FRUGAL FRUGAL FRUGAL - The Millionaire Next Door Book Review #3
FRUGAL FRUGAL FRUGAL is the next chapter of this book.
This chapter explained the lifestyle of the affluent. It stated that:
Being frugal is the cornerstone of wealth-building.
What I learnt from within this chapter was that most of the highest net worth people of America, do not infect have a high income; rather, they have a large amount of assets.
The problem that causes the false ideas around what a millionaire looks like, comes from the media. Stanley argues that,
Could you imagine the media hyping up the frugal lifestyle of the typical American millionaire? What would the results be? Low TV ratings and lack of readership, because most people who build wealth in America are hard working, thrifty, and not all glamorous.
What it also shared was that many middle class families reward their pay increases with more spending money.
The link this all has with frugality is the fact that nearly half of all millionaires that were interviewed had never spent more than $140 on a pair of shoes. What this tells us is that millionaires are frugal as! They don't waste money on things that they don't need to which increases the rate at which they can save.
The book tells me that the majority of millionaires' income is only 7% of their net worth. This means that there is a huge difference between what they make and what they have. How did they do this, and how can I too? I'll tell you below:
To build wealth, minimise your taxable income and maximise your wealth/ capital appreciation without a cash flow).
The problem with taxable income is that tax is the one single biggest cost for most households meaning that you don't get to keep all of the money you make. This is why heaps of professionals like doctors and lawyers are continually asking themselves "why do I make so much money without having anything to show for it??".
Ways you can increase income that is not taxable:
investing in tax free municipals
investing in tax free real estate
building a business in a tax haven
investing in stocks that you won't have to pay tax on the earnings
Re cap of this chapter:
Invest in non-taxable assets
Millionaires are frugal
The lifestyle of a millionaire isn't advertised.
Time, Energy and Money is the next chapter of the millionaire next door. Come back tomorrow to learn about the next chapter.
