Curtis Miller 12/9/10 FIN 1050 The Millionaire Next Door Book Review For my ePortfolio assig me t!

I was i stru"te# to rea# The Millionaire Next Door! writte $y %&omas 'ta ley a # (illiam )a ko! $ot& &avi g P&* )s* %&e $ook #is"usse# t&e "&ara"teristi"s of t&e afflue t* %&e fi #i gs of t&e resear"&ers were +uite sur,risi g! a # as t&ey state# i t&e i tro#u"tio ! u,o "om,leti g t&eir resear"&! t&ey +uit t&eir -o$s as ,rofessors a # e tere# -o$s t&at targete# t&e afflue t a # t&eir ee#s a # wa ts! si "e t&at is a very lu"rative market* (&at t&ey fou # is t&at ma y "&ara"teristi"s we asso"iate wit& afflue "e #o .t lea# to afflue "e at all! or are ot truly a ,ro#u"t of afflue "e* I fa"t! t&ose "&ara"teristi"s t&at we asso"iate wit& afflue "e! su"& as &y,er"o sum,tio ! may eve #etra"t from afflue "e* %&e $ook also #is"usse# t&e "&il#re of t&e afflue t! a # &ow afflue "e travels t&roug& families a # &ow it im,a"ts t&em* %&e last few "&a,ters of t&e $ook #is"usse# &ow to take a#va tage of t&e afflue t market! su"& as w&at o""u,atio s woul# $est suit t&eir ee#s! allowi g o e to ,rofit off t&e afflue t market* /arly i t&e $ook! t&ere was a "lear #isti "tio ma#e $etwee wealt& a # i "ome* I "ome is &ow mu"& you ear * (ealt& is &ow mu"& you &ave* (&at t&is mea s is t&at &ig& i "ome #oes ot always lea# to &ig& wealt&! a # w&ile o e may $e maki g lots of mo ey! t&at #oes ot e"essarily tra slate i to wealt&* %&e ma-ority of millio aires i t&is atio 0a # t&ere are ma y of t&em1 &ave fairly &ig& i "ome a # lots of wealt&! $ut t&ey #o .t look t&e ,art* %&ey live i ty,i"al mi##le2"lass eig&$or&oo#s! ot usually i u,,er2"lass eig&$or&oo#s* %&ey #rive ty,i"al use# "ars! ,ay as mu"& as t&e ma-ority of t&e atio for s&oes a # "lot&i g! a # #o .t

&ave "ou try "lu$ mem$ers&i,s* %&is is t&e key to $uil#i g wealt&! $e"ause t&e fu #ame tal ,ri "i,le of $uil#i g wealt& is livi g well $elow o e.s mea s* %owar#s t&e $egi i g of t&e $ook! a formula is ,rese te# to #etermi e o e.s sta #i g i terms of wealt& a""umulatio * %&e formula is3
age reali4e# a ual &ouse&ol# i "ome 0e5"lu#i g i &erite "e1 i &erite# wealt&6e5,e"te# et wort& 10

