The Millionaire Next Door: The Surprising Secrets of America's Rich

The Millionaire Next Door: The Surprising Secrets of America's Rich

Posted by jack_miller | Published 7 months ago

With 3580 ratings

By: Cotter Smith, Thomas J. Stanley Ph.D., et al.

Purchased At: $27.93

Who are the rich in this country? What do they do? How do they invest? How did they get rich? Can you ever become one of them? Get the answers in The Millionaire Next Door, the never-before-told story about wealth in America. You'll be surprised by what you find out.
This book was not at all what I was expecting, but contains some good advice that many would benefit from. For some background, my wife and I are relatively young and have career jobs. I bought this book for information on making the most of any extra income, learning more about investing strategies, options for generating passive income, and improving my personal finances. I did learn a few things, but not on these topics (maybe a bit on the last point). The book primarily focuses on interesting finds and anecdotes from the authors' years of research on millionaires in America.

The book is divided into eight chapters:
1. Meet the Millionaire Next Door
2. Frugal Frugal Frugal
3. Time, Energy, and Money
4. You Aren't What You Drive
5. Economic Outpatient Care
6. Affirmative Action, Family Style
7. Find Your Niche
8. Jobs: Millionaire vs. Heirs

The author essentially splits everyone into two categories: Underaccumulators of Wealth (UAWs) and Prodigious Accumulators of Wealth (PAWs). UAWs have a low net worth relative to income, and the opposite for PAWs and uses these terms throughout the book.

His primary argument is that PAWs get to be wealthy by living well below their means - these are people who do not look like millionaires, they live in modest neighborhoods, drive domestic sedans, wear a Timex, and usually have a blue-collar job that does not come with an expensive lifestyle associated and as a result can accumulate a sizeable nest egg. On the other hand, UAWs are typically well-educated professionals with high paying and high profile jobs (doctors, attorneys), but due to societal pressures associated with their social standing are forced to squander all their money living in luxury neighborhoods, driving German cars, and sending their kids to private schools. Their expensive lifestyle means that they spend most of their income and as a result have a low net worth, despite outward appearances.

I agree that this is good advice for just about anyone: live below your means and prioritize financial security over social standing. Growing up in a single-income family living in a modest middle class neighborhood, I'm quite used to the live-below-your-means philosophy and I think it gave me at least some sense of good financial discipline. If my parents are any indication, it works great.

Where the authors really lost my interest is that the rest of the book is chock full of anecdotes and some rather uninformative statistics to drive a few other points home. While some of these are good points and undoubtedly useful, they always seem to come with caveats or don't draw any real conclusion, which I found frustrating. Most of the points could have been made succinctly in about 1/10 the amount of page space the authors dedicate to them. These include:

- Most millionaires in America are self employed business owners, because they run their personal finances like their business finances. However, going into business for yourself is very risky so we don't really recommend that as a viable way to get rich.

- Very few millionaires have ever spent much money on a nice suit, pair of shoes, or luxury watch. They usually live in modest neighborhoods or rural areas where the cost of living and social pressures of consumerism are lower.

- First generation millionaires (often immigrants) tend to be succeeded by children with financial struggles, since the parent's desire to "give them a better life" pushes them into careers where they become UAWs, and their upbringing in our consumerist culture impedes their ability to live frugally. But even if it turns them into UAWs, encourage them to go to college and aspire to a while-collar professional job.

- Parents giving money to their children develops and reinforces poor financial habits. This money is almost always immediately spent, and these children generally have no savings since they are looking to their parents as their safety net and counting on an inheritance. Doing things like buying children a house in an upscale neighborhood or sending grandkids to a private school actually makes the children worse off, since they have to spend more to maintain the associated lifestyle.

- The authors spend an inordinate amount of time and space comparing different careers, which I found next to useless since I'm very happy with my chosen career (Engineer) and have no intention of changing. They continually deride pretty much every professional job you can think of, and simultaneously praises how great working for yourself or owning a business is while going on about how difficult and risky it is to actually own a successful business. The author does not recommend changing careers, but again, this is more of a discussion of what their research has shown than any sort of "how to" advice.

- Car buyers fall into four categories: whether you buy new or used, and whether you buy from the same place or shop around. The authors devote an entire chapter to this while only coming to the following conclusions: no method of buying a car is the clear winner, but if you own a business you may benefit from your connections with the owners of car dealerships; and most millionaires drive unassuming domestic (and to a lesser extent, Japanese) cars purchased new or lightly used.

A final note - curiously, I found no mention of anything real-estate related, which to me is highly unusual in any sort of book about building wealth. The only investment advice found here is in the final chapter and could be summarized as "invest in what you know." That is, if you work in a certain sector, your knowledge of the industry will help you make good investment decisions. Not sure how I feel about this one. For example: not working in technology doesn't mean blue-chip tech stocks are a bad investment. Take it with a grain of salt.

