Your Kindle Notes For:

The Millionaire Next Door

William D. Danko and Thomas J. Stanley Ph.D.

Last accessed on Tuesday January 2, 2018

27 Highlight(s) | 4 Note(s)

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Twenty years ago we began studying how people become wealthy. Initially, we did it just as you might imagine, by surveying people in so-called upscale neighborhoods across the country. In time, we discovered something odd. Many people who live in expensive homes and drive luxury cars do not actually have much wealth.

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We are fastidious investors. On average, we invest nearly 20 percent of our household realized income each year. Most of us invest at least 15 percent. Seventy-nine percent of us have at least one account with a brokerage company. But we make our own investment decisions.

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How many generations does it take for an ancestry group that today contains thousands of Victors to become Americanized? Only a few. Most move into the “American normal” range within one or two generations. This is why America needs a constant flow of immigrants with the courage and tenacity of Victor. These immigrants and their immediate offspring are constantly needed to replace the Victors of America.

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Johnny does, however, need to impress his staff of janitors. How? By never giving them the impression that he is making so much money he can afford to have a tailor fit him for a suit priced in the low-to mid-four figures.

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Why would someone who is a millionaire need to budget? Our answer is always the same: They became millionaires by budgeting and controlling expenses, and they maintain their affluent status the same way. Sometimes we are forced to add analogies to make our point. We ask, for example: Have you ever noticed those people whom you see jogging day after day? They are the ones who seem not to need to jog. But that’s why they are fit. Those who are wealthy work at staying financially fit. But those who are not financially fit do little to change their status.

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I have a clearly defined set of daily goals, weekly goals, monthly goals, annual goals, and lifetime goals. I even have goals to go to the bathroom.

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Mr. Friend has always believed that the quality of service that accountants deliver is about the same; only their fees are different. That’s why he picked an accountant who has low fees. In sharp contrast, most wealthy people feel that you get what you pay for in the realm of financial advice.

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If you’re not yet wealthy but want to be someday, never purchase a home that requires a mortgage that is more than twice your household’s total annual realized income.

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among all major high-income-producing occupations, physicians have a significantly low propensity to accumulate substantial wealth. For every one doctor in the PAW group, there are two in the UAW category.

Note:surprising given residency low income

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For all high-income earners (those earning at least $100,000 annually), the relationship between education and wealth accumulation is negative.

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doctors have exceptionally high levels of domestic overhead. The concern in many of these households is with consuming, not investing.

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Operating a household without a budget is akin to operating a business without a plan, without goals, and without direction.

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What if your household generates even a moderately high income and both you and your spouse are frugal? You have the foundation for becoming and maintaining PAW status. On the other hand, it is very difficult for a married couple to accumulate wealth if one is a spendthrift. A household divided in its financial orientation is unlikely to accumulate significant wealth.

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penny-wise, pound-foolish

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When it comes to the allocation of my time, I place the management of my own assets before my other activities.

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PAWs have a regimented planning schedule. Each week, each month, each year, they plan their investments. They also start planning at a much earlier age than do UAWs.

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employees are too often fully dependent on their employers. Thus they tend to be less self-reliant when it comes to planning their investments in a way that will facilitate accumulating wealth.

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millionaires spend more time studying far fewer offerings. Thus, they can focus their time and energy—the resources needed to master their understanding of a much smaller variety of offerings in the market.

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Choose a financial advisor who is endorsed by an enlightened accountant and/or his clients with investment portfolios that in the long run outpace the market. If you don’t have an accountant, hire one.

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We looked at each other; one said: “These people are not into status; they buy automobiles by the pound!”

Note:mpg today

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Many affluent respondents take joy in driving vehicles that do not denote so-called high status. They are more interested in objective measures of value.

Note:weight.....

Yellow highlight | Page: 125 Note | Page: 125

He also has a favorite time of the year to negotiate. He claims he is most successful in cutting deals from the last two weeks of December into February. During the winter season, he says, sellers don’t find a lot of shoppers out and about. Christmas-related expenses and activities and the cold weather distract and discourage most potential buyers from shopping during this period.

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two of every three adult children who receive significant cash gifts periodically from their parents view themselves as members of the “I did it on my own” club. We are amazed when these people tell us in interviews, “We earned every dollar we have.”

Note:trump

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other sons and daughters of affluent parents become PAWs. The evidence suggests this happens when their parents are frugal and well disciplined and instill these values, as well as independence, in their children.

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the children of affluent parents have (in today’s dollars) about a one-in-five chance of accumulating wealth in the seven figures during their lifetimes, while the average child in this country whose parents are not millionaires has about a one-in-thirty chance.

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Webster’s defines courage as “mental or moral strength to resist opposition, danger, or hardship.” It implies firmness of mind and will in the face of danger or extreme difficulty. Courage can be developed. But it cannot be nurtured in an environment that eliminates all risks, all difficulty, all dangers.

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Yellow highlight | Page: 184 Note | Page: 184

The role of enlightened parents is to strengthen the weak.

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