%&ose w&o s"ore a$ove t&e e5,e"te# et wort& are "alle# ,ro#igious a""umulators of wealt&! or P7(s* %&ose w&o s"ore $elow t&eir e5,e"te# et wort& are terme# u #er a""umulators of wealt&! or 87(s 0t&ose w&o &it t&e um$er are "alle# average a""umulators of wealt&! or 77(s! $ut t&is grou, was .t #is"usse# mu"& i t&e $ook1* 7s a $rief "omme t! I #o ot $elieve t&at t&is is a e tirely a""urate formula* %&e ,ro$lem wit& t&e formula is t&at it #oes .t a,,ear to take i to a""ou t ,ast i "ome levels* It #oes ot "o si#er t&e e"o omi" &istory of t&e i #ivi#ual! t&us "a ot $e "o si#ere# a truly a""urate mea s of "om,ari g wealt& a""umulatio * But I #o agree wit& t&e fi #i gs regar#i g P7(s a # 87(s a # t&eir "&ara"teristi"s* %&e ma-ority of millio aires i 7meri"a are P7(s* %&ey live well $elow t&eir mea s* %&ey save a # i vest a sig ifi"a t ,ortio of t&eir i "ome* %&eir i "omes usually are arou # a$out 9100!000* Be"ause millio aires ty,i"ally live wit&i t&eir mea s! a sig ifi"a t ,ortio of t&em live i tra#itio al mi##le2"lass eig&$or&oo#s! ot t&e u,s"ale eig&$or&oo#s ty,i"ally asso"iate# wit& t&em* %&e ma-ority of millio aires #i# ot ear t&eir mo ey t&roug& i &erita "e! t&us $ei g first ge eratio afflue t* Most millio aires are ot 87(s* %&e lifestyle we asso"iate wit& millio aires:"ou try "lu$ mem$ers&i,s! "ustom tailore# suits! a ually $uyi g a Pors"&e:are ot asso"iate# wit& wealt& $uil#i g* %&ese are t&e "&ara"teristi"s of t&e 87(* (&ile t&e 87( may look t&e ,art of t&e wealt&y millio aire! t&ey &ar#ly &ave t&e wealt& t&at t&e ty,i"al millio aire &as* (&ile a ty,i"al millio aire "oul# sustai

t&eir lifestyle for twelve years if t&eir -o$ were to #isa,,ear tomorrow! a 87( woul# $e lu"ky to survive two years* %&ey #o ot ,rioriti4e savi gs or i vesti g! w&ereas P7(s s,e # "o si#era$le time! effort! a # mo ey o fi a "ial a#vi"e a # i vestme t #e"isio s* 7s a result! t&ey are far $e&i # a"tual millio aires i terms of wealt& a # et wort&! eve t&oug& t&ey woul# more likely $e i#e tifie# as a millio aire* 7s ,ut i t&e $ook! t&ey.re ;all &at! o "attle<* %&e ma-ority of millio aires are e tre,re eurs* It was ma#e +uite "lear t&at it #i# =t matter w&at i #ustry t&ey work i > all t&at matters is t&at t&ey=re e tre,re eurs* Millio aires also i "lu#e lawyers! a""ou ta ts! a # ,&ysi"ia s! $ut t&e ma-ority of t&em $y far are e tre,re eurs* %&e reaso for t&e &ig& ,ro,e sity for e tre,re eurs to $e"ome millio aires over ot&er o""u,atio s is t&at e tre,re eurs ofte lear t&e im,orta "e of mo ey ma ageme t! $ei g fis"al! a # ot ,ayi g too mu"&* %&ey are very goal orie te#! a # a"tual wealt& is more im,orta t t&a t&e a,,eara "e of wealt&* ?awyers! #o"tors! a # ot&er &ig& status o""u,atio s &ave a &ig&er ,ro,e sity to e "ourage a &ig& "o sum,tio life style* @uite ofte ! t&ese -o$s re+uire t&e a,,eara "e of status* I fa"t! it=s ,ossi$le t&at if o e #oes ot look t&e ,art i t&ese -o$s! t&ey woul# $e -u#ge# to $e i ferior +uality! maki g it more e"essary to "o sume to kee, u, t&e a,,eara "e of status* 7lso! t&ere=s a feeli g of ;#eservi g it<! after &avi g go e t&roug& years of s"&ooli g* / tre,re eurs! i "o trast! ty,i"ally #o =t s,e # e5te #e# ,erio#s of time i s"&ool* Aowever! it s&oul# $e ote# t&at w&ile t&ere is greater ,ro,e sity for &y,er"o sum,tio i t&ese fiel#s t&a e tre,re eurs&i,! t&ey are still o""u,atio s t&at ,ro#u"e P7(s* %&e fa"t t&at t&e ma-ority of small $usi esses fail is also wort& oti g! mea i g t&at o e s&oul# =t e"essarily sto, goi g to s"&ool a # $e"ome a e tre,re eur if t&ey wa t to $e"ome a millio aire* %&e a$ility for o e to $e"ome a P7( #e,e #s more o t&e attitu#es of t&e i #ivi#ual rat&er t&a t&eir o""u,atio *