One last complaint: most of the financial figures are presented in mid-1990s dollars. I found it frustrating to have to mentally convert to today's dollars to get a relative sense. The authors took the time to update the preface in 2010, it would have been nice to see a revision to the figures quoted throughout the book. (For reference, one 1996 dollar is worth about 1.6 dollars in 2017).

In summary, I was surprised about the amount of praise heaped on this book. I would hardly categorize it as a self-help book, it's more a retrospective on the authors' research and a collection of anecdotes and interesting conclusions about the countless Americans leading unglamorous lives while accumulating appreciable amounts of wealth. It's a quick read and I made it through the whole book on a 5-hour flight with time to spare. I would only recommend this book as an interesting overview of some good financial habits, or as an eye-opener for those with luxurious financial tendencies who struggle to save money despite their income level. However, for those who have already developed some discipline and are looking for detailed strategies and advice on personal finance and building wealth via investments and generating passive income, look elsewhere.

- maurice_phillips

This pretty much supports everything that Dave Ramsey says about the differences between those who truly are wealthy and those playing the part. If you want to be wealthy, do what wealthy people do! This has nothing to do with luck, or being an entrepreneur (although it doesn’t hurt) but living below your means, having a budget, investing and not trying to impress people you don’t like with money you don’t have! Every now and again on the Dave Ramsey podcast he hosts the millionaire theme hour and it is really inspiring to note that the majority of millionaires he interviews are regular “blue collar” people. They live in our neighborhoods, drive used cars and work at our companies, hence “the millionaire next door!”

- anthony_young

In a word, this book was fascinating.

In summary, this book was essentially a long stream of curated data distilled into a finely tuned narrative that I just couldn't put down.

At first glance, the title "The Millionaire Next Door" might sound like some trashy novel just begging for glamour and it's 15 minutes in the spotlight, but this couldn't be further from the truth. I assume most people, when they think of the world 'millionaire,' they think of a high class, high consumption lifestyle full of limitless indulgence. However, Thomas Stanley goes through great length in this book to show precisely why this isn't so. Through countless interviews and a vast list of data, Stanley pulls together that the average millionaire is anything but the cocaine-induced celebrity so often featured in mainstream media.

Quite the opposite, being an average millionaire is within reach of just about everyone. The American Dream is alive and well, but only for those who are willing to sacrifice.

It's kinda funny in a sense. This book put into words and data a lot of things I noticed growing up. I've always said that there are two ways to have more money: make more or spend less, and I prefer to do both. As it turns out, most millionaires feel the same way, and they invest their savings into appreciating assets rather than depreciating assets, like real estate and stocks/bonds as opposed to clothing and cars. The average millionaire doesn't reach such a status until late in life, and inheriting large sums of money more often than not dooms any developing child to a life of high-spending with few fulling achievements.

I could go on, but it's really pointless. In a way, Thomas is simply a messenger, presenting the data he found in an easy to follow format that drives home a list of bullet of points. However, despite this, I still found this book amazing and uplifting, because the message it presents is exceptionally hopeful and inspiring. Everyone should read this book, to help themselves and their finances, because there are no second chances when it comes to time and money.

- maison_gutierrez

This is such an inspiring read because it shows almost anyone can become a millionaire if you live below your means and invest well. I love that the majority of millionaires are people you'd never suspect because they don't live flashy lives in big houses with high-status toys abounding. If you make $200,000 a year, but spend $220,000, you're in trouble. But if you make $50,000 a year and live on $35,000, investing the rest, over time you're going to be in great shape.

I grew up in a super-affluent suburb. My friends' lived in big houses and mansions with luxury cars and country club memberships. We lived in one of the smallest houses in the suburb. My mom was so frugal. I thought it was such a drag!! But when she died (too young), she'd saved enough so that my dad, who lived another 30-some years, was comfortable in retirement. I wonder now if any of my high school friends' parents were actually living on the edge in trying to keep up with the Joneses.

Years ago, I used to charge like crazy. Now I save like crazy, just like my mom.

- henley_thompson

This book was highly recommended on a financial independence/early retirement blog I follow so decided to give it a read. The core message of the book is excellent and insightful. However it could've been covered off much more concisely. The authors had run extensive surveys ahead of this book and so it seems to me that they felt the need to belabor the point by going over every single aspect of their findings via this book. By the time you're a third of the way through you find yourself not learning anything new and just wanting it to be over already.

