Book Review : The Millionaire Next Door
This book, published in 1996, is more applicable today than ever before in a culture of showing wealth.
The moment you turn on your mobile device, which is probably the latest model and not over 3 years of age, you are bombarded with advertisements in all shapes and noises.
For example, sponsors on TV shows, 30-second Spotify interruptions, emails, Instagram, Facebook, coupon flyers, Snapchat’s ‘Amazon must-haves,’ your friend‘s picture from her trip to the Bahamas, your neighbor’s new Ford Mach-E, a story of dinner and drinks, the cashier’s new set of acrylic nails, the snacks near the checkout, random airplane banners on the beach, your favorite rapper talking about his new ‘rari…the list goes on.
The year 2022 has been more open than ever in terms of communication online. A majority of this communication, however, is filled with feeding to the consumer what to look for next. What to spend.
It feels almost weird to wear the same outfit outside with friends, because of those Instagram posts. When we want to simply lie down and listen to music, YouTube will suggest a self-care/night-routine video, and next thing you know you will have an amazon shopping cart filled with skincare products.
People look wealthier than ever. Style almost comes for free, as a new standard. You are not allowed to look bad. This pressure to look and dress “perfect” is now targeting not the moms and breadwinners, but starts with teens. “Success” is portrayed as an image, with frequent vacations, multiple cars, with these so-called ‘self-made millionaires’ who accrued wealth through social media.
What is the easiest way to appear successful? Well, instant gratification. One through a click of a button. Anticipating a lifestyle filled with luxury and limitless time to drink and “explore” cultures across the globe. Thousands of teenagers who hope that in the next 1000 followers, they will get their break. Just more more giveaway video. Just one more outfit. They will make it.
Well, it turns out that watching some BTC and ETH analysis videos didn’t give them the proper skills necessary to earn their first paycheck to their road to becoming ‘financially independent’ at age 19.
It’s not about earning million dollars to be a millionaire. It’s not about stalking the lifestyles of models and celebrities. The actual life of millionaires around us are much less extravagant.
To break it down, there are 3 main characteristics. You should follow this rule, if you want to become rich.
- They spend and live as if they earn 1/3 as much.
- 15–20% of their money is invested
- They focus studying and planning finances, and reducing taxable income.
They calculate in terms of increasing their net worth, not just income. A lot of them are self-employed. The car they drive is a Honda CRV. They use coupons. They do not dress in Gucci. They are not affected by worries about not being able to afford retirement and inflation. They know what they are spending on what, and know exactly how much money they will make in the next year, and how that will be reallocated to double their wealth. They are not active traders, but rather invest long-term. They can survive well over decade even if they were to stop working tomorrow. Their mortgage is paid-off, and their job title might surprise you. Most of them did not inherit their wealth and have discipline to live below their means.
Well, just because you drive a Honda, it doesn’t make you a millionaire, and just because you use coupons, you are not necessarily on the road to becoming wealthy.
Calculate your financial health using this simple calculation:
- multiply your age by your annual income
- multiply the amount from (1) by 10 and divide by 10 after taking out taxes.
- The more you have above this amount, the closer you are on the road to financial independence!
The main point is being frugal. The biggest mistake of wealth is how it looks. The actual wealth is hidden and spread out into multiple, secure investments and there is limited cash flow. Hours and hours are spent managing and financing what they have, and no one complains that they do not earn as much. They don’t have a need to show off wealth, because they are secure to the root. Their mind is not filled with anxiety or wants of unnecessary things.
So, if you want to live a life with peace and change your socioeconomic status, turn off your loud phone for a moment. Take out your transaction history and the calculator. Or, spend time finding a really GOOD accountant. Find a wealthy person and ask for their accountant. This wealthy person does not have to drive a Mercedes (unless they bought it used) and might not live in the most posh area. They might enjoy $3 beer nights at a local bar and wear a casio watch and new balance sneakers. Maybe a black turtle neck…and seem to be really passionate about apple…