Review: The Millionaire Next Door

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The Millionaire Next DoorThe general premise of The Millionaire Next Door is that the pop culture concept of a millionaire is quite false and that most actual millionaires live a very simple lifestyle. The authors, Stanley and Danko, did extensive profiling of people whose net worth defined them as millionaires along with those whose salaries and age defined them as likely millionaires and, using this data, created a detailed profile of who exactly a typical millionaire is. From there, extensive interviews with these “typical” millionaires created a much more detailed picture of what it actually means to be a millionaire in today’s society.

What does this have to do with personal finance? Rather than the image that most of us have of millionaires as people who inherited their money or got famous, most of the people that are actually millionaires got there through strong individual financial planning. They’re frugal people with a head on their shoulders and are often indistinguishable on the street from anyone else.

In the introduction to the book, Stanley and Danko break these traits of millionaires down into seven basic factors (quoted from pages 3 and 4):
1. They live well below their means.
2. They allocate their time, energy, and money efficiently, in ways conducive to building wealth.
3. They believe that financial independence is more important than displaying high social status.
4. Their parents did not provide economic outpatient care.
5. Their adult children are economically self-sufficient.
6. They are proficient in targeting market opportunities.
7. They chose the right occupation.

Most of the rest of the book goes on to outline Stanley and Danko’s findings on each of these factors. A chapter is devoted to each factor, bookended by an opening and a closing chapter.

For me personally, evaluating my life as a snapshot through these factors made it clear how different the old, crazy spending me was different from the newer, financially sound me. The biggest hurdles for me were living well within my means and not worrying about displaying social status; I bought into the psychology that the appearance of affluence was of vital importance, when what really matters is the money in the bank.

What’s Inside The Millionaire Next Door?

On Spending The early chapters of this book really focus on defining this profile of a typical American millionaire, and it turns out that they’re actually very thrifty. The early chapters do a solid job of exposing the pop culture concept of a millionaire – that of the wild spender with an extravagant home and material goods – as just that: a construct of popular culture.

This concept is perhaps best explained by a portion of the second chapter which describes four questions to which the answers determine whether you’re living a wealth-building lifestyle or expending your wealth maintaining your lifestyle:
1. Does your household operate on an annual budget?
2. Do you know how much your family spends each year on food, clothing, and shelter?
3. Do you have a clearly defined set of daily, weekly, monthly, yearly, and long-term goals?
4. Do you spend a lot of time planning your financial future?

Unsurprisingly, the more “yes” answers that people give to the above questions, the more likely they are to have established significant personal wealth. For me, these questions were somewhat comforting, as I am now able to answer these questions with three strong “yes” answers and a “mostly” answer (the budget one is still in process), which compared to the four “no” answers that I would have delivered a month ago indicates that I’m psychologically improving my financial state.

The most powerful point (for me) was the strong correlation between time spent planning and considering personal finance and the actual presence of wealth. The extensive surveying that provides the backbone for this book repeatedly shows a direct relationship between attention to financial planning and accumulation of personal wealth. The people described in this book as prodigous accumulators of wealth generally invested the time in assembling highly detailed budgets and mechanisms for tracking their spending, while the underaccumulators did not invest the time.

The first chapters did expose a major flaw in the book, though: The Millionaire Next Door has a strong anti-youth bias. Early in the book, the authors define a simple rule of thumb for estimating one’s net worth: multiply your age times your realized pretax annual household income from all non-inherited sources and divide by ten. Go on, do it yourself.

When I did this, I was shocked as to what the formula expected as a net worth for me: over a quarter of a million dollars. I’ve only been in the workforce for four years and I have a big pile of student loan debts, so I’ve worked hard to manage to just recently achieve a positive net worth. I’m not alone in this situation – many younger people have had to take on substantial amounts of debt in order to finish school, so only a very lucky or a very exceptional person under the age of thirty five could come anywhere close to matching this rule of thumb. Of course, when you hit your stride in your late forties and fifties, it’s a solid rule of thumb, but the formula is simply not realistic for many younger people today.

Another way that the book exposes this anti-youth bias is via another interesting metric: evaluating your income tax paid as a percentage of your net worth. Now, for youth with student loans, the percentage is likely going to be quite large, but the book says that one should strive for a number approaching 7% (or even lower, if possible). For me, my income tax paid as a percentage of my net worth is probably going to be over 100% this year, and in years past it was infinite (as my net worth was negative). This is a great metric to define your progress in your forties and fifties, but for younger people, it’s a metric that paints an overly critical picture of our financial shape.

