyle sells TV time and newspapers. All too often young people are indoctrinated with the belief that “those who have money spend lavishly” and “if you don’t show it, you don’t have it.” Could you imagine the media hyping the frugal lifestyle of the typical American millionaire? What would the results be? Low TV ratings and lack of readership, because most people who build wealth in America are hardworking, thrifty, and not at all glamorous. Wealth is rarely gained through the lottery, with a home run, or in quiz show fashion. But these are the rare jackpots that the press sensationalizes.