Millionaire Next Door

I just finished re-reading The Millionaire Next Door. I’d put it in my top-10 list of favorite books.

The first chapter is online.

Here's an excerpt:

PORTRAIT OF A MILLIONAIRE

Who is the prototypical American millionaire? What would he tell you about himself?

* I am a fifty-seven-year-old male, married with three children. About 70 percent of us earn 80 percent or more of our household's income.

* About one in five of us is retired. About two-thirds of us who are working are self-employed. Interestingly, self-employed people make up less than 20 percent of the workers in America but account for two-thirds of the millionaires. Also, three out of four of us who are self-employed consider ourselves to be entrepreneurs. Most of the others are self-employed professionals, such as doctors and accountants.

* Many of the types of businesses we are in could be classified as dull/normal. We are welding contractors, auctioneers, rice farmers, owners of mobile-home parks, pest controllers, coin and stamp dealers, and paving contractors.

* About half of our wives do not work outside the home. The number-one occupation for those wives who do work is teacher.

* Our household's total annual realized (taxable) income is $131,000 (median, or 50th percentile), while our average income is $247,000. Note that those of us who have incomes in the $500,000 to $999,999 category (8 percent) and the $1 million or more category (5 percent) skew the average upward.

* We have an average household net worth of $3.7 million. Of course, some of our cohorts have accumulated much more. Nearly 6 percent have a net worth of over $10 million. Again, these people skew our average upward. The typical (median, or 50th percentile) millionaire household has a net worth of $1.6 million.

* On average, our total annual realized income is less than 7 percent of our wealth. In other words, we live on less than 7 percent of our wealth.

* Most of us (97 percent) are homeowners. We live in homes currently valued at an average of $320,000 [in 1997]. About half of us have occupied the same home for more than twenty years. Thus, we have enjoyed significant increases in the value of our homes.

* Most of us have never felt at a disadvantage because we did not receive any inheritance. About 80 percent of us are first-generation affluent.

* We live well below our means. We wear inexpensive suits and drive American-made cars. Only a minority of us drive the current-model-year automobile. Only a minority ever lease our motor vehicles.

* Most of our wives are planners and meticulous budgeters. In fact, only 18 percent of us disagreed with the statement "Charity begins at home." Most of us will tell you that our wives are a lot more conservative with money than we are.

* We have a "go-to-hell fund." In other words, we have accumulated enough wealth to live without working for ten or more years. Thus, those of us with a net worth of $1.6 million could live comfortably for more than twelve years. Actually, we could live longer than that, since we save at least 15 percent of our earned income.

* We have more than six and one-half times the level of wealth of our nonmillionaire neighbors, but, in our neighborhood, these nonmillionaires outnumber us better than three to one. Could it be that they have chosen to trade wealth for acquiring high-status material possessions?

* As a group, we are fairly well educated. Only about one in five are not college graduates. Many of us hold advanced degrees. Eighteen percent have master's degrees, 8 percent law degrees, 6 percent medical degrees, and 6 percent Ph.D.s.

* Only 17 percent of us or our spouses ever attended a private elementary or private high school. But 55 percent of our children are currently attending or have attended private schools.

* As a group, we believe that education is extremely important for ourselves, our children, and our grandchildren. We spend heavily for the educations of our offspring.

* About two-thirds of us work between forty-five and fifty-five hours per week.

* We are fastidious investors. On average, we invest nearly 20 percent of our household realized income each year. Most of us invest at least 15 percent. Seventy-nine percent of us have at least one account with a brokerage company. But we make our own investment decisions.

* We hold nearly 20 percent of our household's wealth in transaction securities such as publicly traded stocks and mutual funds. But we rarely sell our equity investments. We hold even more in our pension plans. On average, 21 percent of our household's wealth is in our private businesses.

* As a group, we feel that our daughters are financially handicapped in comparison to our sons. Men seem to make much more money even within the same occupational categories. That is why most of us would not hesitate to share some of our wealth with our daughters. Our sons, and men in general, have the deck of economic cards stacked in their favor. They should not need subsidies from their parents.

* What would be the ideal occupations for our sons and daughters? There are about 3.5 millionaire households like ours. Our numbers are growing much faster than the general population. Our kids should consider providing affluent people with some valuable service. Overall, our most trusted financial advisors are our accountants. Our attorneys are also very important. So we recommend accounting and law to our children. Tax advisors and estate-planning experts will be in big demand over the next fifteen years.

* I am a tightwad. That's one of the main reasons I completed a long questionnaire for a crispy $1 bill. Why else would I spend two or three hours being personally interviewed by these authors? They paid me $100, $200, or $250. Oh, they made me another offer--to donate in my name the money I earned for my interview to my favorite charity. But I told them, "I am my favorite charity."

Security Conference in San Francisco

Last week I went to a technical conference for work. After hours, Kristin, the girls, and I walked around a bit and ate out together. Kristin added a bunch of her photos from the trip on Facebook. Here are a couple pictures of the Microsoft booth at the conference.

Weight Loss Tip Number Two - Hot Tea at Night

I've lost a couple more pounds since my previous fitness post a couple weeks ago. Not bad considering I went out of town on a business trip. Those trips are the death of me because I go out to eat later in the evening than normal, and the food is paid for by my employer. That's a bad combination.

Besides eating more fruit, I've also made a rule for myself that I won't eat after dinner (this is a big deal for me considering that I used to eat a full plate of leftovers and dessert at night). A few times since I started this, I thought I was really going to die from hunger. ;)

I've started drinking some sweet hot tea in the evening, and that has helped. At least it's something! I does do a decent job of stopping my meanderings to the kitchen.

Jack Handy's Deep Thought o' the Day

I wish I had a dollar for every time I spent a dollar, because then, yahoo!, I’d have all my money back.

Eating More to Lose Weight

My brother and I made a pact that we each would get down to what we weighed in college, by this coming November. Last year at this time I was about 20 pounds over weight (I was traveling for work and eating in restaurants all the time). I've lost ten since then. To make the goal I've set, I need to lose another twelve.

I've tried a few tricks that have helped. One is that I force myself to eat a couple pieces of fruit in the middle of the day, even if I don't feel like it. It cuts my hunger at lunch and dinner and I don't eat as much. Another nice side-effect is that it rehydrates me.

We'll see if I make weight by November.

Fearing Sea Life

This morning at Newport Beach I paddled over the top of a large sea lion (his head was about the size of a man's) when I was turning around to catch a wave. Needless to say, I didn't catch the wave. I was proud of myself for not screaming like a girl, though. I'm not sure why, but I could tell from the way he dove below me that he was just playing (I had seen him lazily cruising through the surf about twenty minutes earlier). I just said "Whoooaaa!"

Dolphins and seals typically don't come inside the surf line. This guy, however, was going right up to the beach and diving below the waves. A girl on a longboard next to me saw him and immediately started paddling away and to the shore. The funny thing was that the sea lion started following her. Her friend laughed.

The Shaq

I thought this blog post by Ted Kluck, one of the writers of Why We're Not Emergent, was hilarious.

…Four years later in the midst of his Great Sadness, Shaq receives a suspicious note, apparently from God, but actually from Pat Riley, inviting him back to that shack, actually a 14,000 square foot Miami mansion, for a weekend. Against his better judgment he arrives at a gated community, in a Cadillac Escalade, and walks back into his darkest nightmare. A nightmare which includes the movies Blue Chips and Kazaam! as well as recordings of all of his many ill-fated rap albums including Shaq Diesel and You Can’t Stop the Reign. What he finds there will change Shaq’s world forever.