In short, the book often ignores the sacrifices youth make early in their life in order to maximize their earning power later. The reason for this bias is in their sampling: everyone interviewed in the book is already well into middle age. They focused on the people that have already had many years to either accumulate wealth or put themselves in a position where their income is barely able to cover their lifestyle while largely ignoring the people early on who have to make sacrifices to allow themselves to be able to make such choices at all. For a younger reader such as me, this book often feels like a peek ahead at issues I’ll be concerned with in ten years; it’s nice for long-term thinking, but not as useful in preparing my finances now for financial accumulation while managing young children and a first home purchase.

On Learning One chapter of the book focuses on that most venerable of status symbols, the automobile. Millionaires tend to buy late-model used and underdramatic automobiles and use several techniques to obtain optimum value on the car. It’s important to note that “optimum value” doesn’t always mean the absolute lowest price, but instead refers to the lowest price that can be found with a reasonable amount of work invested in the hunt. One technique that particularly stood out was the concept of faxing requests for offers on a very specific model to several different dealers, then taking the best one of the lot – a very effective way of effortlessly creating a blind auction.

After this, the book spends two chapters criticizing in great detail the process of giving what the book calls “economic outpatient care” to children. In short, the book is highly critical of any sort of financial support to adult children. This philosophy is broken down into four clear points:
1. Giving precipitates more consumption than saving and investing.
2. Gift receivers in general are never able to fully distinguish between their wealth and the wealth of their gift-giving parents.
3. Gift receivers are significantly more dependent on credit than nonreceivers.
4. Receivers of gifts invest much less money than do nonreceivers.

Taken as a whole, these four points clearly indicate the solution to the problem: people who wish to instill good financial sense in their adult children do not provide them with any significant economic support. In general, I agree with this philosophy.

Unfortunately, the age bias that I discussed yesterday rears its ugly head again in this section. Virtually all of the advice that deals with how to distribute money to children focuses on adult children; there is little discussion on how the average millionaire instills strong financial values in their own children. I already intend to cease regular economic support of my child upon the arrival of his eighteenth birthday, but how can I prepare him for this change? The book offers few clues, generally only ones that apply to both adults and to younger children.

There is one interesting phenomenon mentioned here that I’ve noticed repeatedly in my own life: parents tend to give more money to children with poor financial skills than to children with strong financial skills. Even in my own family, this is true; parents often give what little they have to the child who shows the least independence, while the child that works hard and shows the most independence get little assistance. On some levels, this makes sense, but on others, it merely reinforces poor behavior in the financially dependent child and can inspire resentment in the financially independent child. This further reinforces the idea that economic outpatient care is a bad idea.

On Living The final portion of the book focuses on finding one’s niche – how can one find a role that will enable them to cultivate a healthy financial garden?

This final portion of the book felt very tacked-on and fell quite flat for me. It is quite brief and the content stands apart from the solid material that fills up the 90% of the book that precedes it.

In a nutshell, The Millionaire Next Door recommends that people seriously investigate service industries that cater to millionaires as a way to raise more money. They spend an entire chapter listing possible services that millionaires (as profiled in the book) are interested in or may become interested in in subsequent years.

The book closes by strongly encouraging people to become entrepreneurs. The final chapter is a lengthy pitch for starting your own business, as this is the best way to achieving great financial success. The book mostly paints a rosy picture of entrepreneurship, when in fact most small businesses fail within the first year. I feel that this again exposes an age bias in the book; most young people today are already at a level of debt that far exceeds what the baby boomers were experiencing at a similar age. This is due to the rising costs of education and the exploding housing market, both of which have aided the boomers in becoming millionaires themselves (at least the ones profiled here).

Buy or Don’t Buy?

The Millionaire Next Door has a substantial amount of good content – more than two hundred pages of non-filler written in a reasonable sized typeface. This is in contrast to many personal finance books which are written in an enormous typeface in order to spread out a small amount of content to the point where it appears to fill a larger book.

The material in the book is cohesive and presents a logical and straightforward worldview, meaning you won’t find contradictory statements throughout. The writing is very readable; I’d even go so far as to call it a “quick read,” though the book wasn’t all that short.

My primary nitpick with the book is the prevalent age bias. There is very little of this book that addresses people under 40 or people who are just getting started with personal finance outside of some general guidelines that can be found in any personal finance book. The meat of this book is written for people who are approaching retirement and are dealing with adult children, a situation that (for me) feels a long way off.

