- Enduring Strategies for Building Wealth -
THOMAS J. STANLEY, PhD, and SARAH STANLEY FALLAW, PhD
Subjects: LCSH: Rich people—United States. | Millionaires—United States. | Wealth—United States. | Finance, Personal—United States.
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Book Details
Price
|
2.50 |
|---|---|
Pages
| 282 p |
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|
7,418 KB |
File Type
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PDF format |
ISBN
| 9781493035366 (ebook) 9781493035359 (hardcover) |
Copyright©
| 2019 by Affluent Market Institute, Ltd. and Sarah Stanley Fallaw, PhD |
For nearly 40 years, my father, Thomas J. Stanley, studied the affluent in
America to discover and highlight paths to financial independence and economic
success that did not depend on inheritances or other large monetary gifts. He
found in his work some universal components, but also saw that there were
many paths to wealth involving many unique career, consumer, and business choices.
Despite the evidence-based financial planning principles embodied in his
book The Millionaire Next Door and the tried-and-true paths to wealth
accumulation that have been documented quite clearly, many people continue to
ask, “How come I am not wealthy?” Whether you’re a small business owner,
teacher, attorney, or sales professional, a disciplined, methodical approach to
building wealth has been proven to work. As my father wrote in The Millionaire
Next Door, “They [the millionaires profiled in the book] did it slowly, steadily,
without signing a multimillion dollar contract with the Yankees, without
winning the lottery, without becoming the next Mick Jagger.”1
This slow and steady approach applies to many of life’s challenges, such as
learning a new skill, getting or staying in good physical shape, raising children,
or starting a new business. Achieving any major goal—including financial
independence—requires disciplined action over time, an awareness of one’s own
abilities, and the effective allocation of resources.
But a desire for a certain type of lifestyle—one with a requisite level of
consumption and displayed status—still makes the journey difficult for most of
us. A lifestyle that is dictated by what others do, drive, and wear cannot be
sustained by most without a steady fire hose of incoming cash flow. Many of us
simply accept our current habits, or refuse to do the hard work to change them,
all the while complaining and often giving in to a life of dependency and worry.
Despite the protestations of some critics of his work, my father was not naïve
and stated very clearly that the odds of becoming extraordinarily wealthy while
starting with nothing were not very high. But his research demonstrated time and
again that behaviors can change one’s circumstances, and his life was just such a
story. He had meticulously and consistently changed the way he behaved in
order to become financially independent and overcome his incredibly humble beginnings.
My father never wanted to create a second edition of The Millionaire Next
Door, a book that has become a classic since its publication in 1996, partly
because he preferred to create new works for his readers that offered different
(or fresh) viewpoints on the topic of affluence and building wealth in America.
His follow-up works included The Millionaire Mind, Millionaire Women Next
Door, and Stop Acting Rich. The research and development for this book began
in 2012 in anticipation of the 20th anniversary of the publication of The
Millionaire Next Door in 2016. The original aim was to examine trends over
time related to some new topics, as well as to include comparisons to the data
collected for my father’s prior works.
Together, we decided to take another look at millionaires in the United States
to examine what (if any) changes could be seen 20 years after the original
publication of The Millionaire Next Door, as well as years after his other works.
Our objective was to re-examine the key behavioral traits of millionaires next
door while also considering what building wealth looks like today. My father,
the original founder of the Affluent Market Institute and author of the original
title, brought his baby-boomer point of view and marketing research expertise to
the project, while I, a Gen-Xer and industrial psychologist by training, worked
alongside him.
There was another plan in store for us, one that significantly altered the book
you are reading. My father was killed by a drunk driver in 2015, on the eve of
when the first wave of research invitations were to be sent out. After his death, I
took on the task of compiling his notes along with the research findings from our
latest study, weaving the notes, blogs, and ideas he wanted to have included in a
new book into chapters along with interpretation of new data and data he had
advised me on collecting in the years prior. This bittersweet task took me more
than three years. While I had access to many of his notes and writing, I couldn’t
replace my father’s unique perspective on the new data and the headlines of
today. For that, I would be required to humbly submit my own interpretations.
