So I just finished reading The Millionaire Next Door, which according to the better-established blogs seems to be PF-101 basic reading. It’s about statistically significant behaviors of self-made millionaires. It got me thinking about some interesting (if not woefully obvious) things:
- Rich people got that way by saving all their money.
- Buy used cars. Real estate appreciates; cars depreciate. Why would you spend extra money to let a car depreciate more?
- Rich people encourage their kids to do what other rich people spend money on: attorneys, physicians, brokers, financial advisors, accountants, realtors, psychologists, etc.
- You have more power in your life if you are a business owner or self-employed with many customers (should one bail) than if you are employed with one boss (who can can you).
- Many of the wealthy people surveyed owned low-key businesses that do not require the owner to spend lots of money on status symbols like fancy house, cars, and suits. These are the things that drain money away.
Points #1 and #4 really got to me. #1 because I have gone along thinking that you “can afford” to increase your cost of living slightly as you make more money, because there is still so much left over and you need to enjoy your life. But I guess this drove home the question of: do you want to moderately enjoy your life while working 40+ hour work weeks until you are 60 or 67, or keep it lean, save it up, and retire entirely at more like 50? I always assumed you just had to work until you are very old. And now I realize you can just save your money, and then decide what to do with the liberty of realistic options.
And #4 hit me right in the funny bone because I am the opposite of self-employed with the luxury of many and diverse customers. I am nearly at the bottom of a huge company, with about 3 levels of vertical bosses and about 8 lateral bosses, and very little ability to choose my work. I worry about upsetting even one of the bosses, unrealistic though that concern probably is. And I have no leverage in return except for my good reputation. Heading into the age in which I would like to settle down and have kids, the idea of self-employment intrigues me. Especially since MND indicates that people are occasionally successful at it.
For whatever reason I always assumed that people with small self-employed shops are not good enough to make it in a larger company. But as I look back, I switched to a Harvard-educated boutique dentist when the chain dentist office broke my tooth irrevocably. A boutique, not large conglomerate, maxillo-facial surgeon took out my wisdom teeth expertly. I went to a solo CPA in a breezy, sunlit office at the edge of town to do my dad’s taxes. For these things even I choose to lay out serious money. And all of those self-employed people seemed happy, busy, and successful. Interesting.
Overall the book left me with some good reminders to fall back on… you’ll never get rich if you spend all your money (or more explicitly, if you do no conscientiously try to save every possible dollar). Don’t bother keeping up with the Joneses. They are probably cash-poor. Make smart purchasing decisions: save where it doesn’t matter, and spend where it does. And don’t be a baby about deciding what matters! Get serious. Keep your children in the dark about your level of wealth so they don’t feel entitled. And your children are probably better off without big cash gifts anyway so they’ll make it on their own. Yeah that’s about it for now!