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The Millionaire Mind
by Thomas J. Stanley, Ph.D.
If you want to understand how millionaires think and how they achieve wealth, read The Millionaire Mind by Thomas J. Stanley. As a professor and researcher, Stanley has devoted much of his life to studying the habits and behaviors of millionaires. What Jane Goodall is to chimps, Thomas Stanley is to the affluent. Stanley is also the author of the best-selling book, The Millionaire Next Door, which we also recommend.
However, unlike The Millionaire Next Door, The Millionaire Mind gives Stanley's detailed analysis of the "whys" behind the behavior of millionaires. He explains the decisions millionaires make and how those decisions lead to building wealth. He asks millionaires to explain and describe their own thought process. As much as I enjoyed reading The Millionaire Next Door, I think The Millionaire Mind is a far better book, because it teaches financial thinking. It is a great life-planning book.
The Millionaire Mind is based upon focus groups and a survey of 733 self-reported millionaires. Using geodemography (Don't ask me. I haven't a clue), Stanley selected neighborhoods which were likely to contain a high percentage of millionaires to survey.
It surprised me that only 32% of the 733 surveyed millionaires were business owners. Previously, in The Millionaire Next Door, Stanley reported that nearly double that percentage (2/3) of all millionaires were business owners. That's the number I'm more inclined to believe as being truly representative of the millionaire population.
Stanley reported that the average home value of the 733 surveyed millionaires was $1.4 million, which seemed rather high to represent an "average" home value for millionaires. So, geodemography aside, it seems Stanley selected some rather affluent neighborhoods for his survey. Had he chosen neighborhoods with an average home value closer to $300,000, my guess is that Stanley would have bagged far more business owners and fewer attorneys and doctors among the millionaires found.
Stanley even said he excludes misers, whose God is money, from being of the "millionaire mind." Stanley's goal was to survey people who were not just successful at building wealth, but who were also relatively well-balanced people who tended to enjoy life.
My big criticism with The Millionaire Next Door was the lack of discussion about entrepreneurship. After showing that 2/3 of millionaires were business owners, Stanley just dropped the issue to discuss topics such as the types of cars driven by millionaires. Despite the relative underrepresentation of business owners in the new survey, Stanley does an outstanding job of discussing the role of entrepreneurship and small business in building wealth in The Millionaire Mind.
We learn that millionaire entrepreneurs place high importance upon finding a profitable niche to serve. Stanley writes, "In fact, there is a highly significant correlation between level of net worth and the importance rating of 'finding a profitable niche.'"
The Millionaire Mind has an excellent chapter, Vocation, Vocation, Vocation, which gives examples of profitable small businesses. We learn about "Mr. Richard" who specializes in providing eighteen-wheeler tractor trailer parts. Mr. Richard's company acquires wrecked tractor trailers, strips them for parts, and resells the parts. His net worth is approaching eight figures. And, his annual income is above $700,000 a year. He's the only dealer of used eighteen-wheeler parts listed in his local phone book, among pages and pages of general auto parts dealers.
While writing about Mr. Richard, Stanley needed to make some copies at Kinko's. The man working at Kinko's part-time also owns his own business. He's an attorney. But, he's not too successful because the market is saturated. Stanley's lesson? Specialize, but avoid ultra-competitive "me too" areas. Stanley writes, "Many millionaires have told me that their financial success is a direct function of owning a specialized business in a geo-area that contains little or no competition."
Stanley gives himself as one example of a specialist. He specializes in studying rich people and writing about them. How does Stanley find rich people? One way is by reading specialized trade publications like Rock and Dirt, Swine Practitioner (a veterinarian publication), Waste News, Tugboat Review, and Pizza Today.
Stanley writes: "Most millionaires don't feel the need to have their story told in the Wall Street Journal, in Money, or on 20/20. They prefer to be featured in their industry's 'trade.' They enjoy their status as Turkey World's cover story or Exhaust News' man of the year. Over the years, I've been impressed with many of these trade journals. Not only do they feature America's millionaires, many of the owners of these trades have also become millionaires through their vocation."
Stanley concludes: "The way I look at the American job market is very different from the views of guidance counselors and college placement personnel. They are well intentioned, but they don't fully realize the enormous benefits of being self-employed in the ideal industry [defined by Stanley as profitable and insulated from competition] or even being a senior executive in an ideal industry sector."