There were several reasons why I felt this project, despite the absence of my
father, needed to be completed. They are the same reasons why research within
the fields of consumer science, financial planning, behavioral finance, and social
psychology dedicated to helping individuals become financially successful must
continue as well. In short, we need an ongoing scientific study of how
individuals can build wealth on their own to confirm or refute myths about
wealth, anecdotes, and feel-good stories. We need to use scientific rigor to
separate what sounds good from what actually works.
Myths about wealth still abound in this country. Income continues to be
confused with wealth by the media, the government, and in the minds of
Americans. Anyone who has amassed a fortune on his or her own is often
viewed with suspicion, as if the only pathway to financial success requires either
high levels of “economic outpatient care” (financial gifts from family members),
winning the lottery, or dishonesty. Shiny, glittering images fill our social media
feeds and continue to confuse us about the reality of becoming financially successful.
Many of us are also woefully unprepared and, in some cases, unable to
manage our own financial affairs. Nearly half of all Americans could not cover a
$400 expense without selling something or borrowing money.2 We continue as a
nation to be worried about our finances. The American Psychological
Association found that nearly 64% of Americans feel money is a “somewhat or
very significant” source of stress within their lives.3 This ebbs and flows with the
economy, but money tends to be the top stress factor for Americans ahead of
work, health concerns, and family issues.
Finally, it’s important to note that some critics of The Millionaire Next Door
suggested that the stock-market boom fueled by the developing Internet
economy in the mid-1990s was the reason for the success of the individuals
included in the book, or alternatively that survivorship bias (asserting that the
data only looked at those who had succeeded in becoming wealthy and not
whether the same traits were exhibited by those who failed) was the explanation
for the results. The critics ignored that there were clear comparisons (and often
significant differences) in his work between the prodigious accumulators of
wealth who were effective at transforming their income into wealth and the
under accumulators of wealth, those who, with the same level of income, had
very little to show for it in their accounts. The same behaviors and habits
examined in The Millionaire Next Door have also been applied to populations of
mass market and mass affluent individuals—i.e., those who haven’t “survived”
to be wealthy yet—and the data from these nonmillionaire populations is
consistent in revealing the positive correlation between accelerated wealthbuilding
and factors such as making prudent financial decisions, ignoring
societal pressures to spend, and being focused on goals.4
This book not only includes descriptions and interpretations of the data
collected just before and after my father’s death but also passages he wrote on
his own, typically in the form of blogs that he had marked to include in the book.
For the most part, the data highlighted in this book was collected during 2015
and 2016, but I also included survey results from other ancillary studies
conducted between 2012 and 2018, along with data and research collected by my
data research firm, DataPoints, at various points in time.
In terms of narrative voice, I decided to use the pronoun we throughout this
book. In some cases, however, the reader will also see sidebars that highlight my
father’s individual work including notes, blogs, chapter ideas, and data reviews.
I felt these were critical to the book and that the reader should know that these
were his own words. In other cases, I have included a few sections in my own
voice, noting that it is my own experience and research to which I am referring.
His untimely death in 2015 has left a void not only in the lives of his
immediate family but, based on the numerous communications we received
through his website and other sources during the time after his death, also in the
lives of the readers of his books and blog who were seeking assistance or
encouragement on their journeys to financial independence.
With all of these moving parts as a backdrop, I offer this book as a
continuation of my father’s research and work. In the days after the tragedy that
took his life, some in the media used the opportunity to make the assertion that
the millionaire-next-door concept is dead. That’s not what our data says. I hope
this book will demonstrate that the millionaire next door is still very much alive
and well and that financial success continues to be attainable for almost anyone
who is willing to work for it.
Sarah Stanley Fallaw
Atlanta, Georgia
June 2018
....
List of Tables and Figures
Figure: Ratio of Mean to Median Net Worth for Years Available
1-1. Percentage of Income Received through Trusts, Estates, and Inheritance in
Previous Year by Percentage of Millionaires (1996 & 2016) 1-2. Career-
Lifestyle Groups of Affluent Sample
3-1. Early Experiences of Millionaires
4-1. Most Important Reasons for Latest Home Purchase by Millionaires.
