How to determine if you are wealthy!

[Ima saver]

Re: How to determine if you are wealthy!

wannabe, no I am not a high income earner. I have never earned more than $8500 a year. For most of my married life, I have lived on less than $25,000 combined income for my husband and I. It has only been the last few years that my income has risen closer to $50,000 a year.
I do agree that people should not place a whole lot of faith in the above formula.

[TBH]

Re: How to determine if you are wealthy!

Still want to take money advice from these guys?

No!

Thanks for a very clear analysis, Matthew.

I also found this book really out of touch. What do I care how much self-employed fatcats pay for their watches? Them seemed sort of obsessed with that detail. I've never paid more than $30 for a watch, personally, and I considered that a big splurge.

The book was definitely geared towards high earners in mid-career whose peers are all driving fancy new cars. None of which applies to me. I'll take the (oversimplified and problematic but basically sound) Automatic Millionaire approach any day over Millionaire Next Door.

[autoxer]

Re: How to determine if you are wealthy!

I also found this book really out of touch. What do I care how much self-employed fatcats pay for their watches? Them seemed sort of obsessed with that detail. I've never paid more than $30 for a watch, personally, and I considered that a big splurge.

I agree that their formula wasn't well thought out, but their analysis of spending habits was fascinating. The big message that I got out of the book was that there is a big difference between perceived wealth and actual wealth. The millionaire nextdoor is more likely the farmer that doesn't look wealthy, than the doctor w/ the mcmansion & the luxury car. I got a lot out of that book. Learning the behavior of the real millionaires instead of the people that want to be perceived as wealthy was a real eye opener for me. And the fact that the real millionaires weren't necessarily the highest earners shows that wealth is what you save, not what you spend.

[disneysteve]

Re: How to determine if you are wealthy!

There is a great quote in Kiplinger's this month by Knight Kiplinger in his column. I was actually going to add it to my sig.

"The biggest barrier to becoming rich is living like you're rich before you are."

That is the whole point behind "The Millionaire Next Door." Maybe the wealth formula has flaws, but don't toss out the whole premise of the book because of that. The authors did pretty extensive research of millionaires and how they live and how they spend their money and the results are very revealing.

claire - The whole deal about the watches is just a part of that. The point is that the millionaire is more likely to be wearing the $20 Timex than then $10,000 Rolex. Or driving the $20,000 Chevy instead of the $60,000 BMW.

You can accumulate wealth or you can accumulate stuff. Only a tiny portion of the population, the mega-rich, can do both. If you get hung up on commercialism and status symbols and iconic purchases, you may look rich but you will never be rich.

[Mathew Green]

Re: How to determine if you are wealthy!

Maybe the wealth formula has flaws, but don't toss out the whole premise of the book because of that.

I dislike this book because: 1) The authors did so many things that annoyed me. 2) They seemed like a couple of ivory tower academics who needed to get out in the real world for a while. 3) Their good advice was all old hat to me and easily found in other books I consider better written. 4) Their language was sometimes sloppy or downright wrong (as it is in the Wealth Formula).

To me the book's only redeeming feature was that they focused on successful businessmen who live below their means and maintain a fairly ordinary lifestyle. That has some educational value, but not enough for me to reccomend it. YMMV

[disneysteve]

Re: How to determine if you are wealthy!

To me the book's only redeeming feature was that they focused on successful businessmen who live below their means and maintain a fairly ordinary lifestyle. That has some educational value, but not enough for me to reccomend it. YMMV

On the contrary, I think that is the key to the book's value. So many people don't understand that financial success has little to do with how much you earn and almost everything to do with how you choose to spend those earnings.

Lots of people who earn 30K/yr believe that all of their financial problems would be gone if they suddenly earned 50K/yr. Guess what? It doesn't work that way because once they start earning 50K/yr, they start spending more money on things they couldn't afford before and they end up no better off. And if they earn 100K, the same thing happens.

