This is part 2 of my review of The Millionaire Next Door. Yesterday, I covered the first four chapters of the book and today I’m reviewing the last four chapters.

Chapter 5 - Economic Outpatient Care
What often takes place among the children of the affluent is economic dependency. Wealthy parents are often supporting and funding the high-consumption lifestyle of their children and even their grandchildren. The authors criticize this behavior and explain that “in general, the more dollars adult children receive, the fewer they accumulate, while those who are given fewer dollars accumulate more.” Understandably parents want to support their children and provide for their welfare, but how much is too much? The authors commend parents that provide and help pay for the education of their children. But they also say this about cash gifts that are given to help prop up certain lifestyles; “We find that the giving of such gifts is the single most significant factor that explains lack of productivity among the adult children of the affluent.”

The authors’ main point here is that frugality and discipline must be instilled in the children of the affluent. And these things cannot be bought with money.

Chapter 6 - Affirmative Action, Family Style
This next chapter talks about the distribution of wealth among family members. A trend that the authors mention is how many affluent parents tend to give greater assistance to the child who is struggling financially and economically less productive. And the child who is more financially stable and independent gets a smaller share of the wealth. However, the authors make a great point that the opposite desired effect happens and “you strengthen the strong child and weaken the weak.” Why? Because the economic assistance that is given continues to function as a financial crutch. “They typically lack initiative. More often than not, they are economic under-achievers but have a high propensity to spend. That’s why they need economic subsidies to maintain the standard of living they enjoyed in their parents’ home.”  

The authors offer ten rules for affluent parents:
“1. Never tell children that their parents are wealthy.”
Don’t give your children a reason to spend and raise their standard of living.
“2. No matter how wealthy you are, teach your children discipline and frugality.”
I think this is one of the most important points in this book. These lessons must not only be taught but also modeled.
“3. Assure that your children won’t realize you’re affluent until after they have established a mature, disciplined, and adult lifestyle and profession.”
“4. Minimize discussions of the items that each child and grandchild will inherit or receive as gifts.”
Doing this is like setting yourself up for family conflict. Personally I think parents should minimize their giving and offer only modest inheritances.
“5. Never give cash or other significant gifts to your adult children as part of a negotiation strategy.”
“6. Stay out of your adult children’s family matters.”
I do believe that parents have a place to give advice and warnings, but they also have to realize that some lessons need to be learned instead of taught.
“7. Don’t try to compete with your children.”
This is just dumb. Don’t teach your children that accumulating wealth is an ultimate goal.
“8. Always remember that your children are individuals.”
Some mature faster than others. Don’t compare and make them feel insecure or feel like a failure.
“9. Emphasize your children’s achievements, no matter how small, not their or your symbols of success.”
This advice is right on. Celebrate and praise the positive achievements your children have.
“10. Tell your children that there are a lot of things more valuable than money.”
Again, another lesson that needs to be modeled by the parents.

Chapter 7 - Find Your Niche
This chapter discusses the various careers that could be in high demand as more and more Americans enter into affluence. Potential careers include: estate/tax attorneys, real estate, medical specialists, appraisers/auctioneers, accountants, travel agents, etc.

Chapter 8 - Jobs: Millionaires versus Heirs
Although two-thirds of millionaires are self-employed, the authors caution that “the average net income for the more than fifteen million sole proprietorships in America is only $6,200! About 25 percent of sole proprietorships do not make one cent of profit during a typical year. It’s even worse for partnerships. Forty-two percent, on average, make no profit in a year. What about corporations? Only 55 percent have any taxable income during a typical twelve-month period.” So what does this mean to the reader? There is no magic career or profession that is guaranteed to expand your wealth. And just because you start your own company, don’t expect guaranteed success.  What matters more are discipline, hard-work, and frugality! In whatever career path, there is potential to accumulate wealth if one is diligent and cautious.  More than anything, the authors emphasize the truth that if you truly desire to build wealth and become financially independent one must break away from the high-consumption lifestyle of our culture.  It is probably the single greatest hindrance that entangles so many people into debt and a paycheck-to-paycheck lifestyle.  Don’t try to keep up with the Joneses!

Conclusion
I would definitely recommend this book. Overall a well-rounded book that offers readers extensive research from the lives of millionaires. The conclusions and insights they draw from their findings are definitely worth the price of the book. Of course a better option would be to apply their principle of frugality and borrow it from the library.