‘Millionaire Next Door’ Often Self Made

There is a world of difference between wealth and income, and the difference has little to do with dollars and cents.

The key to amassing wealth, which can be done by you and me, has more to do with style and habit than the amount on the paycheck.

This is the central message of a very readable book, “The Millionaire Next Door,” by Atlantan Thomas J. Stanley and his collaborator, William D. Danko, published by Longstreet Press.

Longstreet is a subsidiary of Cox News Service.

The message of the book is so accessible that the 258-page volume has been on The New York Times’ bestseller list for several weeks.

The book’s strengths are the clear evidence of scholarly digging and analysis of the figures, and the allure of the “Ten Most …” lists that USA Today uses to get neck-snapping attention from readers.

For instance, did you know that the vast majority of millionaires made their own fortunes in one generation? Amassed their wealth because their parents withheld financial assistance from them as adults? That the wealthy got that way mostly by being frugal, but they are suckers for any offer, however costly, to help them plan finances better?

And on the list of Top Ten nationality groups in the United States, who do you think ranks first in wealth accumulation?

Wrong.

The Scottish rank second. Tops are Russians. And it has nothing to do with lugging booty across the Atlantic from czarist Russia. Their wealth largely has been accumulated here.

For the record, the authors define wealthy as anyone with net worth of $1 million, mostly because it is a handy measure. And about 3.5 million of the nation’s 100 million households fit the wealthy category.

Some 80 percent of them made it on their own, in a single generation.

As the title of the book implies - “The Millionaire Next Door” - the wealthy generally do not stand out.

And, yes, two people with the same income and same station in life, living literally next door to one another, can differ to this extent: One could be three paychecks from losing the house, and the other could be financially self-sufficient enough to live 10 years without another cent of outside income.

It has much to do with lifestyle, and authors Stanley and Danko make plain that a satisfying sense of independence seems to drive the millionaire.

The outward trappings of wealth and well-being mean relatively little: They tend to drive second-hand General Motors cars, tell time by a simple watch costing less than $100, and buy their suits for between $200 and $300 off the rack, probably on sale.

The next-door acquaintance, driving a new BMW and wearing a $1,000 suit, scarcely pays attention to the frugal neighbor, and that’s fine with the wealthy.

Most of the wealthy get their income from their own businesses. Others, however, amass their wealth on salaries, salting away 20 percent and more of their income and working strenuously to shelter it from the tax collector.

In the words of the authors, the important rule is simple: To build wealth, minimize realized (taxable) income and maximize unrealized income (wealth and capital appreciation without a cash flow).

The wealthy person spends more time and energy on planning and thinking about his or her financial future than the average person, but probably equal to the time spent by high-income households on expensive cars, clothes and other goods.

Wealthy people tend to raise children who become wealthy in their own right.

And they accomplish that by never reminding their children that they are wealthy and well-off, and by insisting that the children make their own way.

The tradition is at least as old as John D. Rockefeller, Sr., the man who built Standard Oil.

Finally, while the wealthy can be downright stingy, they are generous in certain ways.

They tend to lavish money on certain products and services for their children and grandchildren, for instance, sending them to private schools and making certain their education is of high quality.

They also spend generously on services they think can make them wealthier such as choice medical care, estate planners, accountants and lawyers who specialize in guarding property and wealth.