I give the book a “buy” recommendation if you are over the age of forty, if you have substantially greater assets than many people in your age group, or you are interested in long-term financial planning. The book does a great job of outlining what people should be doing in middle age if they want to build substantial wealth (and enable their families to carry on this tradition) for their later years.

On the other hand, I give the book a “not buy” recommendation if you are young and without appreciable assets. At this point in your life, the focus should be on building a solid foundation for your financial life and this book does little to address that topic. Your time and attention is almost assuredly better spent somewhere else.

I originally reviewed The Millionaire Next Door in five parts, which you may view here, here, here, here, and here if you’d like to read the original comments.

The Millionaire Next Door is the first of fifty-two books in The Simple Dollar’s series 52 Personal Finance Books in 52 Weeks.

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25 thoughts on “Review: The Millionaire Next Door

  1. This book is good for the person who doesn’t have what it takes to be trully rich (e.g. earn a lot of money and not have to worry too much about affording luxuries because they are still saving more than enough). This book is for the middle-class mass-market that wants to have a million dollars saved up by the time they’re old and ready to retire. Do I consider someone with a million in the bank by the time they’re 55 rich? Not really, they can’t live a luxorious lifestyle with that much money. The book is also filled with statistical flaws which we spent an entire day debunking in my stats class. The entire sample set they use is completely stastically insignificant. They sent out a bunch of voluntary questionnaires to people with net worths of $1 million and higher. Who would fill these out? It turns out that their sample set ended up being people towards the bottom end of the millionaire range, towards the high-end of the age range, basically older people who weren’t busy and at the same time weren’t rich enough to be the types who’d rather be sailing. This book is good to maybe point out how consumerism as run amuck in this country, with middle-class people buying $70,000 cars. But if you honestly believe the trully rich buy old Buicks you need to open your eyes and get a reality check. This is essentially a feel good book for middle class people who can never possibly become trully rich.

  2. While the above maybe true the book is a good read (get it from the library) and it does make a case for living below your means. Besides that I wouldn’t recommend the sequel The millionaire mind. basically a rehash of the original.

  3. I read this book a while ago and it changed the way I look at high status items. Most people that I know spend their last dollars on status items instead of investing it. I disagree that this book is for middle aged people. I believe that the earlier you read it the better you will be off. It take a life time to become financially independent, so NOW is the time to start. This book does not suggest that truly reach became who they are by following certain number of steps. It shows how real people can attain financial independence. READ IT AS SOON AS YOU CAN. Even if you are still in high school.

  4. I agree with the flaws. I just read this book and as someone involved in real estate and have seen the great returns and the fact that most of the very wealthy made their money in RE am put off with the Author telling people to not purchase RE. pge 68 do not have a mortgage worth more than two years salary! I make 35k a year and have a net worth of about 150k. If I listened to these clowns Id still be renting… Cant buy anything for 70k except a mobile home which will appreacite at about -30% per year, less the land its on will… I give it a DOnt buy waste of $ & time!

  5. I loved this book and would recommend everyone to read it,including those under 40. I did not find it to have an age bias. I think that it is natural to assume that your net worth should be higher the older you are, as you’ll have had longer to earn and save money. This is why the young should read it in my opinion, so they can learn the importance of spending substantially less than you earn. Earning a large income is nice, but it will not make you wealthy if you spend it all. And I should know because my family has managed to accumulate a $42,000 debt despite our six figure salary.

    I wish I read this book years ago!

  6. Some of the above commenters and the reviewer missed the mark. The book is neither a primer on how to “live well”, nor a review of the expected spending habits of generation X.

    A youth bias? The book was written based on information from interviews and focus group discussions with current “millionaires”. The “average” individual in this group was in the mid 50s, had been married for over a quarter of a century, and was worth about $3-million. These people are not young now, but they began their quest for wealth in their youth. The book does address the current situation of many entering the work force with student debt at a later point in life. This, the authors point out, is neither good nor bad, as long as the basics of good financial discipline and planning are followed. It is a fact that these individuals may begin the saving game a little late, but their additional tools and thus earning power will make up the difference if they leverage these to save and prepare for the future and not just over consume. The authors point +out that the key to financial freedom is not instant wealth but preparation and discipline so you can build wealth. This is aimed at the younger part of the potential audience, as they have the most to gain by beginning NOW.