Financially successful entrepreneurs place great importance upon doing something they love. Stanley says that if you could just make one decision right, you could be very successful financially. That decision is choosing the right vocation suited to you as a person. Find something you love to do. Stanley tells us that selecting the right vocation will give you the emotional energy and focus needed to succeed. I agree 100%. People who succeed do not hate what they do or even, usually, feel lukewarm about it. Life is too short to spend most of your waking time doing something you don't enjoy.
Stanley says the more wealth a person has, the more likely that person will say, "My success is a direct result of loving my career or business." Stanley recommends choosing a career which allows you to fully use your aptitudes, talents, and abilities. The outstanding career and entrepreneurship advice are reasons The Millionaire Mind is a great life-planning book.
There is also great advice about many other topics from house hunting to spouse hunting. Why does Stanley feel qualified to give advice on seeking a spouse? Well, he's found that millionaires tend to have especially stable and loving marriages lasting decades, in a world where unhappiness and divorce are common. After showing that most men seek attractive mates, and most women seek mates who are high earners, Stanley tells us millionaires select their spouses differently. What traits do millionaires value in a spouse? Honesty, responsibility, lovingness, capability, and supportiveness. These traits are highly ranked by both millionaire men and millionaire women.
So, what does Stanley suggest when single rich people ask for his advice about finding a spouse? Using the geodemography of love and assuming that love birds of a feather flock together, Stanley helped one affluent and intellectual "Miss Ann" find an appropriate church group where she might meet her ideal spouse.
Stanley suggests college, night classes, and church groups as possible meeting places of honest and dependable spouses. Skip the singles bar. Stanley says that to become a financially productive person, you should associate with other financially productive people (this is not to be confused with mooching off them).
Of course, hanging out with successful people won't automatically make someone successful, but he will learn more about success. You can't learn success by studying failure. There are too many ways to fail. Financially productive people tend to think differently from the crowd, both in their choice of vocation and in their investments.
This unique ability to see the value behind things has some interesting consequences. Stanley notes that many wealthy aren't big do-it-yourselfers, especially when it comes to dangerous jobs like house painting. Why risk falling off a ladder?
Or, as the old, do-it-yourself electrical wiring joke goes, "There are only three possible outcomes to doing electrical wiring projects yourself 1) You are electrocuted 2) You think you did the job correctly 3) You think you did the job correctly, until you come home to find your house burned to the ground."
Financially successful people understand the value of their own time. They know when to pay someone else to do a job. They also understand the value of buying quality products and maintaining them.
Stanley does a great job of explaining the importance of examining the life-cycle cost of a purchase rather than just the first-cost purchase. As one example, Stanley discusses the importance of buying a home in an area with quality public schools. Rather than paying thousands of dollars in private school tuition, make use of quality public schools. Plus, buying a home in a good neighborhood makes it easier to sell your property in the future. However, such neighborhoods probably have slightly higher property taxes. The rich accept that quality must often come at a price. Most rich understand the difference between quality and "status."
Incidentally, if I were home schooling my children, I'd make The Millionaire Mind required study material. And, if you have children, you might want to think of ways to get them to read this book. Offering them $100 for a well-written, high-quality, in-depth book report showing they have a detailed understanding of The Millionaire Mind might be just the ticket.
Many people want to be millionaires, yet few are. Most people don't think like millionaires. The Millionaire Mind teaches people how millionaires think. If you adopt even a small portion of Stanley's suggestions, your chances of becoming a millionaire will be significantly enhanced.
Some people might be slightly turned off by Stanley occasionally referring to himself and his own thought process throughout this book. Don't be. When Stanley starts contemplating the future cash flow of each letter written in a book and comparing the work of best-selling authors to that of agents, and the relative profitability-per-invested-time of each endeavor, we can say that Stanley has, himself, developed the millionaire mind. He knows what he's writing about. And, financially productive people don't resent the success of others (our view, not studied by Stanley).
We should also note that Stanley often uses aliases for the names of the focus-group millionaires he quotes. That's why we put names like "Miss Ann" in quotes. After reading Stanley's stories about ex-convicts and sellers of dubious, offshore tax investments seeking Stanley's "list" of millionaires, we can appreciate the need for aliases! Stanley doesn't keep a "list" of millionaires, but many marketers do. So, we'll add one suggestion of our own to Stanley's great body of advice: "Never participate in surveys and never tell anyone anything about your finances, your investments, or your private business."
The Millionaire Mind by Thomas J. Stanley is truly a great book. At bainvestor.com we examine many books which tell people how to build wealth. Of those books we do recommend, The Millionaire Mind by Thomas J. Stanley is at the very top of our recommended list.