Quick book recommendation: The Millionnaire Next Door

Bonjour,

I have just finished reading The Millionnaire Next Door from Stanley and Danko.
This is a good read. They made a study of rich people in America (net worth above $1m) to find out how they lived, invested, etc.

Obviously, the main surprise was that there were few show-offs within the group.
I can sum up here a few main points:
- there is a difference between wealth and income. Some millionaires have incomes around $50k pa. But they have accumulated wealth. They also cited surgeons with incomes around $700k pa but without wealth
- to make millions, if you do not inherit, whether you are an entrepreneur or an employee, 2 rules matter: first you need to invest at least 15% of your income in non income realising assets and second, you must take advantage of compounding.
- the millionaires of the first generation have mostly a frugal lifestyle: living in average-affluent neighborhoods, buying second-hand cars, etc. They reinvest a lot of income instead of consuming.
- interestingly, offsprings of self-made millionaire are not likely to espouse this lifestyle as their parents try to over-covet them with higher education, gifts of properties, etc. The authors signal that the spirit of the self-made millionaire is often lost to children unless the parents make the effort to teach them their frugal and hard-working lifestyle. The parents kindness is the downfall of the kids.
- real wealthy people can often retire around 45-50 as they have accumulated enough wealth to generate an income for retirement while high income consumers cannot afford to lose their jobs.
- there is a formula to calculate where your net worth should be: [(your age x your current income) / 10].
If you are 2x above this figure, you are a prodigious wealth accumulator or PAW. If you are 2x below this number, you are an underachiever wealth accumulator or UAW.
- another calculation is how much of your net worth goes to tax each year. Millionaires pay an average less than 7% of their net worth in tax each year. Some billionaires less than 2%. What about you? 

In short, to become a millionaire, you need not be an heir or earn millions or be a genius entrepreneur but you need to:
- invest 15%+ of your net income as it arrives in your bank account and then allocate the rest to the mortgage, bills, etc
- use all the tax-free allowances and pension contribution possible
- try to invest in assets not generating income as long as you can. As soon as income is generated, tax is levied. And tax eats returns. Using a good adviser can be recommended
- live a comfortable but frugal lifestyle. The best car is a 3yo model: 50% depreciated and yet good to go for 10 years. Live in middle-class areas where it is easier to keep-up with the Johneses
- do budget
- have a frugal spouse.
Then, in 20 years, you will have accumulated a decent net worth.

The book is interesting and easy to read with a lot of examples to make you think about the conduit of your financial matters.

The frugality of some millionaires is also sometimes over-the-top to my taste. And I am a relatively frugal person.

Have a good read.