Just finished reading The Millionaire Next Door

[GasX]

Originally posted by: bozack
did my point just fly over your head or what?

No, I am just a crank old bastard this morning... 🙂

 

[FeathersMcGraw]

Originally posted by: bozack
who is to say you make it that far though? heck anyone of us could die in the next few hours...seems like alot of people give up what they could have in the here and now for that which they hope to have in the future and who knows if the future will ever come?

Why spend money on insurance instead of spending it on toys for you to enjoy now?

It's true that no one knows what the future holds, which is all the more reason to prepare for it instead of being forced into debt, poverty, or bankruptcy by the first economic hardship that comes your way.

And it's not like you can't touch your savings once you've put them aside.

 

[bozack]

Originally posted by: FeathersMcGraw
Why spend money on insurance instead of spending it on toys for you to enjoy now?

It's true that no one knows what the future holds, which is all the more reason to prepare for it instead of being forced into debt, poverty, or bankruptcy by the first economic hardship that comes your way.

And it's not like you can't touch your savings once you've put them aside.

Ideally one should find a company that provides insurance, however that logic and your comparison isn't really fitting as everyone knows they will be sick at some point so insurance is a sound "investment"...look like I said before I am not a supporter of spending every dime that one makes, but then again I also cannot agree with the pinch every penny and never reward yourself mentality which that book seems to put fourth...read my last post on money management, as long as you have a decent workable system that allows you to also indulge then there shouldn't be a problem, and if the problem is big enough then chances are no matter what you save you are screwed anyway. I would live a little now than piggy every penny only to get hit by a bus tommorow and never enjoy anything.

 

[kranky]

Although it's been said multiple times in this thread already, I'll mention again that the book does NOT tell you to hoard every cent you have.

Instead of trying to summarize it again, I'd recommend that anyone who has followed this thread - whether you agree or disagree - read the book. It will take a couple of hours. You are just about guaranteed to learn something about personal finance that you didn't know already, so your time won't be wasted.

Then you'll better understand some of the points made here, especially those by members who said they should have heeded such advice. But if you don't want to, hey, it's your money. No one is going to look out for it but you.

 

[DaveJ]

I think the key is to prioritize...

I break down all my investments into 3 categories, in order of priority - long term, short term, and fun stuff. Long term is my retirement fund, I put as much as I can into that because it'll earn the most over the long run. Next comes short term stuff, like building up an emergency fund, or saving for a major purchase like a house or a car. After that comes the fun stuff.

The key is not to sacrifice the present for the future, and vice versa... For me being financially secure means a lot more than having a bunch of toys I can't afford. I also hate getting stressed out and sacrificing a few neat things in the short term so I won't be stressed over the long term is well worth it...

Dave

 

[BlueWeasel]

Originally posted by: Michael
I grew up cofortably middle class but my Dad set a great example. He refused to counter sign car loans, help with making the deposit on the first house, made sure we all had summer jobs after high school. Basically made sure that we didn't leverage off of himand start living beyond our means. My parents were always there if they were really needed, but all three kids (I'm the oldest) ended up with what they could really afford.

At the time I thought he was being an ahole. Today? I hope I do as well for my kids.

Michael

Very good point.

A few months ago, there was a post where a guy was ranting about the cost of college, and how he thought it should be ultimately the responsibility of his parents to foot the bill.

I think it's great if your parents are able to pay for your college education, and I plan on paying for my kids' education. However, mine weren't able to pay the bill, so I took out a loan.

My parents didn't give me what I always wanted, but gave me everything that I needed....and I'm very grateful for that.

 

[BD2003]

Originally posted by: bozack

Originally posted by: SagaLore

So your point is - blow all your money early, spend your entire life paying off debt, and just barely make it to 65 before you go bankrupt and retire off of Social Security income?

Not at all Saga, but rather just be somewhat responsable with money but also indulge yourself from time to time...personally from the threads I have read here (haven't read the book yet) it seems that it promotes being uber frugal until retirement and then you will be so used to saving that any small indulgence will seem like something awesome, while this is a nice idea the fact is that one seriously limits themselves, especially if they like nicer things...I feel that people should indulge from time to time as that is why we work, to support and also reward ourselves.

There are those though who have no control and spend on everything the second they want it, these are the ones who should learn some self discipline.

I personally havent read the book myself, but from its description, it doesnt sound like I need to, cause I already follow what it says, and figured this out all by myself. I didnt know until I read this thread that people actually do not understand this.

Although I may be coming at it from a unique angle. My parents always hid their true amount of wealth from me and my brother, and now I find out that they are borderline millionaires. We lived like we were broke, but I knew we had some sort of money. Just not THAT much money. IMHO he took it one step too far, but whatever he did worked for me, and growing up as a poor boy taught me a few things about money.

For one, you dont need money to be happy. The amount of money you spend is not directly proportional to how happy you are. Being a psych and philosophy major has taught me a few things.

For one, you will get desensitized to anything. You see that brand new shiny car, and feel that that is what you need to complete your life. You get it, it makes you happy for a while, but then you just plain get used to it. This happens to everything, whether its your job, your house, your car, or what you eat for breakfast. This is also the reason why there is so many fat people in America. They are desensitized to the fatty, sugary foods that we now take for granted because they are so abundant. Strawberry cheesecake is quite possibly the most amazing food on this planet, but if you have it every day, you will get used to it.

