In the famous book “The Millionaire Next Door” written by Stanley and Danko in 1996, these two men define and articulate the typical millionaire household in American that is often overlooked. I wanted to summarize many of the points that were made in their book while leaving some out that are specific to wages 20 years ago and other society trends that I see as less relevant today.
Certainly not all millionaires fit into all of these 7 traits, so let me list several other descriptors that they found in their research for this book. I will do this in various categories and will only mention the items from their book that I see as noteworthy and stand out to me.
The typical millionaire household is a married couple with several kids. It is their first marriage and they live in a neighborhood they have lived in for over 10 years where their wealth is 6.5x their neighbors. They are in their late 50’s and most are still working. They don’t worry about most financial “what if’s”. They do worry a little more about health concerns and government decisions and regulations.
The typical millionaire is a business owner or self-employed. He works 50+/- hours per week in the same town his entire adult life. He is 1st generation rich and not likely to have inherited anything. He is college educated but probably doesn’t make a huge income ($500,000+ /year). They live on less than 7% of their wealth and have a median wealth of $1.6 Million (1996 values). They set short and long term goals and plan their finances and future wealth more than others.
These “Millionaires Next Door” are known for their frugality, and typically both spouses are very aware and tight on their budget. Their home value is only around double their annual income and their cars are bought used. They believe in education for themselves, their kids and grandkids, and spend a large portion of their income on it. They also invest 20% of their realized income. They typically have over 20% of their wealth in the securities market and another 20% or more of their wealth in their business. They take a buy and hold philosophy.
Maybe one of the biggest take-aways from the book that may not be highlighted in these statistics is their everyday American appearance. They don’t flaunt their wealth and put their money to work more than buying nicer things. Also, they are savers no matter what their income is.
If this sounds like you or something you are striving to emulate, I may be able to help you position yourself for retirement. Focus on helping near retirees and retirees plan and work towards living their ideal retirement.
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