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While I concur with the principles of frugality highlighted in the MND book, I think the statistical analysis in the book is fundamentally flawed. The authors fell victim to survivorship bias.....they selected the survivors (i.e. millionaires), and then drew up a list of traits that these people had in common (correlation). The authors then concluded that these traits must have been responsible for their financial success (causation). But correlation isn't synonymous with causation.
Frugality and entrepereneurship are the 2 traits the authors identified as being commonly found among millionaires. But the authors didn't include in their survey the people who also were frugal and entrepreneurial, yet failed to attain millionairehood. In other words, the losers were removed from the list. They have been forgotten like corpses dumped in unmarked graves, their lives uncelebrated. How many of them were actually part of the original cohort?
There could have been 1000 aspiring entrepreneurs from the start. They were all equally frugal and hardworking. But due to bad luck and intense competition, 900 of them failed to prosper (a 90% failure rate). Only 100 survived and became millionaires. These are the people that Stanley and Danko then interviewed. This is what I mean by survivorship bias.
Regardless, the equation for building wealth is pretty straighforward. Spend less than you earn, invest what you save. Earn more if possible. If your rate of return is higher then you'll have more wealth (yes, that's partially based upon unknown factors and is therefore unpredictable.) If you save more, then you will have more wealth.
1. Frugality enables you to save more, thus you will have a very good chance of having more wealth.
2. People who are professionals earn more on average, and entrepreneurs are usually forced to be savers and better budgeters than the average person. If you earn more you can save and invest more, so you will have more wealth. If you are better at budgeting and saving, you will save more money and have more wealth.
There may very well be some bias in the study. However, the equation for wealth is pretty straightforward, and any recommendations that will enable one to save more or earn more, and any recommendations that focus on living on less than you earn and investing the rest, are very sound recommendations for people who want to build wealth.
I love this book, the Millionaire Mind (by the same authors) and the Millionaire Women Next Door. I also enjoyed The Jewish Phenomenon by Steven Silbiger (10 Day MBA author.)
... I resent the fact that this article imples that if you are not religious that you somehow cannot be a caring, generous person. What a crock.
IMHO, I think what it is linked more to is tithing.
well YES it is linked to tithing, I see that. But tithing implies that you are religious. Where else do you tithe except to the church, or other religious entity?
well YES it is linked to tithing, I see that. But tithing implies that you are religious. Where else do you tithe except to the church, or other religious entity?
20yrsinBranson
True.
Where else do you really 'force' folk to begin budgeting?
It is through budgeting that that you learn to control your money and begin to build.
People like to flaunt their wealth (whether they really have it or not) because it is a way to attract sexual partners. People are still bound by the laws of biology. People flaunting their wealth is like a peacock flashing his tail: it signals to would be sexual partners that "hey, I have the genes to produce beautiful and strong offspring for you, I have the means to nourish your offspring, I can guarantee the survival of your genetic lineage".
A guy driving a high-end Mercedes Benz signals that he makes a lot of money. He must have a very good job, or must have inherited tons of money from his parents. To land a good job (or to have such rich parents) he must have good genes. Or so the logic goes. Of course, there are tons of fakers out there, so the challenge for the female is to sort out the real McCoy from the fakers. The female who can pick out the real McCoy correctly must have good genes herself (i.e. smart enough to know the difference).
Too funny -- perhaps the best way to sort out the real ones from the fakes is to check their tax returns.
When I worked at a bank, we had quite a few wealthy customers. I was rather suprised when I found some of them bought some of their clothes at garage sales! I knew my manager, who was a VP at the bank, bought most of her clothes at a consignment shop, and she always looked sharp.
I like this too, it might be a wake up call for spend thrifts out there to maybe do something about it.
I see a good amount of it around, I know a gal in the same position title I am..we have about the same level of education and experience, and pretty well the same pay. She constantly is broke, many times spending it before she even gets it...then asks family for additional. I on the other hand have put away 10k in the last six months, only debt is student loans and car loans (better to have the cash now I think), much more in investments. I look dapper at work (though scruffy when not), but often my clothes are bought on sales (I am a clean freak, so I buy very discounted new) and are old (some over 4 years)...she goes out with a group at work to buy clothes during lunch at a nearby mall.
Always remember about the looking like one of the beautiful people. If you want to be rich don't marry someone beautiful or wanting to be in that crowd. They will only make you poor and miserable.
There is one who pretends to be rich, but has nothing; Another pretends to be poor, but has great wealth.
-Proverbs 13:7
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Required Reading
