The Millionaire Next Door

The Millionaire Next Door
by Thomas J. Stanley PhD, and William D. Danko PhD

This book makes sense. A good offense is making money, but financial independence will never happen if you also don't have a good defense. Even someone on a limited budget can ultimately be financially independent if they obey the principles of financial freedom, which ultimately lead to a more relaxed and positive outlook in life.

The principles are:
--live well below their means
--allocate time, energy, and money efficiently, in ways conductive to building wealth
--believe that financial independence is more important than displaying high social status
--parents did not provide economic outpatient care
--their adult children are economically self-sufficient
--they are proficient in targeting market opportunities
--chose the right occupation
--fastidious investors

However, a few more things about average millionaires:
--may have never moved, living in neighborhoods of people with much less affluence
--education is extremely important, and one of the things worth paying for our children to have
--only 1 in 5 not a college graduate
--83% of us attended public schools, but 55% of our children attend private schools
--have a 10 year savings accrued, a "go to heck" fund
--tightwads & fastidious investors, enjoy shopping for a deal on whatever they buy so they can use the remaining dollars for better deals too!

-- the law of annual compounding. Savings beget interest which beget earnings and interest from the interest. Eventually you'll make more by interest than you did working. It just takes time (about 20 years of 15% savings from income per year). Anyone willing to hunt for deals, save their dollars and find luxuries in harder to find places will win this game in the end.
-- economic independence begins by weaning oneself from economic outpatient care from those who love us. Being forced out of the house is not always such a bad thing when one is able to garnish skills, strategies and plans that lead to a productive and independent life.

--UAW's are under-accumulators of wealth: they will spend and borrow more than average. They life high consumption lifestyles. They may have high incomes or low incomes, but little savings. They usually are too busy to spend time on their own financial affairs.
--PAW's are Proficient-accumulators of wealth: they will accrue savings through low consumption lifestyles for an income and age adjusted comparison to UAW's. They may have low incomes or high incomes, but do not live with high spending. They spend alot of time planning their financial future, handle their own investments, but do not day trade.

Gift-Receivers:
--have a hard time distinguishing what is theirs and what was given to them
--increase consumption and decrease savings
--are significantly more dependent on credit than are nonreceivers.
--"weakens the weak", and generally goes to children less adept at producing
--happens less often to the more able to produce children, thus, "strengthening the strong"

Find your Niche:
--productivity is easiest to those who have specialty training or expertise
--time your expertise to market opportunities and you may have an easier time
--the next 30 years may have a good niches with:
-specialty law (estate planning, immigration)
-medical and dental care specialists
-appraisers and auctioneers
-accounting, finance and corporate investment specialists