This book gives some great anecdotes and data showing that living below your means is the real key to financial success and security. I think that is a lesson that a great many people haven't learned.

Is that something many of us know? Of course. But those who aren't hanging out at personal finance discussion boards are the ones who really need to learn that lesson, so if someone is struggling because they are living beyond their means, I always recommend this book (among others).

[LuxLiving]

Re: How to determine if you are wealthy!

I agree with you disneysteve. For some folks reading this book is an awakening...for others it is old hat, family learned stuff. This book and The Wealthy Barber are two good ones for someone spendy needing 'enlightenment'.

Also it's good for those of us who have always been questing for the keys to the kingdom. I always felt like there was another financial book, seminar, tape set or SOMETHING out t.h.e.r.e. {great mystical place out there... that everyone who had money had seen that I had somehow missed. It irked me no end and I kept searching. These two are a couple of those that finally sunk it in to my thick head....ohhhhhh, here's how they do it! Duh! Helped me get off the 'hobbyist' money track and into some serious wealth building tactics.

I really liked the post you made with the Knight Kiplinger quote...I posted in over the Quotes thread.

[Ima saver]

Re: How to determine if you are wealthy!

I like the Kiplinger quote too, steve! We build a house for a surgeon. I thought he was so rich. He bought 2 lake front lots and build a 7500 sq. ft. house. His wife had closet after closets full of clothes and she went shopping every day. Their children had every toy known. He drove 7 leased cars the year we were building their house.
We gave them a final bill for some concrete work we had done at the end. (retaining wall) It was for $1440 and they told us they did not have the money to pay the bill. We paid for it (it was in our name) and they never paid us back.
My dh built that entire house (including all cabinets, tile, etc.) for $13 an hour!

Mr. Dr. certainly was not the millionaire next door.

[disneysteve]

Re: How to determine if you are wealthy!

He drove 7 leased cars the year we were building their house.

What does one person need with 7 cars, especially if they are all leased at the same time? That's insane. Around here, just the insurance alone would bankrupt most people.

[naturalwoman]

Re: How to determine if you are wealthy!

i'm BBD

broke
busted
disgusted

well maybe not that bad, but not wealthy. i could be rich?

[Mathew Green]

Re: How to determine if you are wealthy!

On the contrary, I think that is the key to the book's value. So many people don't understand that financial success has little to do with how much you earn and almost everything to do with how you choose to spend those earnings.

As I probably said somewhere previously, "different strokes for different folks."

Millionaire Next Door isn't all that bad, but given how little most people read and all the other good books out there, it will never be on my 'recomended' list.

[Ima saver]

Re: How to determine if you are wealthy!

There are several other books that I would reccommend first. They did not lease all 7 cars at one time, but they would lease 2 for a few months, then trade them in on 2 more new leased cars. Since I have never leased, I don't know how expensive that is, but I know it is a bad thing to do.

[wannabefree]

Re: How to determine if you are wealthy!

I am certain the formula doesn't apply for younger earners however I really like the millionaire next door because it is simply a statistical study showing who the wealthy are and how they got there. I have this coworker who constantly tells me that you can't get rich working for someone else yet she makes 3 times the median income but she blows it as fast as it comes in. The book for me just dispels the myths about who is really wealthy. The wealthy are simply those who live beneath there means and don't care about what others think about them.

[LuxLiving]

Re: How to determine if you are wealthy!

There are several other books that I would reccommend first. They did not lease all 7 cars at one time, but they would lease 2 for a few months, then trade them in on 2 more new leased cars. Since I have never leased, I don't know how expensive that is, but I know it is a bad thing to do.

Okay Ima, I'm all ears. I'm always up for a good read. Let's hear titles and authors! Come on, my librarian has been missing me!

[Ima saver]

Re: How to determine if you are wealthy!

Debt proof living by Mary Hunt! Still the only investment guide you'll ever need, by Andrew Tobias.! Smart Women finish Rich! by David Bach. And my favorite was the wealthy Barber. (I also like Dave Ramsey)