January 26, 2007

Notes on “The Millionaire Next Door” (Chapter 3 & 4)

Posted in Uncategorized at 10:29 pm by John Roney

Time, Energy, and Money

They allocate their time, energy, and money efficiently, in ways conducive to building wealth.

Millionaires indicated on our survey “business owners” with “some college,” “four-year college graduate,” or “no college.” Warning: Parents should not suggest that their children drop out of college and start a business. Most business fail within a few years of their conception. Only a small minority of business owners ever earns a six-figure income. But those who do tend to accumulate more wealth than others in the same cohort. Those who spend their time in school get started later with wealth building. Most experts on wealth agree that the earlier one starts investing one’s income, the greater the opportunity to accumulate wealth.

“There is an inverse relationship between the time spent purchasing luxury items such as cars and clothes and the time sent planning one’s financial future.”

(It is encouraging that something like options trading exists as a way to help build wealth, by increasing income and also increasing return at the same time. I don’t think that will be talked about in this book though.)

Financial Goals

Many high income producing wealth builders have the following goals:

  1. To become wealthy by the time they retire.
  2. To increase their wealth.
  3. To become wealthy through capital appreciation.
  4. To build their capital while conserving the value of their assets.

Time Allocation

  1. They spend a lot of time planning my financial future.
  2. They have sufficient time to manager their investments properly.
  3. When it comes to the allocation of their time, they place the management of their own assets before their other activities.

 

Chapter 4: You Aren’t What You Drive

They believe that financial independence is more important than displaying high social status.

  1. “Money should never change one’s values…. Making money is only a report card. It’s a way to tell how well you’re doing.”
  2. Only one in five leased their cars. The rest bought used cars most of the time.
  3. “Its much easier in America to earn a lot than it is to accumulate wealth.”
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