Book review: The Middle-Class Millionaire

I like studies that try to explain how societies work. I also like books that explain how we think about money and how our beliefs affect what we do with it. So I enjoyed reading the The Middle-Class Millionaire: The Rise of the New Rich and How They Are Changing America. It was an entertaining book to be taken with a grain of salt.

The authors compared a group of people with a net worth between $1 million and $10 million to a group of people that made between $50,000 and $80,000 a year with a net worth of under $1 million. They concluded that both groups considered themselves middle class. (Interestingly enough, the poorer group was more likely to consider themselves upper middle class than the richer group.) The two groups did vary on a couple of key points.

  1. The millionaires were much more likely to work for themselves and to place a very high value on career and self-development. They were more likely to hire personal coaches and to own their own businesses.
  2. They also work many more hours – 70 hours/week on average compared to 40 hours/week in the control group.
  3. They were more likely to try again in the face of failure. While most of the "regular" middle class would try something different if their first venture ended in bankruptcy, the millionaire group said that they'd try again or you wouldn't benefit from what you learned.
  4. While they both valued education highly, the millionaire group was much more likely to take their kids' failure in school as their own failure and much more likely to pick a house based on schools. The control group was more likely to pick a house near work than a house near good schools. (The millionaire group was also very likely to tear down an old house in a neighborhood they liked to build the house they wanted where they wanted it. The book theorized you can tell the best schools by looking at neighborhoods with the most tear downs!)
  5. They are much more likely to refer specialists (doctors, accountants, lawyers, etc) to friends and much more likely to pick one based on referrals.

Both groups valued education, family, and high ethical standards.

However the point of the book wasn't to point out how different the groups were (although they did a lot of that) but rather to point out how the millionaire group often leads the way when it comes to lifestyle, shopping and habits. (And this group of people, according to the book's study, spend a lot of money!) Middle-class millionaires are the first to buy Tesla cars (cool electric cars) and eventually cheaper models will be developed. They are the first to have home generators, solar power, coaches, health care advocates, etc. The book recommended developing and marketing new products to this group.

The authors obviously considered themselves part of the regular middle class and aspire to be middle-class millionaires. The last chapter covers how to become a middle class millionaire. In short, work lots, start your own business, try and try again, network lots. And did I say work lots? Oh, and pick a profitable field.

3 Replies to “Book review: The Middle-Class Millionaire”

  1. Ya.. this has been looked at quite a bit by lots of people.
    Other things that middle-class millionares have in common are living in relatively modest houses for their income, avoids getting debts early on, and do not support adult children.
    My grampa was one of them. Left the military after WW2 as a trained lineman, went to go and work for ATT. Bought his first house, had it built really, for about 10,000 dollars cash.. tried his hand at several investments that didn’t work out (he was one of those folks that fell for the florida swap land scams in the 50’s.. you’d get driven down there during the dry season and are shown a nice lush meadow.. then you buy it and come back and find out it is flooded most of the year), but just saved up his money, figured out how to invested wisely and after retirement used his money as a hobby and things worked out fairly well.
    My other grandpa worked as a meat packing plant inspector and tells me that the stock market is a scam and a game for the rich. They flirts on the edge of poverty, but his attitude is such that it really does not bother him and he seems quite content.
    It takes all types.
    The true American dream is to become independently wealthy. That is to get sufficient finances to get to the point were you can break free of the “wage slave” mentality (your afraid of getting fired and your employer has authority over you) and have much more deterministic control over their own lives. Usually involves a low-debt lifestyle and the enough money that they can survive on the returns of investments for extended length of times.
    Just having the ability to tell your boss “take this job and shove it” and mean it is quite nice, even if you don’t.
    Quite often it involves owning your own business, but not always.
    Keep in mind that in the USA, at least, the majority of business is small businesses. They do the majority of the work, are repsonsible for the majority of the economic growth, and are responsible for employing 3/4ths of the workforce. That is the true danger of increasing taxes and such… if you eliminate the ability for budding “middle class millionares” to achieve their financial goals then they won’t bother generating the business and jobs that are necessary for pulling the economy up. Working long hours and building businesses involve not only a great deal of sacrifice, but risk… if they make a mistake then everything they’ve worked years for will be gone. So the rewards (independence) are removed then the risks (wasting a huge part of their life) are not going to be taken.

  2. The problem with that book is that it groups together two very separate sets of people.
    When it was written, there were a lot of people who were worth a hair over $1M on the basis of equity in the house, a 401-k and some savings. Many of those people are no longer millionaires, thanks to the bust. People could get into this category with just steady work and professional credentials. Then there’s a much smaller set of people with a net worth of $5M to $10M. They had to have a much better score (an unexpectedly successful business, or getting in on the ground floor of a wildly successful startup) to make their money. But with $5M it’s no problem to never work again and live comfortably; with $1M, most tied up in a house, it’s a very different story.
    Particularly in the latter category, using the term “middle class” is just nonsense. Someone with the option of never working again and living on accumulated wealth is rich.
    The previous commenter raises a straw man: changing the top marginal tax rate by a couple of points isn’t going to change the desire of entrepreneurs to scratch their itch. After all, the tax rates were higher during the boom of the 1990s. What could truly launch an entrepreneurial boom would be to change the US health care system so that people could leave their safe corporate jobs and create startups, but still have secure health care for their families. I know a lot of people who’ve had to give up their dreams of being self-employed because of some pre-existing medical condition (either their own or a family member’s).

  3. Actually, one of the interesting questions they asked was how much money would you need to feel independently wealthy and the middle class group said $5 million and the millionaire group said $24 million, on average.
    I agree the health care situation kills a lot of people’s plans to be self-employed. I have a friend right now that got laid off and he has to find an employer because his wife’s medications run $24K/year. It’s sad that health insurance dictates your career options.

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