The Millionaire Next Door, Part 3

This will be my third and final post about The Millionaire Next Door, so I wanted to drive home the central theme about the inverse relationship between consumption and wealth accumulation. Instinctively, we are much more prone to only contemplate wealth through the lens of income—we seek to earn more to accumulate wealth, but that is only half of the equation.

The authors note, “The majority of people do not have the ability to increase their incomes significantly. Yet income is a positive correlate of wealth. What, then, is our message? If you cannot increase your compensation significantly, become wealthy some other way. Do it defensively.” In other words, you don’t have to start a side business or even wait around for your next raise. You can immediately increase your wealth by decreasing consumption.

Ironically, the authors add, “It’s much easier in America to earn a lot than it is to accumulate wealth. Why is this the case? Because we are a consumption-oriented society.” Our culture lends itself well to over-spending—everyone over-spends, which puts more money in the economy for everyone else to over-spend. So everyone earns a living, but no one accumulates wealth because they give it back when they buy stuff from everyone else.

And the problem is compounded when you think about how spending decisions are interlinked. It usually starts with a house and escalates from there. The authors warn, “Living in [high consumption] neighborhoods requires more than just being able to pay the mortgage. To fit in, one needs to “look the part” in terms of one’s clothing, landscaping, home maintenance, automobiles, furnishings, and so on. And don’t forget to add high property taxes to all the other items.” So you think you’re just buying a house, but then you feel pressure to buy so much more.

Hear me when I say that there’s nothing wrong with having nice things. But we all have choices to make, so just make sure that you are spending less than you can afford. It is easy to want just a little more, but the satisfaction of financial independence will drastically overshadow the fleeting joy of an impulse purchase.


Josh Norris is an Investment Advisory Representative of LeFleur Financial. Josh can be reached at