%&e "&il#re of millio aires are =t as likely as e5,e"te# to $e"ome millio aires t&emselves* Pare ts w&o are e tre,re eurs #o ot e "ourage t&eir "&il#re to e ter e tre,re eurs&i, #ue to t&e &ig& risk asso"iate# wit& t&e o""u,atio ! mea i g t&at t&ese "&il#re ofte e ter "ollege a # ear a#va "e# #egrees i law a # me#i"i e! fiel#s t&at &ave a &ig&er ,ro,e sity to ,ro#u"e a 87( lifestyle* %&e "&il#re of 87(s are =t likely at all to $e"ome millio aires* %&eir ,are ts taug&t t&em to s,e # every #ollar t&ey &ave! to use "re#it e5te sively to mai tai a &ig& sta #ar# of livi g! t&at savi g a # i vesti g is =t im,orta t! t&at it=s $etter to look t&e ,art! a # so o * 'i "e t&e "&il#re of 87(s are ot taug&t t&e im,orta "e of fis"al res,o si$ility! t&ey #o =t #evelo, it* %&ey ofte struggle! too* Bfte ! millio aire ,are ts will give t&eir a#ult "&il#re "as& gifts! eve a ually a # as mu"& as 910!000* %&ey may su,,ly t&eir "&il#re wit& large gifts! su"& as t&e #ow ,ayme t for a &ouse! or eve a w&ole &ouse* %&e result is t&at t&ese a#ult "&il#re &y,er"o sume! livi g well a$ove t&eir mea s wit& t&e e5tra mo ey* %&ey also &ave less wealt& t&a i #ivi#uals w&o #o ot re"eive large gifts as a#ults a # also ear less i t&eir "areers* Rat&er t&a $e"ome i #e,e #e t of t&eir ,are ts e"o omi"ally! t&ey $e"ome i "re#i$ly #e,e #e t! all t&e way u, t&roug& t&eir forties! if ot ol#er! a # e5,e"t a large $e efit from t&eir ,are ts estate w&e i reality t&e estate may $e t&e sour"e of t&eir gifts! i a effort to re#u"e estate ta5es* %&is ,&e ome o is referre# to i t&e $ook as e"o omi" out,atie t "are 0/BC1* %&e vast ma-ority of millio aires #i# =t re"eive a y su"& gifts* Ma y #i# =t eve re"eive fi a "ial assista "e w&e goi g t&roug& "ollege* I ,erso ally feel t&at I "a $a"k u, t&is ,&e ome o * I &ave two wealt&y u "les wit& "&il#re i t&eir twe ties* B e "&il# a,,ears to $e self suffi"ie t* %wo are still i "ollege ,ursui g a#va "e# #egrees* B e is o lo ger i "ollege! got marrie#! a # is goi g t&roug& a #ivor"e* '&e &as t&e a,,eara "e of a a#ult "&il# too atta"&e# e"o omi"ally to &er ,are ts* Aer

