Hello friends, in today’s article, we see the book summary of Millionaire next door book. friend, this book tells you the real meaning of rich. and most importantly, these books, show you the real way to get rich. so let’s understand some lessons from this book,
Millionaire Next Door:-Book summary
so the author starts taking interviews, for interview purposes, he goes to the city’s expensive place, where every building is clean and looks rich.
After taking their interview, those people who live in that building, know, that these people are high-income people. their salary is about millions.
So they look like millionaires, and their expenses are also in millions of dollars.
so because of this, they don’t have anything in form of wealth, so they have only problems, like normal middle-class people,
problems like, What happened in the future, after my retirement, how money comes into the home, what happens in the future. (Book Summary:- Millionaire Next Door)
then the author says, “this person looks rich, but they actually don’t have the wealth.”
Then the author takes the interview those people, who live the behind the expensive building, which has a normal house, and they look normal.
so after taking this type of people’s interview and then they know, their income is not big, they wear normal clothes, they live in a small house, they don’t even drive a car and live a simple life.
so these people, have millions of dollars of property in form of wealth. and they don’t worry about money.
so because of this, they live a good and happy life.
Let’s learn some lessons from this book, ” the millionaire next door by Thomas J. Stanley. and William D. Danko
To define, what are the real rich
Lesson 1:- Frugality:-Book Summary:- Millionaire Next Door
Frugality means, using your resources very carefully and don’t waste your food, or any other extra shopping items or anything.
many people think, frugal means cheap
so people think, If you earn a lot, then why not you spend a lot. and some people do this and spend a lot.
but when you think logically, then you realize is that we all need to be financial-free life, as quick as possible to solve money problems and become millionaires in less than 30 years because we don’t like to be rich for up to 80 years.
For achieving this purpose we have to do saving because saving is important in the process of rich.
let’s understand our life decads
In your 20s you have a very less salary but have time, when you are in your ’40s of age you have a maximum salary but, have very less time for use compounding effect, so you have a big income.
so the author says, ” up to your financially free life number, you have to live a frugal life, in that you don’t waste your money or do expenses. (Book Summary:- Millionaire Next Door)
the author says, ” 905 people don’t achieve their financial free life because of their bad habits.
Suppose, you like to eat outside, you like burgers, and pizza, so you consistently go and eat outside, with your loving one, and you get habited so you have to add compounding in it.
and now imagine, if you doing this regularly then after 10 or 20, your health in very bad condition.
so in this habit, you losing your health as well as wealth also.
Rich people’s 1st secret is they use very carefully their money. they have a record of their EArning and spending.
Earning …………. 70K
and they do long-term calculations about in 2-5 years where they spend maximum money.
2-5 years of calculations
Mortgage – 950
Mobile phone – 50
Gas – 94
Insurance – 101
Utilities – 200
Food and drink – 700
So when you do small spending, it because more dangerous in long term.
so when you get out of college and get a job/ income on that you have to maintain your Savings rate.
let’s understand with an example
if you have 50,000 rupees salary and you spend 25,000 on necessities and all your expenses and your saving 25000 and you invest it. (Book Summary:- Millionaire Next Door)
so you have to maintain their saving rate and focus on saving rate.
when you get raise in income, and your salary becomes 1 lakh rupees per month, then you have to save 25,000 and invest it. Because, whenever we get old, we got next expenses, like marriage, vacation, children care, and their education, home expenses, etc, and your parents get old, so their expenses two.
so because of this saving rate decreases when you get old, so their expenses two. so in starting career time, if you think only invest for, 5-10% and you think I will save in future, so i guarantee you don’t do this.
because, we have stories of that people to
now let’s learn, second lesson from this book
Lesson 2:- The true cost of Consumption
So friends, when we buy anything, we just see the price tag as the only price for that product we think, but in reality, some things are very costly, and we know lately.
Like when you buy expensive things like Mobile, Car, T.V.
Before buying anything, we do research about that product, at least for a month. then we buy the things,
Suppose, when you want to buy a T.V. or laptop, you see the different brands, and you pick some famous brands
then you decide which is better, by their configuration and then you actually see how it works, or look.
so in simple words, the most expensive thing is the time we spend, doing research.
same for the car also, when you buy a car, you want to drive it, if you not driving it, you think that I am wasting my money on a car, in parking.
so you feel, I should drive a car and without your wasting money. so presumably you use that car if you don’t do that you feel very guilty. (Book Summary:- Millionaire Next Door)
so this feeling is not only in big expenses this feeling comes in the small expenses also like buying a subscription to Netflix.
after buying this subscription, then you get definitely search for web series to see.
so when you get a subscription then you get the reason to see that subscription shows.
so in that, you think, you don’t get back your money or say, you lose your money.
so their service/subscription loss is not just like 200-500 rupees. that cost you, your time like, while you seeing shows, that much your time you lost, in that time, calculate how much you earning.
that actual price for this subscription, and that money you can invest and you will become a millionaire.
so because for this reason, the majority of high salary people, don’t get a financially free life.
so these people do five days, of hard work for a good income and they get a good income but they spend money on parties on the weekend.
it’s like you build a house, straight five days of hard work, and on the weekend you destroy that house.
and this cycle continues every week. so if any person does like this, so how possibly they become financially free life. so a financial-free life plan is like building a house. You have to put each and every brick people like in finance, doing SIP. or continuing investment.
so doing unplanned spending is like hammering on the house.
so for this, you have to do some expenses that give you the right path. like emergency fund investment, tax-advantaged account, budget, and savings. (Book Summary:- Millionaire Next Door)
You can do like, buying some books that tell you how to become rich.
so you pay for that book at least this thinking makes you read that book.
Lesson 3:- The opportunity cost of Money:-
Financially smart people, take decisions on opportunity cost. so when you buy things in that things you can buy another product, but you decide to buy this product, so for other options come in the opportunity cost by you.
Imagine you have a 2-year-old i-phone and now you want to buy an i-phone 13, and that price is $1000 and your old phone is in good condition and works well.
but your friend, buy the new i-phone and you also buy the new i-phone. so you get in opportunity cost.
Instead of buying an i-phone, you can invest that money in stocks, and you get let’s suppose 15% return.
so in 10 years, that investment gives you 3 lakh rupees. and in 20 years it becomes 60 lakh. so when you make a decision, while others also taking this, so before doing this you have to think what should do that much money.
If you do not think this way, then you are trapped in the opportunity cost.
Lesson 4:- the secret of the rich:-
so, friends, everyone is looking for a magic formula, some secrets in that someone says, you have to do this, then you become rich.
According to the author, 95% of millionaires are the stock owner, and that lets of wealth invested. in Publicly traded and in between these million, very few are the active traders. (Book Summary:- Millionaire Next Door)
so that means, rich people don’t follow the ups and downs of the stock market.
so those who invest in stocks between then 30 to 40 peoples invest for 5 to 6 years.
that means real rich people are long-term investors.
so that doesn’t want to time the market and they do invest with disciples and hold for the long term.
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so this is all about the book summary of the millionaire next door book.
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