Shane Stenquist
FIN 1050
The Millionaire Next Door Assignment
There are many different types of income earners within the United States. Some
individual’s incomes can range from less than $15,000 a year to well over $100,000 a year. Most
often people believe that in order to be called a millionaire you need to be making a six figure
income. This is not usually the case. In the book, The Millionaire Next Door, Thomas Stanley
identifies seven key elements that he finds most typical American millionaires posses.
Throughout this paper, I will explain each of these elements in detail and discuss ways that I can
achieve my goal to become financially independent.
The first characteristic that Thomas Stanley identified is: They live well below their
means. This attribute describes someone who is frugal, a person who utilizes resources around
them. They are always looking for ways that they can save money. This type of person is not by
any means wasteful. They become a millionaire by budgeting and controlling their expenses.
This characteristic can be hard for some people to do.
Some individuals find that as they earn more money, they tend to spend more money.
Those people who have to constantly spend their money believe in “spending tomorrow’s cash
today. They are debt-prone and are on earn-and-consume treadmills. To many of them, those
who do not display abundant material possessions are not successful” (Stanley, 1996, pg. 36).
Too often young people are sold on the belief that those who have money spend their money
lavishly. If they are taught this by their parents as they grow up it will be difficult for them to
become affluent in their own lives.
The second characteristic identified is: They allocate their time, energy, and money
efficiently, in ways conducive to building wealth. Those millionaires discussed in Stanley’s
book spend a great deal of time daily, monthly, and yearly, planning, budgeting and investing
their money in the most conducive environment. I found it interesting those individuals who are
positive accumulators of wealth (PAW) spend nearly double the number of hours with their
financial investments as under accumulators of wealth (UAW) do. PAWs spend time making and
planning a budget which they follow. It takes time to write down and keep track of all of your
expenses. If you take the time to make a budget and stick with it, then it will pay off in the end.
One aspect that a PAW allocates their time, energy and money is in the stock market.
They spend countless hours studying the stock market to decide which investments and investors
will be right for them. This is one area that I would like to improve on. I am not very familiar
with the stock market. I have never invested money within the stock market. By taking this class
it has helped me to become familiar with different accounts in which I can invest my money.
The next characteristic says: They believe that financial independence is more
important than displaying high social status. We come from a high consumption-oriented
society. In our society people want and expect to have the best possessions possible. We have
been taught that by displaying our personal possessions, other people will assume we are wealthy.
For example, if you live in a six bedroom house with a four car garage that has a Rolls-Royce
parked in it, along with a boat and ATV’s, your neighbors can’t help but to assume that you are
wealthy. In reality you may have numerous assets, but you may not have large investment assets
that will be needed later when retirement comes along. A label of being rich does not make you
wealthy, it is the effort that you put forth in your investments that makes you money.
I liked a saying that was made in the book that went like this, “Money should never
changes one’s values… Making money is only a report card. It’s a way to tell how you’re doing”
(Stanley, 1996, pg. 110). I agree with this statement. If our values change by how much money
we make, then what we feel is important may change as well. In the end it could end up changing
your whole investment outcome.
The fourth characteristic defined by Stanley states: Their parents did not provide
economic outpatient care. Stanley made a huge emphasis in this section that “the more dollars
adult children receive, the fewer they accumulate, while those who are given fewer dollars
accumulate more” (Stanley, 1996, pg. 143). I really liked this quote. I have grown up in a family
that taught me the value of hard work. You have to work for things in life, in order to succeed.
When you work to accomplish something on your own, you tend to value it more than you would
have if it was given to you as a gift. I have found that it is harder to spend your own money that
you worked hard for, than it is to spend someone else’s money. I believe this is the same for
those who receive cash as gifts. You are more willing to spend $5,000 on a customized electronic
when it comes from someone else’s pocket other than your own.
The fifth characteristic is: their adult children are economically self-sufficient. As a
parent it can be hard to raise a child who is economically self-sufficient. In the book Stanley
gives advice to parents in raising financially independent children. The advice that I liked most
said, to teach your children frugality and discipline no matter how well off you are. I believe
these two qualities are important characteristics to teach any child. When you posses these
qualities yourself it is easier to teach these traits to your children. Children learn by example.
When they see you being frugal and self disciplined every day, it will teach your children that
you value these traits.
I grew up in a house where my parents looked for creative ways to save money. Before
making big purchases my parents would talk with each other about their finances. They would
determine if the purchase was a need or necessity. They would also look at their finances and
decided if this could fit into their expenses. My parents were very cautious about charging things
to credit cards. They knew that annual percentage rates could be extremely high and you had to
keep that in mind when making large purchases. By watching my parents it has helped me to
learn how to be wise in my expenditures.
The sixth characteristic addressed by Stanley states: they are proficient in targeting
market opportunities. There are many opportunities in the marketplace that are targeted
towards working with affluent individuals. You can find specialists that work to help solve
problems of the affluent. If you choose an occupation in one of these fields they will be in high
demand for the next twenty years. Some of these occupations include: estate attorneys, medical
and dental care specialists, asset liquidators, facilitators and appraisers, housing specialists,
accountants and more.
The last and final characteristic is: they chose the right occupation. You want to make
sure to choose an occupation that you enjoy going to every day. If you are stuck in a dead end
job that you hate, you will not be very successful in that job. Many millionaires that Stanley
interviewed we entrepreneurs. They took risks at starting their own business. They found
something that they enjoyed doing and turned it into a profitable business. Turning your business
into a success will be hard work. It does not come easily. I know in my own life I do not enjoy
the job that I am currently in. It is difficult to make myself want to go to work. The money is the
only incentive for me. This is why I am going to school. I want to be able to obtain a career that I
will enjoy.
I have a goal to become financially independent. I believe that if I apply these seven
characteristics to my own life that I will be able to obtain this goal. It takes time and effort to
become a millionaire. It will not come easily. You may have to sacrifice some of the material
possessions that you want, but in the long run it will be well worth the wait.