A personal finance blog dedicated discussing such topics as budgeting, asset allocation, 401K, IRA, cash flow, insurance, financial planning, portfolio management, and other areas in personal finance.


Wednesday, August 03, 2005

The Millionaire Next Door - Part III

The most popular posts I have done were in relation to the book, The Millionaire Next Door. Since the posts are now buried in the archives, most of you probably haven't seen the comments to my first two "millionaire" posts. You can check Part I and Part II.

The biggest critic of the book is Miguel, who says the following in his second comment:


Darned, I wrote a good response that seems to have disappeared into cyberspace. Well, here goes again if I can even remember what I said.

My biggest problem with the Millionaire book is that it purports to have conducted "research" on the topic. Sorry, but interviewing a bunch of old men in shopping malls who claim to be millionaires is not research by any meaningful definition. There is no scientific or statistical method here. They are an embarrassment to the field of demographics.

Why is that a problem? Cause people will draw inaccurate conclusions from the books. So, they claim as you say that "millionaires use restraint and don't fall for the material goods that most Americans fall for". That is complete BS. Like I said before, I am a millionaire. Did it before the age of 40. Most of my neighbors are millionaires. Some fit the book's profile, some don't. Personally, I like to eat out a lot, I like to vacation in the Hamptons, I like to travel to Europe, and I like owning a big house. I don't own a luxury car - In fact I don't own a car at all. I live in NYC and I rent them when I need them.

I will concede that the advice to "marry well" is quite sound. I married someone with a sharp eye towards saving & investment, budgeting & penny-pinching. We love the luxuries, but we don't pay retail for them.

My use of the word "conservative" was not in reference to politics, so there is no "liberal" version to be told. The authors are advocating a conservative life style for no other reason than they beleive its a good idea - it's their OPINION and it's not based on any real research.

There are plenty of millionaires who do not fit their lifestyle. So, then what is really the point of the book. I just think they are trying to promote fiction as non-fiction.

American likes to think of itself as a class-less society, and the book feeds right into that uniquely American mythology. That's exactly what people want to hear.

It's not that there aren't some decent concepts in the book. It's that if you don't know any better, you simply don't know what of their writing is BS and what of it is ok.

Thanks for the comment, Miguel.

Personally, I think Miguel is being particularly hard on the book. The point of the book is that "wealth" is not what we think it is. Rather, "wealth" (in financial terms) is our net worth. It's not how much we make, but what we keep from what we make that ends up making the difference.

I think EVERYONE can gain some insight from reading this book.