The book Millionaire Next Door is a thoroughly researched book about the live of various multi-millionaire in the United States. Through the research, some common points among all of these multi-millionaires were deduced. Becoming a multi-millionaire takes a lot of risk, hard work and patience. Nobody in the world has become successful without working right off their face except those who have the generational wealth.
These are some observation from The Millionaire Next Door:
- Millionaires Save: Millionaires have the discipline of saving exceptional amount of their income. Millionaires save 40% of their gross income. Let’s face it: If you are making $40,000, and you save $12,000(40 % of 40000) and $12000 goes to IRS, and you spend remaining $6000 for living, then in 10 years you have saved 1.2 million. You become millionaire in 10 years. According to the research, most American save 4% of their income.
- Millionaires are frugal: Of course, if they save money they are frugal with some exceptions for sure. They have accumulated wealth not by spending the money they have earned.
- Millionaires drive frugally: Most millionaires drive cars for long time. They don’t typically buy car in two or three years. Most commonly they drive same cars for more than 10 years. They always focus on storing their money.
- Millionaires live frugally: Basically, millionaires live in the home that represents only 10% of their net worth. This sounds implausible; but this is what the research shows. By living in modest homes, they put themselves in a position to compare their spending to people who generally have much less money and thus feel less social pressure to spend extravagantly on their clothes, cars and vacations.
- Millionaires are entrepreneurs: Most of the millionaire own business. Their business may not make good money but that becomes good assets over the period of time. Their business generates robotic amount of money that means it works 24 hours and 365 days (which only robots can do).
Therefore, if you are already living frugal life, you have started living millionaire’s life. You can easily turn $1000 saving account into $1 million for 40 years. But the challenge is to be wealthy not only rich. Rich is having money, but wealth is having money and time. So, storing money will help you become rich not wealthy. In order to be wealthy and retire as a multi-millionaire, you have to seek for the vehicle that can multiply your stored money (40% of your gross income). By brilliantly investing your stored money, you not only increase your net worth but also decrease your time to become multi-millionaire. The goal is: Don’t lose money, save it, invest it, make lots of passive flow of income. But as mentioned above making such enormous amount of wealth requires lots of hard work, patience and discipline, living frugally, saving constantly, and investing intelligently.