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Saturday, 02.04.2012 |
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| The Middle-Class Millionaire |
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Product Details
Notes
CHAPTER 1 - THE INFLUENCE OF AFFLUENCE
purchasing decisions of rich people might exert a "downline influence"
so what they buy could affect what other people buy with less money
but in fact, a study showed that it's not true, except for celebrities
normal rich people don't affect the buying trends of middle class friends
rich people don't talk about purchases because they want it to stay exclusive
but middle class millionaires are influential networkers
they seek advice and offer advice to others, and they believe others listen
7.6% or 8.4 million American households make up the "working rich"
they are achievement-oriented, high-earning and big-spending
they believe that most problems can be solved with:
creative thinking, the right people, and an open wallet
the book's definition of Middle Class Millionaire:
net worth including primary residence of $1M to $10M
self-made, not inherited
586 households were surveyed in this range
definition of regular middle class:
household income between $50k and $80k per year
net worth under $1M
3,128 households were surveyed in this range
21% of U.S. households earn more than $80k
55% of households earn less than $50k
about 80% of people making $50-80k consider themselves middle class
the remaining 20% think of themselves as upper middle class
CHAPTER 2 - MILLIONAIRE INTELLIGENCE
Benjamin Franklin is remembered for his achievements after 42
but he spent the first 25 years of his life focusing on getting rich
he built his wealth in the printing business, and socialized with all classes
four attributes of Middle Class Millionaires (MCM):
hard work, networking, persistence, and financial self-interest
other people will never run your business as well as you do
Americans generally work longer hours than other industrialized countries
MCMs work 70 hours per week vs. 41 hours for regular middle class
MCMs are good at networking, and they are interested in it
they think it's important to financial success
but sometimes they don't think of it consciously, they just naturally do it
MCMs had about 3.1 major failures, while middle class people had 1.6
MCMs believe that learning from bad decisions is important to success
middle class people often give up and try something different
MCMs often try again in the same field
everyone believes that perseverance is important to success
but MCMs are more likely to act on that belief when they face adversity
failures still affect them emotionally, but they are able to still act
entrepreneurs create something of high value and make it their own
MCMs want to benefit financially from their work
more than 80% of them are entrepreneurs or professional partnerships
65% of MCMs consider ownership stake very important to success
in contrast, only 28% of the middle class consider ownership important
MCMs have about the same level of education as the middle class
but many of them learn more from real world business than from an MBA
it's better to have an ownership stake than a salary
MCMs consciously put themselves in the flow of money
they don't just say "do what you love and the money will follow"
they often take advantage of competitive weakness and negotiate harder
salaried workers dread Sunday evening, MCMs look forward to a new week
CHAPTER 3 - MIDDLE CLASS BUT MILLIONAIRES
MCMs often tear down an old house and build a new house on old land
this makes financial sense, but it offends the neighbors
it's similar to gentrification in the city, but it's being done in the suburbs
they have the money to do it, but they still have middle class values:
family, security, education, health, self-betterment, and community
the middle class want to secure upward mobility for the next generation
they say things like "i have to live for others and not for myself"
middle class like to raise children, upper class send them to boarding school
middle class like their kids to leave for college, working class may resent that
both MCMs and middle class don't consider themselves wealthy
in a teardown, builders often sell a new house for 3 times the old one
3 out of 10 houses in Hinsdale, IL have been torn down and replaced
teardown towns are usually the ones with the best public schools
MCMs have very middle class values, which differ from upper class
middle class people rank high: ethics, education, and marriage
upper class rank these lower
middle class people rank low: "my own interests and hobbies"
upper class rank this very high, along with career and financial independence
MCMs do value financial independence and career
but they generally think of working for others rather than themselves
high net worth people focus on working for themselves
the importance of "friendship" decreases as wealth increases
same thing with "community and neighbors"
MCMs value the local school more than convenience to work or shopping
they think a child's academic success reflects on their parenting success
CHAPTER 4 - THE RICH WORK FOR THE POOR
there's more people with money, and they value their children's education
so there's a growing demand for paid college admissions counselors
MCMs want a highly selective or prestigious university
the reason is not just for a good job, but for good networking opportunities
MCMs are early adopters and can influence the masses to embrace a trend
they also rely on others heavily, including their professional success
many belong to a formal or informal networking group
