Could This Be The Most Sought-after Financial Education Book?
The Millionaire Next Door is arguably one of the best books for financial education. The book has sold over three million copies to date and offers sound and simple advice on how to improve your financial standing by thinking like a millionaire. This financial education book shows you how simple spending habits can lead to you having more cash in the bank than most will earn in their lifetime. In this blog, we examine what could make this the most sought-after financial education book ever written.
"Whatever your income, always live below your means." - Thomas J. Stanley
Stanley's book teaches the reader three main simple lessons. These are to live within your means, be realistic about your earning potential and wealth to recognise your overspending and to ensure that you teach your children good habits. This financial education book is excellent in that it considers both the future wealth of your offspring and your own wealth and comfort in life.
The first lesson that Stanley teaches readers is that they need to start saving responsibly as soon as it is possible to do so. This doesn't mean when you have more money than you want, it means when you have more money than you need to live. If you start saving responsibly from the moment that you earn more than you need to live, you will begin amassing wealth straight away. If you don't, you will always have to rely on your labour. Millionaires in large part attest their wealth to the fact that they live frugally and within their means. From the moment you start earning, you should save as much as you can afford and avoid wasting money on luxuries you don't need.
Don't miss: Why Is Investing So Much Better than Saving?
Calculate your financial earning potential
Stanley states that you should be able to calculate how rich you should be at this point in time with a simple equation. The equation is to multiply your age by your pre-tax income and divide it by 10. This number should give you the cash you have in the bank. If you earn $80k at age 30, for example, your wealth should be $240k. This figure is used as a starting point to determine if you are doing well or if you need to up your game to get closer to your expected wealth over time.
Don't teach your kids rich habits
The final major takeaway from the Millionaire Next Door turns to look at the children of rich people. The average American child of a millionaire is supported with $15,000 per year, teaching them to live a lifestyle that they can ill afford. Stanley suggests the importance of teaching kids to be frugal with their money, instead of giving them all of the money they could want and need. By providing too much, you actively stop your children from learning how to handle money and protect their finances so that they can grow to amass wealth.
The Millionaire Next Door uses sensible reasoning to explain the steps that individuals should be taking to ensure they are able to amass wealth through their work instead of just earning for the sake of spending. With the three key lessons posited in the book, Stanley was able to live a frugal life and amass wealth, helped in large part by the earnings from this excellent book.
You might also like: The Money Book for The Young, Fabulous and Broke
If you enjoyed reading this article from Trading Education, please give it a like and share it with anyone else you think it may be of interest too.