RamistThomist
Puritanboard Clerk
Stanley, Thomas J., Danko, William D. The Millionaire Next Door: The Surprise Secrets of America’s Wealthy. Lanham, MD: Taylor Trade Publishing, 1996.
What would it be like if Solomon wrote a modern-day investing account? Many of the ideas in Proverbs translate quite well to today’s marketplace. Thomas Stanley’s argument is simple: early on, you can be wealthy or “rich,” but you likely cannot be both. Rich people usually generate high income, but since they are high spenders, it does not equate to long-term wealth. Wealthy people, those whom Stanley labels”prodigious accumulators of wealth,” or PAWs, generally live be seven principles:
These are general principles, much like the book of Proverbs.There are exceptions, but this seems accurate. By contrast, “average accumulators of wealth,” or AAWs, do not plan and they prioritize the new iPhone. (Stanley wrote several decades ago. Evidently, buying a $2,000 watch was the equivalent of an iPhone). AAWs are high-income, high expense. This is evidenced by vague-financial goals and short term activity on the stock market, buying and selling stocks based on the latest prediction.
One good way to build wealth is to minimize taxable income and maximize unrealized income (e.g., wealth appreciation without a cash flow). Other factors include never purchasing a home that requires an inordinate amount of total realized annual income.
Are you wealthy? Stanley offers the following equation
Age X realized pre-tax income, excepting inheritances; divide by 10.
Conclusion
I am not a millionaire. I do not know if I will ever get there. Moreover, this book’s use of statistics has been criticized by professionals, or so I hear. I do not know how to read statistics, anyway. The conservative, long-term vision for growing wealth seems sound, though. It fits with biblical principles.
What would it be like if Solomon wrote a modern-day investing account? Many of the ideas in Proverbs translate quite well to today’s marketplace. Thomas Stanley’s argument is simple: early on, you can be wealthy or “rich,” but you likely cannot be both. Rich people usually generate high income, but since they are high spenders, it does not equate to long-term wealth. Wealthy people, those whom Stanley labels”prodigious accumulators of wealth,” or PAWs, generally live be seven principles:
- They live below their means.
- They allocate time and resources to build wealth.
- Financial independence is more important than high social status.
- Parents did not engage in “economic outpatienting.”
- They want their adult children to be both financially successful and independent.
- They target marketing opportunities.
- They chose the right occupations.
These are general principles, much like the book of Proverbs.There are exceptions, but this seems accurate. By contrast, “average accumulators of wealth,” or AAWs, do not plan and they prioritize the new iPhone. (Stanley wrote several decades ago. Evidently, buying a $2,000 watch was the equivalent of an iPhone). AAWs are high-income, high expense. This is evidenced by vague-financial goals and short term activity on the stock market, buying and selling stocks based on the latest prediction.
One good way to build wealth is to minimize taxable income and maximize unrealized income (e.g., wealth appreciation without a cash flow). Other factors include never purchasing a home that requires an inordinate amount of total realized annual income.
Are you wealthy? Stanley offers the following equation
Age X realized pre-tax income, excepting inheritances; divide by 10.
Conclusion
I am not a millionaire. I do not know if I will ever get there. Moreover, this book’s use of statistics has been criticized by professionals, or so I hear. I do not know how to read statistics, anyway. The conservative, long-term vision for growing wealth seems sound, though. It fits with biblical principles.
