The Millionaire Next Door: Book Summary

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When we think about the “Millionaires”, what comes in mind? – Is it the people living on the Upper East Side in New York, or Hollywood? What kind of car they drive? Which luxury brand they wear? Well, we all want to find an answer to these questions. The book- “The Millionaire Next Door” points out how the American millionaires actually live, and how you and I can become ‘Millionaire’ someday.

This book summary will take you through the most common denominators among those who successfully build and sustain their wealth.

About Authors

Dr. Thomas J. Stanley was the most famous and powerful person in the United. He was a well-admitted analyst and counselor. Moreover, he was also the writer and co-writer of some victorious books. Dr. Willian D. Danko was a retired instructor of the Business School, from the University of Albany. He also was well informed regarding the customer’s way of behaving and mostly the method of growing assets. Two books were written by him on wealth and being wealthy.


Did you all know that nearly all of the Millionaires were not born rich, they themselves have worked hard to become rich. I’m assured that you must have thought about becoming rich once in your life. Good for you as this book will help you know how millionaires control their time, money, and life success.

This book essentially splits everyone into two categories-

  • Under Accumulators of Wealth (UAWs)- These people have a low net worth relative to income and the opposite is true for PAWs. UAWs are typically well educated professionals with high-paying and high-profile jobs such as Doctors, Engineers, Lawyers, etc. who feel the societal pressure to keep up with. It is this lifestyle that causes them low net worth because they spend most of their money.
  • Prodigious Accumulators of Wealth (PAWs)- PAWs grow wealthy by living well below their means. These are people who do not fit into the stereotype of millionaires. They live in modest neighborhoods, drive practical Sedans, and doesn’t feel the need to keep up with the societal pressure.

So how do the rich get rich and what’s their end game?

We all want to know how we can achieve even a tiny sliver of their wealth. The book “The Millionaire Next Door” shows you the simple spending and saving habits that lead to more cash in the bank than most people earn in their lifetimes. This book is will help you avoid critical mistakes on your way to financial independence. To become a millionaire, all you need to keep in mind are

  • Planning
  • Living below your means, and
  • Avoiding a few mistakes.

So, how can you do this? If you’re truly interested in unlocking financial freedom, here are a few ways to do it.

The 12 Characteristics of a Millionaire

These are the 12 characteristics of millionaires that helped them to become a millionaire.

  • Income should always be greater than expense.
  • Time, energy, and money are allocated towards wealth. We spend more than twice the amount of time on financial planning and investing as to our non-millionaire friends.
  • Freedom and financial security are more important than displaying high social status.
  • Never receive cash gifts from parents and self-employment. About 2/3rd of ourselves are our own bosses. 75% of us consider ourselves entrepreneurs.
  • We have a go-to fund which can help us sustain our lifestyle for 10-years or more.
  • Most of us are 50+ in age.
  • We are well-educated. Only 1/5th of us aren’t college graduates.
  • Investment is the key. About 20% of our annual income goes into investment and we make those decisions ourselves.
  • Invest for a long run. Over 90% of us invest for more than a year.
  • We buy cars by the pound. Haha!
  • We’re cheapskates. (in a good way!)

Start Saving as much as Possible

Start saving as much as you can from the moment you start earning more than you need to live. Most people think that to become a millionaire, you have to earn in millions. Well, that’s not true. Even if you’re one of the top earners in the world, taxes will eat away roughly 50% of your income annually. 30-40% will be spent on food, clothing, and shelter leaving your chances of becoming a millionaire to nearly 10%.

But if your truly want to be a millionaire, you never even have to earn near that much. The moment you earn more than you need to live, save as much as you responsibly can and avoid spending money on non necessities. Having a good budget and living a frugal life is really as you need to build wealth especially if you start young. Around 55% of all millionaires credit their wealth to simply being deliberate about their finances and having discipline when it comes to saving.

Play Defense

Does your house operates on an annual budget? Do you know how much your family spends each year on food, clothing, and shelter? Do you spend a lot of time planning your financial future?

Millionaires to a greater extent would answer yes to these questions. Now you must be thinking why would a millionaire needs to have a budget? Because that is exactly how they became a millionaire- by maintaining their affluent status.

So how should you play defense? For starters, should you buy or rent a house in a modest neighborhood (now an upper-class one)? To live in an upper class area, it’s expected to have a certain lifestyle that might even be more expensive in the long run than the apartment itself. Living in a modest and safe area instead will be easy to keep up with, and accumulate wealth. This is co-related to the above point, spend little on possessions that will depreciate in value.

Cash Gifts are Bear Favors

A bear favor is a Swedish expression of someone doing another person a service that they think will have a positive impact but which ends up being a disservice instead. Every parent wants their children to be prosperous and successful in their lives. How do wealthy parents make sure that their kids get a head start? Well, they provide them with extra money that proves to be counter productive. The more dollars adults children receive, the fewer they accumulate. Adults who sit around waiting for their parent’s money are much less productive than their counterpart.

Cash gifts teach children to live above their means. Gift receivers have, in 80% of the instances, a lower net worth than their peers. Adults who get money from their parents have a hard time to distinguish between their parents wallets and their own. It’s much easier to spend other people’s money than the self-generated one. So can you give your kids that will increase their likelihood of becoming prosperous and successful? The answer is simple- Tuition. Apart from that, try to create an environment where independent thoughts are cherished and where achievement, responsibility, and leadership are rewarded.

Quick Recap

If you don’t have the time to read the entire book summary, then here’s a quick recap of summary we have discussed above-

  • Becoming a millionaire is the result of hard work, lifestyle decision, planning, and self-discipline. Planning and self-discipline is not inheritance or luck.
  • You must play great self defense to accumulate wealth.
  • Start saving from a young age in order to increase your net worth.
  • Cash gifts are counterproductive to accumulate wealth.

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