- gia_johnson

What is the best way to become a millionaire? Frugal! Frugal!! Frugal!!! Awesome book overall. The book is very American and about American millionaires. I'm African, wish it had a more global perspective but you learn applicable knowledge, regardless of location. I recommend 100%

- ayleen_lopez

This is a motivational read for those who want to build wealth. The central message though is a fairly unsurprising one, in that to build wealth you need to spend less than you earn and then invest the difference over the long term. While that might elicit the response ‘No kidding Sherlock!’, the point is that most of us don’t do that. In the same way that to lose weight you need to eat less and exercise more - no secret involved you just need to stick to it, but many of us know this but still don’t.

The point of the book’s title is that many apparently affluent people (nice house, nice car, nice clothes etc.) may not have much wealth built up (savings and investments etc.) because they are spending most of their income. People who do have a lot of wealth built up tend to live much more modestly and frugally.

The only real downside for me (other than that the point could probably be made in one chapter) was all the facts and figures drawn from their research. Pretty soon you’ll get fed up of the ‘this percent of that, which as a percentage of this, as a ratio of’ and just start skim reading it as you got the point from the first paragraph.

- eddie_castillo

Although its findings about millionaires is based on American millionaires, I'm pretty sure the principles in The Millionaire Next Door apply worldwide. One of the most surprising things I learnt was that the majority of millionaires (something like 70%) got their through self employment - not fame, inheritance, or any of the more common things we're led to believe. A very refreshing, relatable and inspirational book - rightfully deserving of its reputation as a foundational read for success.

- keyla_mendoza

These guys put a lot of effort and time to write this book therefore 4 stars. Much appreciated. It can open eyes to some people, maybe change views. I think it's a good book in general but personally myself I found it a bit boring and repetitive. I think all could be said in much less pages. I jot some notes down but wouldn't read it again.

- kareem_smith

The ideas in this book are well-known and simple, the problem is that it takes so long to get to the point. You can read about these ideas on any personal finance blog on the internet in much less time.

I agree with many that criticize this book for its clear survivorship bias; starting a business is not going to be the right thing for everyone. Perhaps focusing on "successful upper-middle-class" financially independent types would have been more realistic and helpful to most, but "The Financially Secure Person Next Door" wouldn't be as good a title.

- delaney_roberts

A very informative and thought provoking read. Some points are laboured on a bit, but in general the information is well presented.

- briana_morales

Useful information, backed up by copious examples and statistics from surveys and studies.

- myles_lopez

I was looking for something...a secret formula or just general advice that would help me in the recession. Maybe an idea that that would lead me to riches...and I think I've found it!

TMND is not a book about getting rich quickly, and it certainly isn't another book that is based on thinking yourself rich which I can't stand because if we could all think ourselves rich we would be. Do you seriously think that every starving child in third world countries doesn't! If you want the truth about how you can make a better life for yourself then this is for you.

This book is based on the research of many millionaires, OK its not all of them but the ones who opted into the research program. Although this doesn't give a complete analysis of every millionaire what it does give you is a thorough look at the lives and stories of people who may have come from humble beginnings or even inherited their wealth.

Why is this good info? Because the vast majority of us don't have a clue about what it takes to get into that position or what it means to maintain it! After reading this book all the things I thought about rich peoples spending habits changed, it made me start to think about my life and what I could do to improve it without even directly asking me to do it.

The word frugal is not something that most people consider to be a good word especially in times when consumerism is rife, but if you want a good life then it may be something we should all think about, the millionaires in this book were mostly just that FRUGAL or tight fisted :0. on balance it may seem like a sacrifice but if at the end of your life you don't have to worry about your pension, kids or family because they are all taken care of then in my opinion its worth a try!

- eric_nelson

TV is saturated with messages about the rich lavishly spending their money. This is a refreshing book communicating the opposite (the rich are savers).

- alaia_scott

This book kicked my backside.
It made me aware of how many mistakes I've been making over the years.
It does have one chapter that seems completely superfluous ('what kind of cars millionaires buy', goes into excessive boring details).
Describes the difference between income and wealth.
Very interesting.

- braxton_moore

Although this book explains how the affluent live some of their lives, it dose not tell where to invest or how to go about making those decisions on investments

- duncan_morris

I am writing this review after reading 50% of the book. The main theme of this book is BEING FRUGAL which is already present in our Indian society it constitutes 50% of the book. Apart from that it gives knowledge who become rich, which generation accumulates wealth, what plan these frugal natured have.difference between real millionaire and a pseudo millionaire etc.

A MUST READ ON MONEY MANAGEMENT

- amari_thompson

It shows over and over that you can save up money as your neighbors did and become millionaires. Main idea: there are bunch of them. Not mega millionaires, but at least one or two millions are possible.

- sam_flores

Very interesting read on the traits that make millionaires and eye-opening insights into the frugality often shown by the over-achieving vs the opposite for under-achieving.

Would recommend for anyone who’s keen to improve their personal finances and improve how they manage money - it’s not what you earn, it’s what you keep...

- kiara_turner

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