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The Millionaire Next Door - https://amzn.to/2K1z0jt
Welcome to the last part of The Millionaire Next Door series! This has been a fun experiment and I really appreciate everyone being along for the ride. Below is my summary of the final section of the book.
Find Your Niche
Here the author states that while most self made millionaires are frugal, they are willing to spend (regardless of cost) on services of value. Taxes, legal, medicine and similar fields.
Follow the Money
While there are 3.5 million millionaire households in 1996, that number is expected to hit 5.6 million in 2005. These folks are estimated to gift over 1 trillion dollars in the same period. I loved this section, basically, we are about to cover a list of jobs that directly benefit from the spending of these millionaires, and how you could potentially make your first million.
Business and Professionals to Benefit from the Affluent
In order to be brief, while still getting you the information, the author goes into each field he thinks would service millionaires while still being very profitable. Here is that list:
Really the most interesting among this list is immigration law. I did not know there was a law passed in 1990 that allowed foreign nationals to obtain permanent residency if they invested $1,000,000 in a US company that created more than 10 jobs.
Jobs: Millionaires vs Heirs
As we have discussed before, the author points out that most American millionaires are self employed. One thing that was very interesting however, is he found that there is a more solid correlation between the character of the owner, than the profitability of the sector. This is obvious but when you read it, really sends it home. Basically, if you are willing to try and work hard, you are more likely to succeed than someone who may be in a very profitable field, but does not have that drive.
Only Change is Predictable
Here we looked at different sectors over the period of 1984-1992. Dry cleaners for example were very profitable in 1984, but in 1992, it became much less profitable. However, mens clothing exploded, along with construction. Mining on the other hand became much less profitable. One crazy statistic was that the average income for a sole proprietor was only $6200. It really demonstrates that while most millionaires are business owners, there are a whole lot more barely getting by.
Self Employed Professionals vs Other Business Owners
Of these American millionaires, only 1 in 5 pass the business to their children. Most encourage their heirs to become self employed professionals (doctors, lawyers, engineers, etc.). There was an excellent quote:
They can take your coat, but not your intellect
Basically, if you own a bunch of machines, and land, but something happens to it - you cannot replace it easily. However, you can take your brain and knowledge with you. It is much easier to be a doctor moving between states, than say, a farmer.
“Dull-Normal” Businesses and the Affluent
Most millionaire are not in traditionally sexy businesses. People are consistently making money doing things that are not exciting (trash pickup, lawn care, and similar). One of my favorite stories on this topic is the women who made her first million in NYC. She started a business that drives around and picks up dirty restaurant linens, then washes and returns them. Very simple, very profitable.
Risk or Freedom
In this chapter, they highlight an economics professor who asks his MBA students, “What is risk?”. The professor's response was, “Having one source of income”. This is incredibly true, most people work for a living, if something happens to their job, they lose all of their income. It is very risky objectively to live with only a single stream of income.
One more interesting note - one of the most potent indicators of success is enjoyment in what they do. This ties directly into drive, if you have passion and are excited to do what you do - you are far more likely to do so.
I am just a regular guy who does far to much research on financial independence and early retirement (FI/RE). I look forward to sharing my journey with you all.