If you’ve been around on the interwebs and Twitter enough, and if you’ve read enough personal finance books, you’ll know a heck of a lot about The Millionaire Next Door. She or he spends less than you’d think, they don’t drive a Rolls Royce or Jaguar, and they’ve probably made it to millionaire within one generation, using their own hard work and money.
Good for them. I’m glad that there are many millionaires who are not concerned with ostentatious displays of wealth and the superficialities that go along with it.
But I don’t think you should try to be another millionaire next door. And I don’t think you should even care about it. The millionaire next door makes for good reading, and even for a healthier society perhaps, but here’s what I think you should really be thinking about and what you should do instead of trying to copy their act.
Why You Shouldn’t Care About The Millionaire Next Door
1. It’s just another form of keeping up with the Joneses, except that now you’re aware that some of the Joneses have actually done really well for themselves. I’m not saying don’t do well or succeed, though. I’m saying stop benchmarking yourself to others, or at least, to some broadly defined idea of what “they” are doing. Role modeling is different. It’s more specific and based on intrinsically-determined goals that you may have developed – you seek out someone who has already done what you’d like to do.
2. Focus on cashflow, not networth. A million isn’t a million anymore anyway. I know, I know, you get that. It’s not the ultimate in networth which is going to make a difference in your life. It’s not even necessarily your baseline income (what you make from your primary workplace). You know already: it’s what you keep, it’s what you (re)invest, it’s what you don’t spend. Take a look at how a PhD student in physics was able to retire on a graduate student’s salary. All you need is to find a way to bring in more money than you need – that number might turn out to not be very much. And you don’t want to spend your whole life striving to get up to an income level you don’t even need to be at. What a waste!
3. Focus on ethics and integrity, not some isolated goal like reaching a million dollars. You don’t know what they did to reach their millions. I don’t want to single anyone out, but let’s just say we know more than a handful of people happily wealthy who have arrived via means not very commendable. And I’m not even talking about outright crime or illegal activities. I don’t want to stifle your own imagination or use only extremes as an example, but consider Arnold – who makes 20% ongoing from all royalties from the Terminator series (in addition to the baseline salary, plus bonuses and tie-in fees). It’s hard to say he “earned” something that only depended upon the stroke of a pen of a contract lawyer and the obligations that the producers had to use him or Terminator 3 would fail. But I digress – and there are better, more mundane examples elsewhere.
4. Many of the commendable characteristics of the Millionaire Next Door have nothing to do with networth and everything to do with just making sensible decisions. Should the millionaire really get “brownie points” for doing these? So don’t pay attention to the millionaire next door for that. There’s little you can learn from her/him. Painting your own house, buying a used car – basic frugal choices that you and your friends may already be making.
Lovers of The Millionaire Next Door by Thomas Stanley may misunderstand what I’ve been saying here. The book definitely provides an interesting thought experiment to reevaluate your own concept of millionaire – but I’m not sure that it ultimately adds a new concept to your own personal finance repertoire. Sure it’s great that there are frugal millionaires – but we should all be frugal, right?
If The Millionaire Next Door is the source of your own personal finance motivation, I’m not sure you’ve really escaped from running on the wheel with the Joneses. You could do better living in a van, life on your own terms, completely in touch with your needs and freedom. Get a little more creative – following a generic template won’t do you any good.
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