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With student loan debt well over a hundred thousand for many professionals, the cost of homeownership and children, plus the social pressure to spend their income on luxury goods, it’s a wonder they are able to build any wealth before the age of sixty. Thus, they make a lot of money, but cannot build wealth. 93) Few would pick a lawyer with a five year old Honda and inexpensive suit over one with a new Mercedes and bespoke three-piece.
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Another reason is that the professional value of lawyers, doctors, etc., is often based on “display factors” such as luxury cars, exclusive neighborhoods, and expensive clothing – even though there is no intrinsic correlation. They are quick to point out that this should not stop people from going to school, rather, don’t do it if your main reason is to become wealthy. 91) The main reason is simply that they miss out on a decade of earning that could be compounded for a longer period of the earner’s lifetime. Stanley and Danko found that the more education = less wealth.I would like to know how many people who: believe that net-worth and self-worth are closely associated and view item acquisition as a competitive sport, have changed their consumerist habits after reading this book. This lifestyle puts them in an earn-and-spend cycle, making them financially dependent on their jobs so they can pay off their luxury cars and fancy vacations. By conflating symbols of wealth with actual wealth, they are committing self-sabotage. Ironically, those with high incomes but little wealth are often the result of spending all their income on expensive goods to give the affectation of wealth, leaving no money leftover to actually earn their way to financial independence. What they value is financial independence and they actively work towards that goal. The premise of this book is that most wealthy people do not use their money to purchase status symbols looking at their cars, houses, clothes, you would not know how much wealth they have accumulated, hence, they are the millionaires in your average, middle-class neighborhood.
The system is very different today but the lessons are still universal, even if you don’t end up wealthy.(1) Put another way, they were young when young people made a lot more money and they invested this large amount of money when investments were cheap.
As wages started to stagnate, in the ’70s they had plenty of money in investments which far outgrew income during the next two decades. (edit: new edition just came out in 2019, will review soon) The people researched here were young and investing when economic inequality was very low so the average person made much more than today (post-war through the early ’70s). My main hesitancy in recommending the book is the applicability of the data which has not been updated since its original publication in 1996.
I found myself heartily agreeing with their descriptions of hard work, frugality, and planning as the glaringly unsexy building blocks of financial security. Where the book really shines is its ability to define and detail actual wealth versus symbols of wealth. It is an enjoyable read as the authors illustrate hard data with anecdotes and comparison stories, easing the reader through charts and numbers.
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Review: This book by academics is written for a popular audience to understand what they’ve discovered in their research and how to apply it to our own lives. (Edit: a new version has JUST come out which I am looking forward to getting my hands on!) That said, the core values of the work are timeless. Would have been 5/5 if there was an updated edition as the data is from the ’90s. Excellent read, despite a different economic ecosystem than we have today. – want to know how to raise their children so they will be financially independent adults – buy status symbols but are not wealthy (the book shows this kind of behavior is often self-defeating) – have a good income but still live paycheck to paycheck – want guidance on what habits and core beliefs build wealth Track your spending, live below your means, follow a budget, create short- mid- and long-term goals, plan for your financial future. Publisher: Pocket Books, a division of Simon & Schuster, New York, NYĪuthors’ keys to building wealth: FRUGALITY.