The Millionaire Next Door
The past few weeks I’ve been reading The Millionaire Next Door (1996), a classic book about how many wealthy people are much frugal and less obvious then what the color television might suggest.
The core concepts revolve around the idea that wealth is built through discipline, frugality, and invisibility, rather than high-status consumption or luck. The book’s research identifies that most American millionaires live far below their means and are often first-generation affluent.
Core Concepts of the Book
- Wealth vs. Income: True wealth is defined by net worth (what you keep), not annual income (what you spend).
- Frugality as a Foundation: Millionaires typically drive used or practical cars, live in middle-income neighborhoods, and avoid luxury brands.
- Efficient Allocation: Wealthy individuals spend more time planning their investments and managing their finances than they do shopping or consuming.
- Financial Independence Over Social Status: They prioritize long-term security and “walk-away power” over the outward appearance of being rich.
- The PAW vs. UAW Formula: The book categorizes people into Prodigious Accumulators of Wealth (PAW) and Under-Accumulators of Wealth (UAW) based on their ability to turn income into net worth.
- Economic Outpatient Care: Giving financial support to adult children often hinders their ability to build their own wealth and encourages dependency.
The wealth-building formula in The Millionaire Next Door is a simple calculation used to determine your Expected Net Worth (ENW) based on your current age and earnings. It categories individuals as Prodigious, Average, or Under-Accumulator of wealth.
Age x Pre-tax Income / 10 = Expected Net Worth
- Income: Includes realized household income from all sources (salary, dividends, etc.), but excludes any inheritances.
- Net Worth: Your total assets (cash, investments, home equity) minus all liabilities (debt).
- Expected Net Worth: What you should be at your age.
Wealth Accumulator Categories
The authors use the result of this formula to rank your wealth-building efficiency:
- Prodigious Accumulator of Wealth (PAW): Your actual net worth is twice (2x) your ENW or more.
- Average Accumulator of Wealth (AAW): Your actual net worth is roughly equal to your ENW.
- Under-Accumulator of Wealth (UAW): Your actual net worth is one-half (0.5x) your ENW or less.
Modern Criticisms of the Formula
While the formula is a useful rule of thumb, it has some notable limitations:
- Younger Earners: The formula often overstates expected wealth for people in their 20s and early 30s who haven’t had time for compound interest to work or who carry heavy student debt.
- Late Bloomers: It can understate targets for those near retirement whose investments have had decades to grow exponentially.
- Home Equity: There is debate among readers on whether to include primary residence equity. While the book generally includes it in total net worth, many modern advisors suggest focusing on investable assets for a clearer picture of retirement readines
How Things Have Changed Since 1996
While the behavioral principles remain relevant, the economic landscape has shifted in notable ways:
- Inflation and the “$1 Million” Bar: In 1996, $1 million was a high bar for wealth. Due to inflation, $1 million in 1996 would require nearly $2 million today to maintain the same purchasing power. A $1.46 million net worth is now often cited as the minimum needed for a comfortable retirement.
- Housing Costs: Real estate has outpaced general inflation in many areas. A modest home that used to be a hallmark of the “next door” millionaire can now cost over $500,000, making the “modest neighborhood” strategy harder to achieve for younger generations.
- Conspicuous Consumption Culture: Social media has intensified “lifestyle inflation” and the pressure to signal status, making the quiet, invisible wealth of the 1990s harder for many to maintain.
- Democratized Investing: When the book was written, fewer than 25% of households owned stocks; today, that number is over 60%, thanks to low-cost index funds and automated apps.
- Shifting Career Paths: While many of the original millionaires were small business owners, modern millionaires are increasingly highly-compensated employees (e.g., in tech or medicine) who may prioritize aggressive saving over owning an “unglamorous” business.
Rain for Saturday 🌧️
I will put on a rain coat mid-morning and brave out to the bike shop to get a quick link. I tried to reuse the quick link from another chain, but apparently it’s a single use part and it popped out on test riding, though not far from home this time.
