Summary of The Next Millionaire Next Door Book by Thomas J. Stanley, Sarah Stanley Fallaw
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Short summary
In “The Next Millionaire Next Door”, Thomas J. Stanley and Sarah Stanley Fallaw highlight how specific decisions, behaviors, and characteristics align with the discipline of wealth building, covering areas such as consumption, budgeting, careers, investing, and financial management in general. They include results from quantitative studies of wealth as well as case studies of people who have been successful in building wealth. They discuss general paths to building wealth on your own, focusing specifically on careers and lifestyles associated with each path, and what it takes to be successful in each.
Ignore the myths of wealth — being rich isn't about how much money you make or spend
Listen the first key point
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In our society today, many people continue to buy into the myths of wealth, thus decreasing the likelihood of taking on the responsibility of building wealth on their own.
Out of all the myths about wealth, one that is very popular and seems to strongly persist is the idea that income equals wealth.
In life, we have the freedom to choose the kind of life we want to lead and the way we build or maintain wealth. Whatever path we choose, generating income for our household will no doubt be of paramount concern at some point in the process. But income isn’t the same as wealth. Income is what you bring home today.
Wealth is what you have tomorrow, and the next day, and the day after.
The media often portrays wealth as income instead of net worth, creating the erroneous perception that simply receiving a big paycheck necessarily leads to wealth.
Wealth is how much money you accumulate, and it is directly proportional to your net worth, which is the sum of your assets minus your liabilities. Income is what you bring in over a period of time, and you report it on your annual income tax return.
However, periodic income certainly affects your net worth, but it doesn’t define true wealth. For instance, consider an individual who makes $1 million in wages in a year and spends $1.2 million in consumption during that same year. The wealth (balance sheet) impact would be negative $200,000.
Even though income and net worth are related factors, they are not equivalent. So, each should be used in different ways to assess overall financial health and progress. To
be truly wealthy and financially independent, you have to learn how to set aside a fraction of your income for savings and investment.
Another popular money myth you have to beware of is whether a person's wealth can be determined by what he drives, buys, and wears.
Many people think that being a millionaire means you have to wear designer clothes and drive expensive cars. But the truth is, 86% of those who wear expensive clothes and drive luxury motor vehicles are not millionaires. In fact, those neighbors you see driving fancy cars and living an extravagant lifestyle might be in debt up to their eyeballs.
Wealth isn't about how much money you make or spend — it's about how much money you save.
Most of the self-made millionaires today are people who live a pretty prudent lifestyle and built their wealth by saving and investing.
Millionaires spend below their means and avoid buying things they don't need. This leaves enough money left over to commit to saving, ultimately increasing net worth. Therefore, if you want to build wealth and become a millionaire, you have to stop trying to keep up with the Joneses.
The concept of ignoring what others are driving, buying, and wearing is known as social indifference.
This indifference to how other people spend their money is related to the ability to build wealth over time. Those who show high levels of social indifference, regardless of their income and age, have a better opportunity to build wealth. Conversely, those who focus intently on what others buy and always want the latest and greatest in consumer goods, like technology or accessories, are less likely to be able to create wealth.
“One man pretends to be rich, yet has nothing; another pretends to be poor, yet has great wealth.” ~ Proverbs 13:7
second key point
Our experiences growing up can impact the financial decisions we make today
When it comes to economic success, the nurture side of the equation goes a long way. That is, our upbringing, choice of spouse and friends, and social culture can influence how and if we’re able to transform income into wealth.
"The Next Millionaire Next Door" offers enduring strategies for individuals seeking to build wealth. Written by renowned author Thomas J. Stanley and Sarah Stanley Fallaw, this book delves into the habits, mindsets, and behaviors of millionaires, providing valuable insights and practical advice. With a focus on long-term financial success, the authors explore the key factors that contribute to wealth accumulation, empowering readers to adopt these strategies and achieve their own financial goals.
Who should read The Next Millionaire Next Door
Aspiring entrepreneurs seeking practical strategies for achieving financial success.
Individuals looking to build long-term wealth and financial stability.
Anyone interested in understanding the mindset and habits of self-made millionaires.
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Do you find yourself staring at your computer for long minutes, unaware of time slipping by? Do you enter a room and suddenly cannot remember why you stepped in the first place? Is it a herculean task for you to sit through ten pages of a book without reaching for your phone? If yes, your focus needs some work and fast.
Actually, yours is not a unique situation. Many adults like you have issues concentrating on a given task. However, in this fast-paced world of ours, you can’t afford to be not focused at all times. Thankfully, this article comes to your rescue! With the tips and tricks from Hyperfocus by Chris Bailey, you will get in the top percent of folks who have mastered the art of concentration.