A Misunderstood Message

The Millionaire Next Door's message has taken on a life of its own

One of my favorite personal finance books is The Millionaire Next Door. It documents in detail the spending, saving and investing habits of American millionaires. As its title suggests, many millionaires don’t look the way we expect them to look. To be sure, some look like Thurston Howell. But many have frugal habits. The authors found, for example, that the most popular car brand among millionaires was Ford.

But there’s a point that’s often misunderstood about this book. Many interpret the findings, such as the car buying habits, to mean that there is merit in frugality as an end in itself. In other words, if millionaires have these habits, then we all should. But the authors’ conclusion is a little different.

The primary message is this: Many millionaires become wealthy because of their frugal habits. If you drive a Ford instead of something more upscale, that leaves more dollars available to invest and grow. However, if you’ve already become wealthy, then the authors see nothing wrong with using your wealth as you see fit.

Put another way, driving a Ford might help you become rich. But once you’ve become rich, there’s no crime in driving something else if you wish.