Can YOU Be The “Millionaire Next Door”?

by Vered DeLeeuw · 12 comments

I read the book “The Millionaire Next Door” ten years ago, in 2001, shortly after the painful dot-com bust. At the time, I had felt that I needed to reinforce my basic belief system about handling money, the value of money, and what it means to be “wealthy.” Now, after the Great Recession and with a still-shaky economy and a high unemployment rate, the book is as relevant as ever – if not more so.

Define “Wealthy”

When I had first read the book, I really liked the basic premise, which contrasted a “wealthy lifestyle” with being truly wealthy. If I had to pick just one sentence from the book to sum it up, it would be this sentence: “Those who successfully build wealth believe that financial independence is more important than displaying high social status.”

The book helped me form and fine-tune my now strong conviction that “rich” does not mean, “surrounded by luxury,” because luxury can be financed with debt, and anything you finance with debt is not truly yours. I believe that “rich” means “free” – free from financial worries, free from the need to work full time whether you want to or not, free from being forced to report to a nasty boss. It means being free to pursue your true passions, to give to the causes you care about, and to be in full control of this very short life you’ve got.

Beware of Consumerism

Consumerism stands in sharp contrast to financial freedom, because it enslaves you. Unless you were born into money, and assuming you belong to the middle class or the upper middle class, consumerism will keep you in whatever class you were born into, forever. You will not be able to accumulate wealth, because you will spend too much. Perhaps you will be temporarily soothed by the act of buying and consuming, but you will never be truly free.

Here in the US, we’re facing incredibly strong pressures to spend and consume, from powerful companies and industries with huge advertising budgets. We’re told we should buy things to be happy, to feel better about ourselves, when in fact buying them usually leads to no more than a temporary rush, which ends with a disappointment and with the urge to buy even more.

I love America, and have chosen to build my life here. But the huge pressure to consume, stronger here than in any other place I’ve ever lived in or visited, is something that stands in the way of building wealth, and so has to be acknowledged and dealt with.

Living Below Your Means

I read an interesting personal story in one of the financial magazines I subscribe to – perhaps it was Kiplinger’s. The story was about a man who had accumulated $1.4 million by simply living below his means. He was not born into money, and received no inheritance. But when he started a new job and received a substantial raise, he continued to live as if he was making just a quarter of his new salary, because that’s what he was making before. He stashed the rest, invested wisely, and over ten years, he became a millionaire.

How many of us will ever have the discipline to do what he did?

Ignoring the Joneses

If you feel pressured to consume in order to display your purchases and acquire a higher social status, you will have a hard time becoming financially independent. LOOKING rich is expensive, especially when financed by debt, so for most middle and upper middle class folks, it’s a choice – you either APPEAR rich, or you accumulate wealth and – eventually – become rich.

But I Want to Enjoy Life, Dammit!

Well, define “Enjoy.” Some of the book’s critics say that the book promotes living a socially secluded life, hoarding money and never enjoying the pleasures that life has to offer. My thoughts? On a scale where on one extreme you have a miserable tightwad, and on the other a deep-in-debt spendrift, there’s a vast middle ground and it’s up to each of us to decide where on that scale we want to be. I certainly enjoy fine dining, high-end vacations and even the occasional designer clothing item (though I buy those on sale). My husband and I love to host, and donate annually to several charities.

My point is, that when deciding where to place yourself on that scale, keep in mind that while spending offers lots of pleasures, so does being financially independent. In this sense, the book is invaluable, because we live in a culture where the “get pleasure from spending” message is very prominent, but the message of “get pleasure from being able to tell your boss you are leaving for good because you don’t need the money” is rarely there, and when it’s there, it’s usually tied to winning the lottery, not to working hard, living below your means, investing wisely and accumulating wealth.

Where are YOU on that scale? Will YOU become the next “Millionaires Next Door?”