4-2. Least Important Reasons for Latest Home Purchase by Millionaires.
4-3. Purchase Price and Current Home Values for Millionaire Homeowners 4-4.
Percentage of Millionaire Homeowners with and without Estate/Trust
Income by Original Purchase Price of Home 4-5. Percentage of Millionaire
Homeowners with and without Estate/Trust Income by Current Market
Value of Home 4-6. Total Median Cost of Homeownership by Month and
Satisfaction Indicators for Selected US Cities (2012) 4-7. Budgeting &
Frugality of Prodigious Accumulators of Wealth vs. Under Accumulators of
Wealth 4-8. Most Paid by Millionaires for Clothing and Accessories: 1996 to
2016 (in 2016 Dollars) 4-9. Most Spent by Millionaires for Jeans,
Sunglasses, and Furniture 4-10. Top Makes of Motor Vehicles of
Millionaires (1996 & 2016) 4-11. Model Year Cars by Percentage Owned by
Millionaires (1996 & 2016) 4-12. Percentage of Income Spent on Categories
by Millionaires
4-13. Charitable Deductions as a Percentage of Size of Estate
5-1. Categories of Wealth-Related Behavioral Patterns
5-2. Discipline Related to Wealth Status: Under Accumulators of Wealth vs.
Prodigious Accumulators of Wealth 5-3. Education Levels of Millionaires
(1996 & 2016)
5-4. Percentage of College-Educated Millionaires by Type of College 5-5.
Success Factors: Percentage of Millionaires Endorsing as Important or Very
Important (1998 & 2016) 5-6. Hours Spent Per Month in Selected Activities
for Under Accumulators of Wealth vs. Prodigious Accumulators of Wealth
(1996 & 2016) 5-7. Hours Spent Per Month in Selected Activities for Under
Accumulators of Wealth vs. Prodigious Accumulators of Wealth 5-8. Hours
Spent Per Week in Selected Activities: Millionaires vs. American Population
5-9. Time Spent in Previous Week on Selected Activities by Percentage of
Millionaires 5-10. Time Spent Thinking about Selected Topics by Percentage
of Millionaires 5-11. Percentage of Prodigious Accumulators of Wealth and
Under Accumulators of Wealth Spending Time Worrying About Selected
Topics in Past Week 6-1. Selected Millionaire Job Titles
6-2. Sources of Income for Millionaires
6-3. Career Strategies & Choices of Self-Employed Millionaires vs. Other
Millionaires 7-1. Percentage of Assets Held by Millionaires
7-2. IRS Estate Tax Data Comparing 2016 and 1996 Estate Tax Returns 7-3.
Investing Statements by Millionaires’ Agreement
7-4. Average Holding Periods for Investments
7-5. Investing Strategy of Millionaires by Percentage
7-6. Reported Investing Behaviors of Millionaires
Appendix B: Rankings of Sole Proprietorships by Percentage Profitable (1998 &
2015) This publication is designed to provide accurate and authoritative
information in regard to the subject matter covered. It is sold with the
understanding that neither the author nor the publisher is engaged in
rendering legal, investment, accounting, or other professional services. If
legal advice or other expert assistance is required, the services of a
competent professional person should be sought.
Most of the names in the case studies contained in this book are pseudonyms
used to protect the privacy of the individuals involved.
....
Contents
List of Tables and Figures
Preface
Chapter 1: The Millionaire Next Door Is Alive and Well
Chapter 2: Ignoring the Myths
Chapter 3: Influences on Wealth
Chapter 4: Freedom to Consume
Chapter 5: Strengths for Building Wealth
Chapter 6: Getting to Work
Chapter 7: Investing Resources
Conclusion
Appendix A: Studies
Appendix B: Rankings of Sole Proprietorships by Percentage Profitable (1998 &
2015)
Appendix C: Selected Job Titles of Moonlighting Mass Affluent Prodigious
Accumulators of Wealth
Notes
References
Screenbook
....
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Classification: LCC HC110.W4 (ebook) | LCC HC110.W4 S733 2018 (print) |
DDC 332.024/010973—dc23 LC record available at https://lccn.loc.gov/2018030576
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