"The Millionaire Next Door" by Thomas J. Stanley & William D. Danko

• Wealth is not the same as income. If you make a good income each year and spend it all, you are not getting wealthier.
• Wealth is what you accumulate, not what you spend.
• Wealth is more often the result of a lifestyle of hard work, perseverance, planning, and most of all, self-discipline.
• Seven common denominators among those who successfully build wealth:
• They live well below their means.
• They allocate their time, energy, and money efficiently, in ways conducive to building wealth.
• They believe that financial independence is more important than displaying high social status.
• Their parents did not provide economic outpatient care.
• Their adult children are economically self-sufficient.
• They are proficient in targeting market opportunities.
• They chose the right occupation.
• Multiply your age times your realized pretax annual household income from all sources except inheritances. Divide by ten. This, less any inherited wealth, is what your net worth should be.
• If you are in the top quartile for wealth accumulation, you are a PAW, or prodigious accumulator of wealth. If you are in the bottom quartile, you are a UAW, or under accumulator of wealth.
• To be well position in the PAW category, you should be worth twice the level of wealth expected.
• What are three words that profile the affluent? Frugal, frugal, frugal.
• Being frugal is the cornerstone of wealth-building.
• The affluent tend to answer “yes” to three questions:
• Were your parents very frugal?
• Are you frugal?
• Is your spouse more frugal than you are?
• Great offense in economic terms means that household generates an income significantly higher than the norm. Great defense is when a household is frugal when it comes to spending for consumer goods and services.
• Most people will never become wealth in one generation if they are married to people who are wasteful. A couple cannot accumulate wealth if one of its members is a hyper-consumer.
• The foundation stone of wealth accumulation is defense, and this defense should be anchored by budgeting and planning.
• They become millionaires by budgeting and controlling expenses, and they maintain their affluent status the same way.
• Financially independent people are happier than those in their same income/age cohort who are not financially secure.
• On average, millionaires spend significantly more hours per month studying and planning their future investment decisions, as well as managing their current investments, than high-income non-millionaires.
• You would be wise to use your expertise to help you make your investments.
• Small expenses become big expenses over time. Small amounts invested periodically also become large investments over time.
• To build wealth, minimize your realized (taxable) income and maximize your unrealized income (wealth/capital appreciation without a cash flow).
• It’s easier to accumulate wealth if you don’t live in a high-status neighborhood.
• You will never become financially independent without purchasing investments that appreciate without income realization.
• If you’re not yet wealthy but want to be someday, never purchase a home that requires a mortgage that is more than twice your household’s total annual realized income.
• Living in less costly areas can enable you to spend less and to invest more of your income.
• People who become wealthy allocate their time, energy, and money in ways consistent with enhancing their net worth.
• There is a strong positive correlation between investment planning and wealth accumulation.
• Begin earning and investing early in your adult life.
• There is an inverse relationship between the time spent purchasing luxury items such as cars and clothes and the time spent planning one’s financial future.
• Planning and controlling consumption are key factors underlying wealth accumulation.
• Having adult children who are UAWs greatly reduces the probability that their parents will ever become wealthy.
• Planning and wealth accumulation are significant correlates even among investors with modest incomes.
• Operate your household like a productive business. The best businesses hire the best people. They also patronize the best suppliers. Utilizing the best human resources and top suppliers are two major reasons the most productive organizations succeed while others fail.
• One of the great advantages of being a self-employed business owner is the ability to leverage your organization’s patronage habits.
• In general, the more dollars adult children receive, the fewer they accumulate, while those who are given fewer dollars accumulate more.
• Whatever your income, always live below your means.
• Discipline and initiative can’t be purchased like automobiles or clothing off a rack.
• Rules for affluent parents and productive children:
• Never tell children that their parents are wealthy.
• No matter how wealthy you are, teach your children discipline and frugality.
• Assure that your children won’t realize you’re affluent until after they have established a mature, disciplined, and adult lifestyle and profession.
• Minimize discussions of the items that each child and grandchild will inherit or receive as gifts.
• Never give cash or other significant gifts to your adult children as part of a negotiation strategy.
• Stay out of your adult children’s family matters.
• Don’t try to compete with your children.
• Always remember that your children are individuals.
• Emphasize your children’s achievements, no matter how small, not their or your symbols of success.
• Tell your children that there are a lot of things more valuable than money.
• Self-employed people are four times more likely to be millionaires than those who work for others.