Sunday, January 16, 2005
Sunday Book Review: Millionaire Next Door
Let's pretend there's two kinds of millionaires. The first kind are what are called "leveraged" millionaires. These are the Donald Trumps--the guys who live off borrowed money. These are the guys we always see filing bankruptcy on the news, but who still manage to live in the big houses and ride in the limos.
The second kind are the "equity" millionaires. These are the ones who have scrimped and saved to get where they are. They've cut corners, clipped coupons, driven used cars, and in the process managed to get far enough ahead of the game that their net worth has seven digits to the left of the decimal point.
Now, let's say you're going to do a study on millionaires. And the way you decide to get them to let you study them is to offer them some money to fill out a survey. Which type of millionaire do you think is the most likely to respond?
The Millionaire Next Door isn't so much a "How-To" book as it is a "How-Dunnit." Millionaires were interviewed about their spending habits, lending habits, and other M.O.'s. The results?
Surprising facts like this: The average millionaire lives below their means. The average millionaire drives a used car. Actually, a used economy car. The average millionaire hasn't made a house payment in 15 years.
This book has become the bible of the suburban millionaire-to-be. Nearly every beginners finance book will reference this book.
Is this book entertaining?
Nope. Not in the slightest. It's actually kind of boring.
But that is perhaps the book's biggest insight. The everyman's road to wealth isn't about glitz, glamour, pizzaz or funny stories. It's about doing certain things consistently, month in and month out, until powerful ideas like compound interest and dollar cost averaging work for you instead of against you.
After reading references to this book in every other book in the world, you're going to have to crack it open eventually, so you may as well get it over with and learn it all right from the start.
Posted by Erik at 10:30 PM