The Millionaire Next Door by Thomas Stanley and William Danko provides profiles of several millionaires’, their lifestyles, and the financial decisions these individuals make. The authors divide the book into chapters based on factors that allowed these millionaires to achieve financial independence.
My favorite advice from the book is: “You will never achieve financial independence without acquiring assets that appreciate without realized income.” Simply put, this can be interpreted as “let your money work for you.” I find this philosophy especially interesting as I didn’t learn this concept until recently, while the wealthy teach their children this concept from an early age. Now that I’ve learned this concept, one of my focuses financially is that of acquiring assets that generate passive income. So far, my passive income is generated by equity investments, bond investments, and cash in savings accounts. I would eventually like to enter the rental real estate market and use it as a source for passive income.
The Millionaire Next Door makes another point that resonates with me: The wealthy spend more time managing their finances than do the less wealthy. This time usually includes a very methodical approach to spending and saving. A coworker once told me, “Why do we work so hard for 40 hours (or more) a week, but spend so little time managing the money we earn in those 40 hours?” The wealthy understand that achieving the goal of financial independence requires meticulous planning and discipline in spending and saving.
Of the personal finance books I’ve read, this is by far my favorite. I definitely recommend the book and also recommend it as good financial reading for students.