    Don’t invest in real estate? Again the reader missed the point. The authors point out that the individuals they interviewed made their money in segments of the economy they understood. If you are in real estate make your money there. If, like me, you are in industry, make your money there. Make sure you have a plan and work it.

    The basic premise of the book is that there is the real possibility that the careful individual can develop a million dollar net worth while sustaining a reasonably comfortable lifestyle and afford the same during retirement. This will not be a life that will be ever featured in “Lifestyles of the Rich and Famous”. The way these millionaires built their net worth is a combination of disciplined spending and careful planning. These are not the kinds of habits that our get it now and pay for it later, consumption oriented, economy normally applauds.

    The book points out the basic economic choices all consumers make. Will you choose to have others make you money, or will you only make money for others? The freedom to choose depends on your freedom to direct personal financial resources. This freedom is a function of preparation to participate in economic activity, and your consumption habits.

  7. I found this book to be totally eye-opening, and I think the best person to read it is a high school kid who has not gotten his first student loan. Then maybe he would dedicate his college years to not accumulating a lot of debt. Such high student loan amounts are a factor of choices such as which school and what degree of lifestyle chosen for the school years. Can you imagine the power of knowing and believing at age 18 that the key to financial success lies in the balance sheet not the income statement! This is a great book. I do agree it does not shine favorably on people who start their professional life after years of school, such as physicians. It does however, give such people the enlightenment to know they better spend those early years beefing up their net worth rather than their lifestyle…

  8. I read your comment on the book, The Millionaire Next Door.”
    I was interested to know based on this book, what would you believe in your opinion are the elements of American society, ie, social characteristics, economy, government, etc,that account for the phenomenon?
    Sincerely,
    Jim

  9. Age bias? I’ve only been in the work force for 6.5 yrs. I’m bang on that calculation that they have.

    If you’re lucky to be able to live at home during studies and first few years of work, it is a HUGE advantage. Take it…

    Car expenses? I bought cheap 4 yr old jap car at auction. The prices are so low for ex fleet cars that used car dealers buy from there. The car is over 10 yrs old now and hasn’t skipped a beat.

    As for investing, I put right to the possible limit on my 401k last financial yr (which I keep a close eye on). I’m not in the top 10% of income earners, buy hey the government subsidises your savings! It reduces income tax payable and earnings compound tax free! I not a big spender and I don’t even notice the difference that goes into the 401k.

  10. The “Urban Legend” behind the book, as it was told to me, was that the researchers–a group of sociologists–came across a news item that the U.S. was headed towards having a “million millionaires.” This piqued the researchers’ curiosity and they set out to find just what this cultural phenomenon and demographic segment was like. A central theme of the book was their shock that the “average” millionaire was nothing like what they thought, or what the conventional wisdom and cultural stereotype was. The old adage you can’t tell a book by its cover rings true.

    What I liked was the inspirational, sound description of people with modest means that made good. Living a modest, quiet, and conservative lifestyle over decades works wonders.

    One aspect not covered was that inflation, over many decades, has made millionaires “just because.” Years ago, back when the dollar was worth twenty-five cents, there were far fewer millionaires than today. When I entered the job market thirty years ago a decent engineer’s salary was 15K, now it’s 90K. And millionaires then were few and far between. In the 1980′s Forbes magazine had a centerpiece article on the world’s first billionaire, a Taiwanese shipping executive–he wasn’t even an American! Today even billionaires number in the hundreds, worldwide.

    What I did not like about the book was their formulaic treatment and categorizing people into groups like “Prodigious Accumulators of Wealth” (PAW). The formula does not account for differences in circumstances. The U.S. has large mobility across income demographics. Also, there are large differences across geographic regions. A million in Southern California is not the same as a million in Wyoming or a million in NYC.