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{ 12 comments… read them below or add one }

Hunter April 21, 2011 at 7:13 am

It’s funny that w are conditioned to think we need to live a certain way to feel like we are successful. The slick marketing machine is all about extracting our consumer dollars. There’s no market incentive to promote individual wealth, other than to look wealthy, and have a shabby net worth.

Love this book, still relevant today.

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tmgbooks April 21, 2011 at 8:14 am

It is simply getting harder and harder to save a part of what you earn. Of course it is possible, but with incomes for the middle-class being stagnant for the last decade, the money to just keep your head above water is eroding the ability of the family with an average income to save at all.

The price of a gallon of gas is fast approaching $5. Here in my house, we are very prudent in our use of tomatoes simply because the price here locally is almost $3 a pound — more than ground beef.

There is only so much cutting-back to be had in any budget and eventually savings gets laid on the table — it is, after all, the least painful place to cut.

We in the middle-class are actually getting poorer everyday thanks to government policies. Every time the Fed prints new money to add to the money supply, it devalues your dollars and so the actual value of your savings.

And by keeping interest rates artificially low to the benefit of banks and consumers, savers are losing ground to inflation. I just had a CD rollover to one-half of one percent. At that rate, why bother saving? Do the math and at that rate it will take almost 150 years for your money to double. Again, why bother?

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Ginger April 21, 2011 at 8:41 am

tmgbooks, is right, it is getting harder to save. But even though it is hard we can do it. It requires making communities again, helping each other out and making hard cuts.

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Donna April 21, 2011 at 8:52 am

Freedom to live your live without worry – that is wealth. Knowing you can survive if you didn’t have enough money because you trained yourself to do so-that is wealth. You are absolutely right. The only worry you may have is someone stealing it or misusing your finds so you still must be diligent.

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B Kelly April 21, 2011 at 9:24 am

I recommend de living below ur means method. Great way to keep grounded n excellent way to propel u towards financial freedom. I did just that for about 4 years n grew a respectable portfolio on de side.. De secret’s out.. Try it.

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Jenna, Adaptu Community Manager April 21, 2011 at 10:52 am

I certainly hope to be one in the future. I definitely agree with the living below your means and knowing what is really important to you. No matter what, if you focus on what makes you happy even if you don’t become a millionaire you’ll still be happy (and probably feel like a millionaire anyways).

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Brad Jobs April 21, 2011 at 11:42 pm

Is the book still available in the bookstores? Or does someone has one for sale? I want to read the book. Such a waste that I haven’t heard of the book before. Thanks for the article by the way.

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Slackerjo September 28, 2011 at 4:37 am

Get it from the library first. If you decide you want a copy, then buy one.

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Squirrelers April 22, 2011 at 3:45 pm

It’s all how one defines success. To some, it’s having the best toys. For others, including me, it’s about being financially free. I’m a long way from getting there, but that’s what motivates me and not expensive things. That said, we do need to have balance in our lives and not be money-obsessed misers either. There’s a balance, and one can focus on financial independence while having balance.

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Financial Misfit April 25, 2011 at 11:02 am

With our government writing checks that our great great grandchildren are still going to be cashing, it is tough to save. And for the meager savings that one does amass, there’s the looming cloud of how will the government take it away as we become a more socialistic society.

It has always been hard to save but now-a-days it FEELS like it is getting harder:

My medical insurance premium increased by 35% last year or $80/check.
My auto insurance remained almost the same but my house insurance increased by 23%
My property taxes increased by 18%
Food is outrageous. The costs have been exponential and are forecast to increase by 30% this year
Gas is taking a walk on the wild side …forecast to be $4.50 by mid summer

Wow. when you stop and think about it, Americans have a damned good reason for their low savings rate.

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Mano April 28, 2011 at 9:50 am

Being successful for me means being free from financial troubles. You don;t have to spend much just t show that you are successful. It is important to save for the rainy days. It’s easy to earn but it’s hard to save.

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John October 20, 2011 at 8:10 am

Work hard, save your money and watch the Federal Reserve inflate it away.

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