I’m still wrenching the bike 🔧 but hopefully if I buy a quick link from Mad Dawg Bicycles I’ll be able to get the bike back on the road by tomorrow. I looked into reusing a pin from another chain but it’s not recommended, and indeed once I pulled the quick link from the old bike, they say you really can’t reuse it. They’re not that expensive, certainly cheaper then a chain and cassette. I still am working on straightening and adjusting the derailuer – that might be at the root of my problem. I ‘m hoping to ride in on Monday and Tuesday of next week, also visit the Arboretum tomorrow if the weather is good enough.
Going out to see Mom and Dad later today, 👨👨👦 as they plans for Mother’s Day. I will probably wait until tomorrow to take the SuperDuty to Wally World 🛒 and I don’t know maybe do a hike or visit an preserve if it’s not raining too much tomorrow. I can say I want to drive as little as possible with the high gas prices but honestly I don’t care that much. It’s not that much money, 💰 and eventually gas prices will come down. ⛽ It’s silly to think what is happening today will forever be the future, as such short-term thinking is rarely the long-term reality, as we all learned in 2008 and 2022 with the big hikes in fuel prices those years. And I still make good money, and investments continue to grow rapidly with good economy.
Truth is that the SuperDuty is such a pain point in my mind. 🧠 I do like my truck, but I concede it was not cheapest truck, though it’s still a very basic work truck, admitly an HD truck. I try to be frugal but it’s the one luxury in my life, drinking fuel like all HD truck pickups do. Did I need the one-ton axle? Or legitimately all the off-road features and remote start? But it’s a lot of fun on the back roads, even if it has carpet delete and a very unpadded steering wheel. I had considered a steering wheel cover but decided against it as another expense. Honestly once I get the cap and things wired up I will travel more, though it’s black fly season 🐜 and that sucks in the woods. Things will be so much nicer come July.
I still want to do that Michigan trip in August, but I’m so troubled by gas prices. ⛽ But you bought yourself a brand new F-350, not a 25-year old Honda Civic and you’re worried about fuel economy and global warming 🌏 so you want to drive said ginamormous truck to Michigan to drive past all those stinky old dairies 🐮 and hog farms 🐽 with smoldering burn barrels out back. 🛢️ And see the great wilds of the Upper Peninsula. I should draw a line on gas price – maybe $5 or $5.50 a gallon is too much to spend but what difference really would it make for a great summer trip?🌲 🌲 🌲 A couple hundred bucks? I bought the HD truck for reliability but those SuperDuty truck groups on internet increasingly have me down with all the problems people report, though I’m not convinced that Toyota, GM or Dodges are any better. 🛻 Car just suck today, or maybe they always did.
Other then that, I want to finish up reading The Millionaire Next Door 📚 today. I’ve had that book out from the library for about two weeks now, and I’ve kind of read it for a while, then put it down. The book is 30-years out of date, though the message seems still seems quite valid. I am always quite interested in personal finance and investing, because it buys things like my F-350, and eventually that off-grid cabin with the hogs and burn barrel out back. 🛖 And no more recycling plastics, paying electric bills or hopefully buying as few groceries or going to town as little much as possible with all the urbna problems and crap. 💩 Compost and not landfill the poop.
Camping, kayaking and finding fortunate at Good Luck Lake
Head north on NY Route 10 from Caroga Lake (about 10.6 miles) or south from the junction of NY 8 in Piseco (about 11.6 miles). Keep a sharp eye out for a marked pull-off on the east side of the road; the trailhead itself is directly across on the west side. The sign for the Dexter Lake Trail is often the primary marker—once you cross the road, follow the register and look for the spur leading toward Good Luck Lake.
Paddling the West Branch Sacandaga
For those bringing a boat, the West Branch Sacandaga River provides a winding, scenic approach to the lake. Launching from the bridge on Route 10 allows you to paddle upstream through gentle, snaking waters.
- The Wildcard: Depending on recent rainfall and beaver activity, you’re likely to encounter beaver dams and other “strainers” (fallen logs) along the way.
- Preparation: Be ready for occasional short portages. The reward is a tranquil entry into the shallow, calm waters of Good Luck Lake, which rarely sees heavy wave action even on windy days.
Camping & Hiking: From the Shore to the Cliffs
The lake features approximately 12 primitive, first-come, first-served campsites scattered along its northern and eastern shores. These designated sites are accessible via a short hike (about 0.4 to 0.5 miles) from the road.