  11. The wealth formula is only a rough guide. It is not intended to be a hard and fast rule. Individual circumstances will have an impact. Lack of health care insurance could wipe out one’s nest egg, for example. This rough guide won’t be as accurate for folks on either extreme of the age continuum. Also, I would think someone supporting a family would be less able to match the wealth accumulation goal than a single person. A dual income family should probably include income and assets of both but I don’t see that specifically addressed in the book. It will be most accurate for folks who fall into the meat of the bell curve; the mid and late-career people.
    With that said, it seems that those who have come up short of the mark for their age/income cohort are the main ones complaining. When I was in my late 20s I had only about half of the desired level of financial net worth. Since then, I haven’t gained that much salary-wise but I have gained considerably, investment-wise. My advice to you young-uns identified as “underachievers” is to not take offense at the formula. It has its limitations. Most definitely, don’t use it as justification to crawl into a hole and give up. Instead, concentrate on your game plan. You can’t spend your way to wealth. You simply must live on less than you’re making or you’ll never see any progress. Eliminate all debt as quickly as possible. I don’t care what any financial “experts” say. Most of them are long on theory and short on results. You can’t get rich by paying someone else. Well, I couldn’t possibly mean a mortgage, too? Doesn’t everyone have a mortgage? Nope. I paid ours off on my clerk’s salary and I am the sole wage earner for my family. If I can do it, you can, too. My advice is to not take on consumer debt. With the exception of a home, if you can’t pay for it in cash, don’t buy it. Things can’t make you happy anyway. You’re either happy or you’re not. So separate wants from needs. You need less than you think. You must do the saving/sacrificing in the present tense, not tomorrow or some other day. Otherwise, your dreams of financial independence will fade quickly and permanently.
    I’m in my mid-40s and make a little less than the national average, salary-wise. I’m just an average guy with a stay-at-home wife and one child. I’ve lived a modest lifestyle for years while my contemporaries lived it up. Even today, I drive an old beater. It’s not pretty, but it is reliable. While morons in Escalades sneer at my rust-mobile, I laugh at their debt. I’m in the PAW category. They are slaves in denial. Do what’s right for you and don’t bother trying to impress other people. Be honest, always.

    (

  12. The review states: “(M)any younger people have had to take on substantial amounts of debt in order to finish school…” For those who have taken on student loans already, not much you can do. But for parents, its another reason NOT to take on student loan debt of any kind. Don’t believe you can’t get a college degree without it. As for Jay in FL who thinks the book is a waste of time and money because of its position on purchasing real estate, I think he misses the point. Don’t buy what you can’t afford, Jay. If you are in real estate, you probably subscribed to the notion of leveraging and of using equity in one property to buy another. That’s a house of cards waiting to collapse. I participated on behalf of one of my firm’s clients in the execution of a judgment where the entire contents of their near half million dollar home was emptied into trucks and sold at a sheriff’s auction, all because the guy leveraged one property investment against another looking for the big payday instead of slowly, steadily winning the race by living frugally and saving. For those who are not currently on pace to retire at age 65 with at least one million dollars in a Roth IRA or other mutual fund, read the book.

  13. The biggest benefit that I see to “The Millioanire Next Door” is the fact that most people who reach that position do so over an extended period of time, do so by sound investing and saving, and have a plan as to how to get there. It also shows that many millionaires do not display their money on their sleeves (or in their driveways or on the sidewalk) and that their money works for them rather than them working for their money. Can it be a disheartening read for a younger person just out of school? Sure, but it also help give an idea that making a million over time is very doable.

    Some of us had a lucky break when we were younger and may have had an equity event or two that could set the stage. For those that don’t get those, it’s good to know and to realize that you can *still* make a good sized nest egg by looking at the habits of others that got there as well.

    This book shows that there are a good number of people that you would never consider being “rich”, but are. It also points out that many of the people we think are “well off” probably aren’t as well off as we think they are. Both of those are good take-homes. The book isn’t perfect, and some of the criticisms, I can appreciate, but then, at 40, I found I’m the right age to appreciate it :).

  14. Trent, thanks for recommending this book. It’s really inspiring to know that actually, most millionaires are frugal.
    The expected net worth formula is hard to achieve for youngsters though, except for the ones who have high income, frugal, & begin to invest heavily at a very young age
    I just wish that I had read this long back then in the past….it’s ok though, I have passion to earn the meaning of money & money management to my son as soon as possible (he’s still 2 month old now)

  15. Interesting review. I am kicking myself that I didn’t even know about the “blind car auction”, but have filed that tip for my next car purchase, in six or seven years’ time…

    I also went right off and did the tax/net worth computation. It came out at 11% and I am very far from being a millionaire (net worth of about 185k in US Dollars), and not very likely to become one, since I spent my 20s with the career button put on “snooze”. But I am now 42 and maxed out with my pre-tax retirement contributions. These lop off a sizeable chunk of otherwise taxable income, while increasing simultaneously my retirement fund, which of course is part of my net worth. So yes, Trent, you are right that not all in the book applies to younger people – folks under 30 wouldn’t even be legally permitted to pay that much in retirement contributions as percentage of their salary.

