Portrait of a Millionaire from the Millionaire Next Door

I was reading a book given to me by a colleague.  He is one of the guys that I was going to form a business with, but somehow the idea fell through.  We’re still good friends today and we share tidbits and books such as this one that I am reading to keep us motivated. 

The book is entitled, ‘The Millionaire Next Door’ by Stanley and Danko.  It is very interesting.  I am just re-reading the book because I read it once before.  The first few pages caught my eye again and would like to share it with you.  These are what millionaires do and their traits that will sometimes surprise you.  Take a look.

PORTRAIT of a MILLIONAIRE

• 70% of head of millionaire households make 80% of their household income.

• 1 in 5 of millionaires are retired and the two-thirds that work are self-employed.

• 3 in 5 millionaires that are self-employed consider themselves to be entrepreneurs.

• Many types of businesses they are in could be classified as dull-normal (welding contractors, auctioneers, rice farmers, owners of mobile-home parks, pest controllers, coin and stamp dealers, and paving contractors).

• 50% of millionaires have stay-at-home spouses.  The number one occupation of millionaire spouses, if they do work are TEACHERS.

• Their average household net worth is $3.7 million.  Nearly 6% have a net worth of over $10 million.

• On average, their total annual realized income is less than 7% of their wealth.  That means they only live on less than 7% of their wealth.

• 97% of them are homeowners.  They live in homes currently valued at an average of $320,000 (maybe higher now since the book was written before the real-estate boom).  50% of them have lived on the same home for more than twenty years and have enjoyed significant increases in the value of their homes.

• 80% of them are first-generation affluent.

• THEY LIVE WELL BELOW THEIR MEANS.  THEY WEAR INEXPENSIVE SUITS, DRIVE AMERICAN-MADE CARS.  ONLY A MINORITY OF THEM DRIVE THE CURRENT-MODEL-YEAR AUTOMOBILE. ONLY A MINORITY LEASE THEIR VEHICLES.

• Millionaire wives are meticulous budgetters and planners.  They are more conservative spenders than the person who brings home the bacon.

• They SAVE 15% of their earned income.

• They have a ‘go-to-hell-fund’.  In other words, they have accumulated enough wealth to LIVE WITHOUT WORKING for 10 or more years.  Anyone with a net worth of 1.6 million would be able to live more than 12 years without working.  But since the save 15% of their income it could probably be longer.

• They normally don’t trade wealth for acquiring high-status mateiral posessions.  This results in millionaires having 6.5 times level of wealth more than their NON- MILLIONAIRE neighbors.

• They are fairly well-educated.  Many of them hold advanced degrees.   18% have master’s degrees, 8 % are law degrees, 6% are medical degrees, and 6% are P.H.D.’s

• 55% of their children are attending or have attended private schools.  Yet, only 17% of millionaires have attended private schools.

• As a group, THEY BELIEVE EDUCATION IS EXTREMELY IMPORTANT FOR THEMSELVES, THEIR CHILDREN, and THEIR GRANDCHILDREN.  THEY SPEND HEAVILY FOR THE EDUCATION OF THEIR OFFSPRING.

• About 2/3 of them work between 45-55 hours a week.  The are NOT SLACKERS who work just because it’s a job.

• THEY ARE FASTIDIOUS INVESTORS.  ON AVERAGE, THEY INVEST NEARLY 20% OF THEIR HOUSEHOLD REALIZED INCOME EACH YEAR.  MOST OF THEM INVEST AT LEAST 15%.  79% of them have at least one account with a brokerage company but they make THEIR OWN INVESTMENT DECISIONS.

• They normally recommend their children to take up accounting or law degrees since these are the services that the AFFLUENT are in much need.  Tax advsisors and estate-planning expert will be in big demand over the next fifteen years!

‘WEALTHY’ as  defined by Millionaires:

Conversely, those people whom we define as being wealthy get much more pleasure from owning substantial amounts of APPRECIABLE ASSETS than from displaying a high-consumption lifestyle.

Now – who among you have these traits?  Wouldn’t you want to become a millionaire someday?  LET’S GET TO IT!!!

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