If you’re staying at the lake, the Good Luck Cliffs are a mandatory side trip. The trail begins with a gentle walk along the lake before transitioning into a steep, 650-foot ascent over boulders and glacial erratics. From the top, you’ll find an expansive ledge with stunning views of Spectacle Lake and the rolling southern Adirondack hills—the perfect spot to see if your luck holds for a clear sunset.
Nickled and Dimed 🪙
The expenses that I dread and absolutely hate paying the most are the little things. Like paying the full $2 to ride the Bus Plus downtown because my cellphone wasn’t working on the day I dropped the SuperDuty off to get the bedliner put in.
Another 70¢ isn’t going to put me in the poorhouse forever, I make good money, but I was still pretty upset about it on the day that I spent $621 to have them spray my truck bed with some plastic, covering the gooseneck bolts, for a better camping experience. But I didn’t complain about that.
Or today, I was annoyed how much the price of cookies went up when I purchased them for the team. $10 fucking bucks for two boxes of bakery cookies, each box only had 6 admitly delicious and well liked cookies in it. Made me team happy but I cringed about the expense, even though I make that amount more then 10,000 times each year.
Then the quick link broke off my bike, leaving me stranded, and having to take the Bus Plus to work form Rail Trail, and then take it back downtown and then local bus home. There goes another $3.90. Assuming I can’t build a chain out of parts I have – or another old quicklink I have around – I’ll go to bike store and get one for $5 or $10. Another expense. As I look my $60,000 SuperDuty truck, which I don’t regret buying that much despite the high cost of gas.
I was thinking how I am thinking of scaling back my summer vacation and doing future trips, with the high gas prices after buying a SuperDuty. But then I realize the SuperDuty gets about the same gas milage as my lifted truck, but with many more creature comforts. And it rides so nicely on the rural highways and has great features like hill descent and dual alternators and remote start for a ton of camp power. But gas so is expensive, don’t you know. Yet, in context $4.50 a gallon gas is only a $1.50 more then $3 gas, so when I burn through 10 gallons on a 150 mile trip, it’s only going to cost me $15 more. Rather then $30 dollars, it will be $45 dollars. And aren’t I still getting a lot of joy out of the trip? It’s not about commuting. Still the nickel and dims chew at my mind.
These little things annoy me as I feel like Is shouldn’t have to pay them if life only went a little smoother, inflation not so high. The thing I hate about nickles and dimes is they can grow so ordinary, become background noise and add up quickly. Everybody thinks about buying a $60,000 SuperDuty, but not so much about that extra bus fare or that $5 quick link. Yet, it’s so frustrating, to see my future being chewed away bit by bit over little expenses, even if I do make good money and can afford these bull shit expenses.
So having a bad day with the bike! 🚴
Got a flat tire when I stopped at Hannaford had to swap out the rear tire. Not just a puncture hole, the valve stem was damaged. So I put a fresh new tube I had spare in the bike tire. Then when I got to the bottom of the rail trail, passing the Center for Disabilities Services, the chain snapped – the quick link broke apart. Ended up pushing the bike back to the Blue Line Express bus, and was in the office by 9:45 AM, which ain’t bad figuring I was running late already.
Tonight I’ll push the bike up to Broadway, catch the local bus downtown, and then transfer to the local bus out to Delmar. I still should be able to get the 5:45 home, and be home by 6:15. Not much later then if I rode or took the shuttle home. Bummer, hopefully I can just connect another chain link together, still had some slack in the chain using the chain breaker. Only had the chain on for a week, so I must not have gotten the chain link perfect, or maybe the derailleur is off. Might have gotten bent at Partridge Run, and that’s why I’ve been having chain issues.
Worse comes to worse, I’ll get another quick link or possibly a chain on Saturday or Sunday, and hopefully should be back on the road come Sunday or Monday. Wally World has quick links for sale with a chain breaker. Or I could local bike store. Also get two more bike tubes – a new spare to carry on my for emergencies, and one at home as a backup. At least now I have the SuperDuty truck, so I can run to Walmart or if neccessary Steiner Sports, I have options besides Mad Dog Bikes.