    That said, that very formula is probably a useful wake-up call for 40somethings, to see where they should be at that stage in their lives. I am sure you’ll be far ahead of me by the time you are 42!

  16. This is one of my favorite books. I agree there may be some flaws, but overall its very sound and inspirational.

    I have read the book several times and on my friends has read it as well and we have had some great discussions about the book.

    I worked for a successful man (financially ) and his traits were exactly the profile by the authors Danko & Stanley.

    My former boss was very frugal. He had an estimated net worth according to him in the millions. He had owned apartment buildings and office buildings, and a large house. Yet, he once offered to give me his sports jacket which I accepted. I was surprised to learn it was from Sears. It lunches never cost more than .20 cents. Usually he would eat and apple and a bag of popcorn. He advised me to spend less money than I make and invest the difference.

  17. I also have to disagree with the fact that this book is only for middle aged people. I read it about a year ago at age 26 and it has changed my definition of a “status symbol”. Appreciating assets and no debt are the only important status symbols. Saying this book is better served towards middle aged people is like saying you shouldn’t worry about retirement until you retire.

  18. The only objection I have to this book is the strong message that you shouldn’t give your children money. I agree, unless ill, an adult child shouldn’t be supported, but in today’s world, it is almost impossible to get by in the begining without some help from mom and dad….and let me just say that if you decide to follow the no giving the kids money advice, you’d better make money, a lot of it and hope like hell you don’t lose it in the market, to illness or outlive it because if your your kid has any sense, he is going to tell you the same thing you told him and not give you a cent. Remember, be nice to your children, they are the ones that will be picking out your retirement home.

  19. Hi Trent,

    I recently commented about this post on my blog. My article is basically about the bailouts and your comment about economic outpatient care really hit home. Our government is being that parent! It’s giving economic outpatient care to the worst companies rather than the best. Here is the link…

    http://www.insightwriter.com/2009/03/03/government-bailing-weaker-companies/

    Would love to know your thoughts. Possibly in a future post here at The Simple Dollar?

    Cheers,
    Jeremy

  20. My husband brought this book back from one of his US work trips – we both loved it.

    What it seemed to be – for me – is a description of how people who are cautious, don’t want to get involved with property or stock market speculation, who are prepared to work hard and live simply can become millionaires.

    Like Jennifer, I wish I had read this years ago. By living in the way the millionaire next door lives we have saved a massive amount of money towards our retirement. What this says to me is that although we only had mortgage debt, we wasted immense amounts of money – and we thought we did okay!

    I would say that there is enough in this book to make it worth a read – though if you can get it out of the library even better.

  21. I can point to reading this book (about 10 years ago) as the Single Pivotal thing that completely changed my thinking regarding spending and status symbols. I was in my 20′s at the time and thought it was speaking directly at me.

    I just picked up a copy at my library’s booksale last week and look forward to reading it again.

  22. Indeed, I also disagree that this book has an anti-youth bias. It is simply targeted TOWARD people slightly older when talking about the size of your net worth or income tax as a portion of your net worth. Yes, the authors could have smoothed that over a bit.

    That being said, the advice of living a “wealth-building” lifestyle are valid to everyone.

    I bought this book ten years ago and promptly loaned it out. I got it back three years ago when someone mentioned the title and… CLICK… I remembered and asked for it back. I’ve been living more of this lifestyle than living to support my lifestyle.

    Yes, I live in probably a nicer neighborhood than recommended by the authors, but we are here for the long haul and the schools are excellent and we bought the cheapest house in the subdivision.

  23. I’ll add that many of the criticisms miss the most important point and I think Trent underemphasises this point.

    The most important part of the book is debunking status myths.

    This book is good for all ages, but especially youth.

    Say you are earning good money and you ask yourself ‘how much SHOULD I spend on a suit. Your colleague might say they always buy $3000 suits. Its important to know that ACTUAL millionaires would rarely spend over $300.

    I’ve read books about how we figure out what a reasonable price for something is (Priceless by William Poundstone). It argues that we have a pretty good idea whether one thing is worth more than another thing, but actually we have no idea how much things should cost. Thus you get ‘anchor’ prices. If Hermes sells one bag for 50,000, you end up thinking the 2000 bag is a bargain. The millionaire would probably spend 100 (not on Hermes, my current bag cost 30 euros and the previous one $44 both were/are lovely).

    This book helps you figure out that financial security is better than ‘status’ (also that they are pretty much mutually exclusive).

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