Book reviews for Millionaire Next door and its sequel
On a recent recommendation I read The Millionaire Next Door and then I went ahead and read The Next Millionaire Next Door. They were interesting to read but I will not be adding them to my recommended reading Financial books. Some of the information was eye opening, but to be honest I think that the only people who will get value out of these are those that would probably have come across them already. If you are not already somewhat close to the mindset discussed in the books, I would not consider them to be stirring enough to modify behavior. I could be wrong, but I just don’t see someone reading one of these and changing how they live and spend. If you have read the books and feel otherwise please comment down below and share your thoughts.
It did have an impact on me in the ways I will describe below.
- It gave me a Net Worth to set as a goal. A lot of other books talk about saving all you can and having enough but none really gave a good rule of thumb. These books do offer a very easy to calculate rule of thumb. Again this is not going to be attainable but everyone. However, you will usually never make a goal you do not set. The equation is pretty simple.
- Take your Annual Salary= As
- Take your Age = Age
- The divisor is 10.
- (As * Age)/10.
- So if you make 60,000 and you are 30 years old you should have 1,800,00/10 = 180,000 Net Worth.
- When purchasing a house (this varies some between the books) you should never spend more then 2-3 times your annual salary for your house. So in the above scenario (60k Annual Salary). It would be a bad idea to buy a house much above 120k – 180k.
These two actions do not mean you will become a millionaire. However, most millionaires have met those criteria.
They both talked a lot about the difference between High Income and High Net worth which is a very critical difference. Those with the highest incomes have some of the lowest net worth.
They also discussed that the majority of millionaires in America were not born into the wealth. They did not win the lottery. A lot of them were first generation immigrants.
The biggest message through the book is one most of us know already. Live below your means. Save, Save, Save. The average millionaire is quite thrifty. It was surprising to find out how they live and to find out more you can read the book.
Another key point was to find a job you love. That was actually a key component to a lot of millionaires.
The final notes I will say is that one thing that millionaires are not frugal about are their CPA and CFP’s. They would rather spend more money for quality then try to skimp on. Fee Based preferred and that does include the Fee Based that uses a % of your Assets for the base. The important factors are that they are a fiduciary and they are not going to be compensated by selling or recommending a product. An advantage of the second book is that it does provide some excellent questions to ask your Financial Advisor before becoming a client. Although, I personally recommend googling to get a more complete list. Those were great questions though.
If you have read them please comment below with your thoughts. If you have questions feel free to ask them. Hope you find this review useful.