fat&er gave &er t&e first &ouse s&e a # &er &us$a # ever ow e#* Ae &as give &er a "orral wit& &orses* Aowever! I am u aware of a y a,,re"iatio of t&ese gifts from &er or t&eir value* '&e a,,ears to feel e title# to t&ese gifts! a sym,tom of /BC* 7 ot&er "ousi a,,ears to $e "om,letely i #e,e #e t a # &a,,ily marrie#* (&ile &er ,are ts likely ,ai# for &er e#u"atio ! s&e #oes ot seem to &ave re"eive# a y large gifts si "e* %&e ot&er two "ousi s are ,ursui g a#va "e# #egrees* B e is marrie#! a # &is ,are ts gave &im &is &ouse for &im a # &is wife* Ais wife=s ,are ts are also very wealt&y! a # "o tri$ute to su"& gifts* %&ey #o ot ee# to ,ay for t&eir e#u"atio ! si "e t&eir ,are ts su,,ly t&e mo ey* (&ile t&e "ou,le #oes ot e5&i$it t&e same sym,toms of /BC su"& as &y,er"o sum,tio ! or #o t&ey a,,ear to re"eive t&e same amou t of gifts! t&ey still "a $e "o si#ere# at risk* %&e ot&er "ousi ! si gle! works for &is fat&er=s $usi ess #uri g t&e summer to &el, ,ay e5,e ses! t&oug& &is tuitio is largely ,ai# for $y &is ,are ts* Ae #oes ot e5&i$it sym,toms of &y,er"o sum,tio relate# to /BC* I #o ot see &im at as great a risk of e5te #e# /BC* %&e $ook "lose# wit& #is"ussio s o targeti g t&e afflue t e"o omi" i"&e* %&e two fa"tors t&at t&e $ook seeme# to "e ter arou # w&e "o si#eri g &ow to target t&is e"o omi" grou, is t&e ,riorities of t&e afflue t a # t&e &y,er"o sum,tio of t&eir "&il#re * B""u,atio s su"& as estate attor eys! fi a "ial a#visers! a # ,&ysi"ia s are goo# o""u,atio s w&e targeti g t&e wealt&y! si "e it targets t&eir mo ey ma ageme t ,riorities* Ma y a#ult "&il#re of millio aires s,e # "o si#era$le amou ts of mo ey o ,rivate e#u"atio ! so tea"&ers! ,rofessors! a # ,ro,rietors i t&e fiel# $e efit* Co tra"tors w&o $uil# or remo#el &omes woul# also $e efit from a#ult "&il#re * My e#u"atio i my Perso al Fi a "e "lass relate# to t&e i formatio lear e# i t&e $ook i several im,orta t ways* First! Perso al Fi a "e a # The Millionaire Next Door em,&asi4e t&e

im,orta "e of savi g a # i vesti g* %&e rule of t&um$ ,rese te# is ;,ay yourself first*< %&at is key to $uil#i g wealt&! si "e it "a more easily fa"ilitate livi g $elow o e=s mea s* Perso al Fi a "e taug&t t&at "re#it s&oul# rarely $e use# for sustai i g a &ig& sta #ar# of livi g! si "e t&is re#u"es future s,e #i g ,ower* The Millionaire Next Door s&owe# t&at su"& s,e #i g &a$its te # to lea# to o e $e"omi g a 87(* Bot& Perso al Fi a "e a # The Millionaire Next Door s&ow t&e im,orta "e of $u#geti g! i vesti g of time to fi a "ial ,la i g! ,ayi g for goo# fi a "ial a#vi"e! a # ,ayi g o e=s fair s&are of ta5es* I woul# ot &ave u #erstoo# t&e role a # im,orta "e of estate ,la i g ,rese te# i The Millionaire Next Door wit&out my e#u"atio i Perso al Fi a "e! a # "o versely! The Millionaire Next Door rei for"e# my u #ersta #i g of estate ,la i g* The Millionaire Next Door taug&t me t&at for o e to a""umulate wealt&! o e must u #ersta # t&e time value of mo ey! a "o "e,t I #i# ot u #ersta # $efore Perso al Fi a "e* The Millionaire Next Door! t&erefore! was a valua$le su,,leme t to Perso al Fi a "e* 'o to "o "lu#e! if I &a# to take away t&ree t&i gs from my e#u"atio i Perso al Fi a "e! i "lu#i g rea#i g The Millionaire Next Door! I woul# say first! $u#geti g is im,orta t to a"&ievi g fi a "ial goals* 'e"o #! if o e #esires to a""umulate wealt&! o e must save a # i vest a "o si#era$le amou t of mo ey! a # must $e willi g to "ommit time to maki g wise fi a "ial a # i vestme t #e"isio s* %&ir#! o e must e5&i$it #is"i,li e fi a "ially to a"&ieve t&eir fi a "ial goals* I will kee, t&ese lesso s t&roug&out my life* Perso al Fi a "e! w&ile t&e least favorite of my "lasses! is "learly t&e most ,ra"ti"al! a # for t&at! I am gla# I took it*