they also bring in new members to their networking groups
Innovators are the first group to jump on a new idea
MCMs are Early Adopters, they follow next but they spread ideas quickly
a common strategy is to enter at the high end, then move down
that lets you test things with a high margin first and finance mass production
this is the diffusion model by Milton Friedman
CHAPTER 5 - THE DOCTOR WILL SEE YOU WHENEVER YOU'D LIKE
100,000 Americans pay for concierge medicine to get priority access
this requires an annual fee, but it's cheaper than the ultra-expensive doctors
the affluent are looking more for experiences instead of just things
a concierge used to be only for hotels, but now it applies to many industries
many concierge medical practices only cost $1500 to $2k per year
time is really important to MCMs, so they will pay to avoid wasting time
CHAPTER 6 - THE BEST ADVICE MONEY CAN BUY
45% of MCMs hire a professional or life coach
a coach can point out things that your friends might not be willing to say
middle class uses coaches for personal life, but MCMs use it for career
middle class try to fix their weaknesses, MCMs improve their strengths
during vacations, MCMs want both relaxation and self-improvement
the goal is first to build personal success, then family, then community
CHAPTER 7 - THE OWNERSHIP EXPERIENCE
fractional home ownership is a growing trend, basically vacation homes
this lets you spend vacation time with family without worrying about details
MCMs are willing to pay more to optimize their core values
a lot of businesses provide the experience without the hassle of ownership
so you can rent sports cars, live in fancy houses, etc, on a part-time basis
this is not a weekly time share, it's marketed more like a country club
owning a second home means you spend your vacation time fixing it
plus with fractional ownership, you get the variety of many locations
most Americans don't have time to do a lot of travel or vacationing
so it makes more sense to do fractional ownership for the time you have
access to an experience is the benefit, ownership is burden
this works for sharing motor homes, sports cars and lots of things
CHAPTER 8 - ROOTS AND WINGS
entire communities are being developed that cater to MCMs
these includes houses built for home business and raising children
the design allows residents to walk to stores and parks
they bend some of the restrictions that most developments need to have
MCMs tend to believe in protecting themselves and their family
other middle class people believe that the government will protect them
MCMs are less politically active, they vote but they don't get as involved
about 57% of them are Republicans, and 31% are Democrats
MCMs trust the profit motive in others more than altruism or civic duty
they believe a good business treats its customers better than government
CHAPTER 9 - THE NEW RULES OF THE NEW RICH
in 2005, the top 10% of households account for 48.5% of all income
the top 1% actually account for 21.8% of all income in the U.S.
the rich are getting richer through automation and globalization
there used to be a blue collar middle class from high wage manufacturing jobs
the average white collar income is actually going down
but the total income is going up because the top people are making much more
the bell curve is becoming more of a barbell, separating the rich and poor
the middle class often pursue only what they are interested in doing
MCMs pursue careers that have prospective financial rewards
they put themselves in the flow of money and they think consciously about it
MCMs also make sure to obtain ownership stake in their work
in any job, you can find a way to get into the flow of money, even on the side
teachers don't get paid a high salary, but they can write books or do consulting
the middle class want to diversify their income sources
but MCMs often concentrate all effort on one moneymaking endeavor
MCMs focus, the rest of the middle class tends to hedge
this means more risk for the MCMs, but also more reward if successful
73% of the middle class wants to "think like a millionaire"
only 2% of MCMs believe in that, they are much more action-oriented
the dark side of MCMs is they may be more ruthless in business
they want to take advantage of weakness in others
that's what they need to get to the top, but it can cause ethical problems
MCMs don't like to lose, and they're willing to do anything to win sometimes
they have mental toughness, they believe they deserve to win
MCMs like to persuade others to invest with them
the middle class likes to put their own capital at risk
MCMs focus their bets on a specific business, but they hedge their risk
risk taking is not thrill seeking, it's a calculated risk
if something goes wrong, you don't lose it all, you survive to take more risks
most MCMs could live for more than a year if they lose their income
the rest of the middle class would run out of money in 3-4 months
MCMs fail approximately twice as often as the rest of the middle class
but they try again in the same field, because this is where they learned
the middle class will often give up and try some other new field
learning from mistakes is more important than education or networking
the middle class often accept failure as a sign you're doing your best
MCMs network a lot, and they use networking to advance their career
the middle class use networking more for personal connections
MCMs often hire a life coach or business coach for career help
the middle class don't invest in their success
they tend to cut back on little luxuries instead to try to save money
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