Tuesday, August 3, 2010
The Millionaire Next Door, by Stanley and Danko
The Millionaire Next Door, by Thomas J. Stanley and William D. Danko, is an informative and useful book. There are several interesting points mentioned that should pique one's interest in reading this book.
• The wealthy are not necessarily the elite. They are ordinary people who live well below their means because they do not need to put their wealth on display. You would never know if you lived by "the millionaire next door."
• This book uses a simple formula to determine if you are a PAW (prodigious accumulator of wealth) or a UAW (under accumulator of wealth). Your age times your realized pretax annual income (except inheritance) divided by 10, minus any inheritance, is your target net worth.
• Budgeting is an integral part of building net worth. If one is aiming to become wealthy, he must minimize his taxable income as he gains untaxed capital.
• Buying too expensive of a home could easily hinder you from reaching your goal. In America, it is easier to make a lot than to become wealthy; but that does not mean that the ladder is impossible to climb.
• Economic outpatient care (gifts to adult children) often invites the children to be irresponsible with money. It is better to set up investments for them that will pay out gradually.
• The occupation most likely to make money is one that targets the low-consumption lifestyle of America's millionaires.