Review: The Millionaire Next Door

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The Millionaire Next Door coverThe Millionaire Next Door: The Surprising Secrets of America’s Wealthy by Thomas J. Stanley and William D. Danko. Taylor Trade Publishing, 1996.

Who should read this book?

Anyone. Everyone. And if you’re a woman, you should read Millionaire Women Next Doortoo.

What problem does it solve? What were the insights, or what did it cover?

The book was written by demographic analysts who surveyed people who have a net worth of more than $1M in the US. This is what they found out about them.

What will you learn? (ie, what deficit in your education does this fill in?)

This will completely reprogram your beliefs about what “rich people” do and have. What you think you know now? It was all put there by clever marketers. Read this, and find out the truth.

As far as I’m aware, there are no other books like it. However, women will probably want to pick up Millionaire Women Next Door as there are substantial differences between women who are rich and men who are rich; how they got there, how they stay there, and how they behave.

I’m intrigued. Tell me more.

First of all, rich is not what you’d think. First of all, the authors define “millionaire” as a household with a net worth of over a million dollars. But then they further break it down into people who are “wealth accumulators” Basically, take your yearly income, divide by 10, times your age, and that’s what your net worth “should be” if you’re saving and investing at a reasonable rate.

People with less than that are “under-accumulators” and people with more than that are “over-accumulators.” Surprisingly, (or not) a large percentage of people in high-earning professions are under-accumulators.

The author’s explanation is that the more you’re required to spend to “keep up appearances” the less you’re able to accumulate wealth. In fact, most of the nation’s wealthy are not the so-called “1 percent”. They are working class or middle class business owners who have been frugal throughout their lives, saved a lot, and invested well. But they nearly always fly under the radar because they don’t “look rich.”

They also budget, almost never splurge on fancy cars, clothes, or jewelry. They are (especially the women) self-taught investment experts, cautious business people and pay little-to-no attention to status.

In fact many people drew a direct link between caring what people thought of your lifestyle and “staying poor.”

Most noteworthy, though is that the personal households were run as businesses. This is a pretty crucial mental shift, I think. In our consumerist culture, it’s easy to look at your income, and look at your desires, and have your only question be “can I afford it?” In these households, they looked at the benefits, asked themselves what the impact on the bottom line would be, and decided whether [whatever] would be a good financial business decision.

Stanley reports that when he gives lectures, he often gets a lot of angry response about that, along the lines of “What’s the point of having money if you’re not going to enjoy it?” But he points out that when you spend money “to enjoy yourself,” you don’t have that money anymore. Also, it seems like millionaire households are satisfied with the simpler things in life — — and that satisfaction is what enabled them to become millionaires in the first place

What doesn’t the author cover, or what are some problematic areas in the book?

Although the author is obviously measuring wealth, at points I found this emphasis to be problematic. For instance, millionaires average 52 years old. Stanley covers extensively the problems of financially independent parents having offspring who expect handouts to underwrite their own lifestyle. But not only that, the problem of The Will is sure to bedevil the strongest of families. In many of his examples, having your fortune outlive you seemed as much of a problem as outliving your fortune.

There were also a number of sideways remarks about “liberals,” “taxes,” and a lack of charity I found off-putting — — apparently male millionaires are very likely to be conservative, and they make almost no charitable donations, (although they do often make gifts of tuition to their grandchildren and health expenses to their offspring). Women millionaires, on the other hand, donate about ten percent of their income to charities.

Another thing I had a problem with was his mention (in Millionaire Women Next Door) of farmers as being rich. It’s certainly true that farmers look great on a balance sheet: all that land and equipment is worth a pretty penny. But it’s not liquid and I find farmers are often very cash-poor. In fact, the saying is that farmers “live poor, die rich” because it’s not until they sell their land and get out of farming that they have the money to enjoy themselves. But, that is anecdotal and perhaps I overstate the problem.

How long will it take out of my life?

It’s a pretty hefty book (about 280 pages) with a ton of appendices. But I found it a fairly fast read because I was so interested. The text is liberally sprinkled with anecdotes and he puts his statistics into human terms, so it’s not at all a difficult read.


All in all I found the books fascinating. Plus, now that I’ve seen the habits of the truly wealthy, I can with clear sight adjust my own habits. For instance, saving looks more appealing, now. I’ve reinforced my choice to be self-employed, and now it appears I need to look more into investing. They don’t mention how travel works as a lifestyle option, at least with all this data I can come to my own conclusions.

Personally, I’ve noted how many problems come from being visibly wealthy. The happiest, most well adjusted families are the ones where they acted exactly the same regardless of how much money they had in the bank, so personally, my goal is not for “millionaire-hood” or especially “deca-millionaire-hood” but just enough in the bank to feel independent of the winds of fate and economic conditions. After that, it’s gravy.

But don’t take my word for it. Read the book yourself and make your own decision.


2 thoughts on “Review: The Millionaire Next Door”

    1. Most of the millionaires surveyed (who became millionaires in one generation) were self-employed. That’s because they were able to start working earlier in life (rather than spending the better part of a decade on school, or being burdened by student loans) and also, psychologically speaking, because they were able to experience the strong correlation between working hard and being rewarded for it (which is easier to track in running your own business than it is at a job, where you don’t get to choose your proirities).

      All is not lost for people who want to be employed. Professionals are often millionaires (doctors, lawyers, accountants) although they were more likely to be so if they invested their profits in real estate (otherwise they spent too much on ‘wealth artefacts’ like houses, cars, country club memberships, etc.). School teachers and professors were also much more likely than average to be wealthy, which might be because they had to be frugal enough to make their salaries stretch over the summer months as it was that they didn’t have to ‘keep up with the Jones'”

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