Lesson from “The Millionaire Next Door” (IM 549)
Thomas J. Stanley, in his book " The Millionaire Next Door: The Surprising Secrets of America's Wealthy", identifies and reveals the seven common traits that shows up again and again among those American who accumulate prodigious amount of wealth.
Defining three terms Prodigious Accumulator of Wealth (PAW), Under Accumulator of Wealth (UAW) and Average Accumulator of Wealth (AAW), Stanley highlights the financial judgement and characteristics of all three types of individual. He clearly states that most of the true wealthy in this country don't live in Beverly Hills or Park-Avenue; they live right next door. They live UAW life but are actually PAWs.
According to Stanley, the seven common denominators of PAWs are:
- They live well below their means: PAWs are always frugal and they earn to build wealth while UAWs earn to spend and maintain their high living standards. PAWs become millionaire by budgeting and controlling expenses. They know how to minimize taxable/realized income and maximize unrealized income.
- They allocate time, energy and money efficiently in building their wealth: PAWs focus of playing great defense of wealth. They know what it takes to build wealth and so they invest their time, energy and money in it.
- They believe "Financial Independence > Social Status": PAWs know that they are not what they drive. They live in middle class neighbor, drive normal cars because they know that they are playing long-term, not short-term. They acknowledge that building wealth is not something that will change lifestyle.
- Their parents didn't provide economic care: PAWs' parents don't provide them with economic/cash benefits. Stanley's research also claims that 6 out of 10 millionaires didn't receive any economic care from their parents. His research also shows that the more dollar adult children receive, the fewer dollar they accumulate, while those who are given fewer dollars accumulate more.
- Their adult children are economically self-sufficient: PAWs teach their children how to fish, they don't do glucose feeding. They teach them how to struggle and succeed in whatever they do. On the other hand, UAWs "weaken the weak", by supporting them that makes them dependent throughout their entire life.
- They are proficient in targeting market opportunities: They millionaires are very proficient in seeing the opportunities. They take their failure as the opportunity to learn.
- They chose right niche: They are very good in finding the right occupation. They focus on their strength and work on it to make it even more stronger.
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