Anyway, the point of all this, is that to be happy, you dont need to have everything, you need to have balance. Not to give into your every whim, but not to miserly deprive yourself of everything. But you have to also take into account that your level of enjoyment of something is more proportional to not how much you spend, but how much you expect.

Also, the more you have, the more you need. Once you get a TV, you need the dvd player, need to pay for cable, need more and more. Get a car, it needs repairs, upgrades etc. Expenses bring more expenses.

So the goal is not to continually raise the bar of expectations, but to keep the bar at a reasonable level. This is possible for practically everyone, as long as they have some sort of foresight. Once youre in that hole, its hard to get out of it. I learned that quick. Get out while you still can, and stay out.

Personally, I save about half of what I make. This is after my rent and all my expenses, including stuff bought on a whim. This isnt a hard and fast rule for me, that I absolutely must save half, I just can resist buying every last thing I see. Im pretty sure most of my friends would consider me to be the wealthiest of the group (ironic when I used to be the poor boy), and even through that I still live WELL below my means. But I couldnt be any happier. Im not depriving myself of anything that I need. Sure, there are things Id love to have (like that big shiny HDTV), but Id just get used to that too.

The more I save, and the more it compounds, the less Ill have to work in the future. It isnt and will never be about having more than everyone else around me. I just want to live comfortably, and the less work I have to do, the better. 🙂 Let my money work for me, while everyone else slaves away for their stuff that ends up owning them in the end.

For what its worth, eventually Ill have a gigantic inheritance. But Im not waiting around for it.

 

[TallBill]

As soon as I start pulling in a regular paycheck (next week), I'm automatically taking out at least 20% of every check untill I retire.

 

[Michael]

I've read the book and it doesn't say be a miser. It says that you should understand your spending habits and what it does to your future wealth. The examples they give are of people who spend less than they make. They have different areas they spend on, but they did a bunch of surveys and tried to group common habits.

I know what my budget is and spend accordingly. I spend lots, I just make much more. My desire for things has not risen in line with my increase in income - it has lagged my income increase. As I save both a set percentage of my income and a set dollar amount as well (for college for my two kids), I have done great.

I'm hoping that a few things will work out and my mortgage can get piad down all at once. Should be doable in 2-3 years.

Michael

 

[Descartes]

I picked up the book last night, and I read about half of it before I went to bed. My opinion of it right now is pretty low. I can summarize what has been said so far:

- Foreign cars are bad; Ford is good. Millionaires buy American-made cars.
- Keep the taxes on your wealth to a minimum by keeping the ratio of realized income to wealth low in proper proportion.
- Live a lifestyle of a blue-collar worker no matter what. Janitor good; doctor bad.

Ok, so that's a bit of satire, but I feel like I've read about 200 pages of essentially reading the same thing said 20,000 times. I really don't need so many examples to hammer home the very basic idea. It almost seems like the authors have a vendetta against the people who disagree with these ideals. I can completely appreciate not spending $5000 on a watch, $2000 on shoes, etc.; however, so far I've not read the point behind living so parsimoniously to obtain wealth. The authors gave several examples of 50+ year old millionaires, including one woman who saved her entire life only to give away all her money when she died. What the hell is the point of that? I want to experience life as much as possible, and that includes pursuing my personal interests. Not everyone who spends money spends it on outlandishly expensive clothing, cars, or houses.

Anyway, I hope I'll have a different opinion once I finish the other half tonight. Perhaps this book would be of more help to the likes of Nelly than those with reasonable common sense.

 

[Thegonagle]

Originally posted by: Skoorb

Originally posted by: Thump553
I probably know, or am professionally associated with, a dozen or more or such "quiet" millionaires. Not a single one of them is a tightwad or hoarder-quite the opposite. They generally have a clearer sense of what they need and want than most of us. Far too many of us are have been brainwashed by our consumerist society to always wanting to buy something to make us momentarily happy.

It's not a foolproof system, there is a certain amount of good luck involved, as well as steady habits. They generally made it through life without a divorce, extended unemployment or ner-do-well offspring. But it is certainly doable by the great majority of us without any real, MEANINGFUL crimpes in our lifestyles.

I don't know how old you are, but by this post I'd guess you're a good bit older, and wiser than the rest of us. I think you nailed it with the second paragraph 🙂

Yes. Very well said, Thump553.

 

[etech]

I haven't read this book but it looks as if it might be a good companion or substitute for the MND.

'Automatic Millionaire'

Amazon link

Yep, a lot of it is common sense but many people have not been exposed to any of the principles of compound interest and the such that will allow them to get comfortable in their retirement instead of trying to live off of social security.

 

[NogginBoink]

An additional book recommendation:

For those who think MND means "save everything, have no fun, and leave money to your kids," I recommend the book "Die Broke" by Stephen Pollan. The book is a little radical, but it outlines a plan of wealth accumulation in your early years and a plan of enjoying it and getting rid of it in your later years. The author's premise is that the last check you should write is to the undertaker.... and it should bounce.

What the author does well in this book is lay out a plan on how to use and enjoy the wealth that you've accumulated and ensure you don't outlive your money.

Again, it's somewhat radical, and I don't agree with absolutely everything in the book, but as a philosophy I find it very appealing.