This episode, I look at the key financial lessons we can learn from The Millionaire Next Door and what it teaches us about being wealthy and looking wealthy.
This episode, I recap the lessons The Millionaire Next Door teaches us about how to achieve financial success.
I cover what the writers learned from interviewing people with over 10 million dollars and what the most common jobs are for millionaires…
“Feeling financially well off feels fantastic and you don’t need the recognition.” – Ben Jones
“The harder you work the luckier you get.” – Mak
01:11 – Key ways to achieve financial success.
01:30 – The importance of having the right expectations for your investments.
02:22 – Pieces of wisdom you can learn from The Millionaire Next Door.
03:39 – Interviewing people with over 10 million dollars
04:35 – What the majority of millionaires do for a living.
Connect with Ben Jones:
#1 Where are higher-income families more likely to do most of their Christmas shopping, compared to lower-income families?
A) At a pet store
B) At the North Pole
D) At a yard sale
#2 What are lower-income families more likely to use to pay for Christmas shopping?
A) Home-grown vegetables
B) Compliments to the store clerk
C) Monopoly money
D) Credit card
#3 How do 29% of Americans plan to pay off their holiday bills?
A) By doing the dishes for six months
B) By joining TikTok and hoping they go viral
C) Using their tax returns
D) With money from generous strangers
#4 How long did we calculate a typical $1500 credit card bill would take to pay off at average interest rates if you only paid the minimum amount?
A) 44 months
C) Ten years
#5 Prices today are around 50% higher than 20 years ago because of what?
A) 44 months
C) Ten years
The Millionaire Next Door takes 7 lessons, and talks about all the research into how the author came down to those 7 items. It almost sounded like a labor of love. He wanted to share with the world the real secrets from everyday people who did some amazing things financially.
I think it drives home the idea that it really isn’t rocket science. All of this requires discipline until the habits are internalized. Benjamin Franklin had 13 Virtues that he tried very hard to internalize, and one of them was Frugality. Being financially well-off feels fantastic, and you don’t need recognition. I know it’s an internal thing, that’s Zen-like. When trying to lead a healthier life, I used to hear the saying “nothing tastes as good as it feels”. It’s like a state of mind, almost like a smile exploded in your stomach. Ok, that was a reach, but it feels pretty good.
I’m going to paraphrase a bit:
Live below your means
Spend your time wisely
Being rich feels better than looking rich (and being broke)
Don’t create kids who are financial monsters
Build your kids into self-sufficient adults
Take advantage of financial opportunities
Choose the right occupation
As we discussed in the podcast, you can’t have unrealistic expectations of your investment. Around 20 years ago, I made a HUGE investment with that expectation and lost it all. I believed someone very close to me. A HUGE mistake, I put aside all my reason, and got brutally crushed. It took a toll emotionally. To this day, I think about it. And, it took me 15 years to get back on track. Very painful. I didn’t understand the business, the people and several aspects of what I was getting into. A very expensive lesson.
That story is only to tell you to follow the wisdom and lessons we’ve been studying. FOMO is the fear of missing out. Chasing a grand slam investment is fun, but usually leads to a very bad ending. However, with experience and hard work you’ll do great things. I love this saying, as I find it so true. “The harder you work, the luckier you get.”
It’s always interesting to me to look at the numbers of being wealthy. In this book, there are many nuggets of wisdom, if you take a minute to process it. For instance, 70% of millionaires never paid more than $29,200 for a new vehicle and only 5% ever paid more than $57,000.
That doesn’t sound like what a millionaire would do when you’re looking from the outside in. I would’ve thought they bought really expensive cars. But it feels better being wealthy than looking wealthy. What if you didn’t have to worry about having a full-time job? BAM!! That’s liberating. What would you do with your time? Would you hang out with friends more often? How about more time with the family? Would you learn how to paint? Travel?
Plus, the book references that millionaires don’t always choose to buy new cars. A good portion have older cars. For people who buy a new car, and aren’t wealthy, generally they don’t spend their time wisely as one of the lessons highlights. It was found out that those who don’t make great financial decisions spend 60 hours to buy a new car. A wealthy individual often goes for use, and doesn’t waste the time looking for the best deal, newest bells and whistles and driving all over town.
Here’s something else interesting. When putting together the book, the authors had to do a lot of interviews. When performing those interviews with decamillionaires, meaning those with over $10 million in net assets, they were caught by surprise by the first interviewee who showed up in an older “run-down” suit. The person was a real estate investor who owned various businesses, and didn’t value having an expensive new suit.
The interviewers invited these decamillionaires to a penthouse for a fancy gourmet meal with expensive beverages. Not a single one ordered any expensive food and they didn’t drink any of the gourmet wine. They only ate the gourmet crackers! Unbelievable. It’s the concept of living below your means that really hit home with the authors after that experience.
If you’re curious about the right occupation, I can at least tell you what was found in the book. The majority of millionaires are small business owners, self-employed, or sales professionals who get paid on commission. Maybe that’s something to think about.
Hopefully, I’ve given you a couple pieces of wisdom you can use. Thanks for listening and I’ll see you again next week for more Money with Mak & G.