Millionaire Next Door

The Millionaire Next Door Summary

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Grab a copy of “The Millionaire Next Door” here.

“The Millionaire Next Door” by Thomas J. Stanley, Ph. D., and William D. Danko, Ph. D., provides an inside look at the practices and ideology behind every day millionaires.  It aims to knock down the preconceived notion that millionaires are the essence of driving fancy cars and strutting their status.  The book is a collection of comparisons between those that are what the book calls “PAWs”, or prodigious accumulators of wealth and “UAWs”, or under accumulators of wealth. 

“The Millionaire Next Door” will open your eyes to exactly how the wealthy obtain and remain truly wealthy, and how those that appear financially sound from the outside may actually just be living pay check to pay check.  Read “The Millionaire Next Door” Summary below to see how your habits stack up with the every day millionaire and learn how you can implement their strategies to accumulate wealth.

Why is this book important?

It challenges the status quo.

“The Millionaire Next Door” does a great job challenging the idea that millionaires are solely people that own expensive clothes or flaunt their high income for society.  Many millionaires in the United States are every day people that have worked hard to accumulate wealth over time and implement strategies that teach their children to be wealthy as well. 

It provides actionable tips.

The book does a great job of specifically calling out what wealthy people actually do to increase their wealth with ideas and practices you can adopt.  There are abundant examples throughout the book comparing prodigious accumulators of wealth and under accumulators of wealth and how the choices made by those groups affect their day to day lives and the future of their children.  “The Millionaire Next Door” gives specific bench markers for you to compare your own wealth accumulation.

How to determine if you are wealthy:

  • Multiply your age times your realized pretax annual household income from all sources except inheritances.  Divide by ten.  This less an inherited wealth, is what your net worth should be.

“Millionaire Next Door” is best for…

… bench marking your own personal wealth building journey and comparing how your habits stack up to those that are already millionaires.  Questions like “do you know how much your family spends each year on food,” and “do you have a clearly defined set of daily, weekly, monthly, annual, and lifetime goals,” will help you examine your own habits and start working towards a better financial future.

Top 5 take-aways.

  1. Millionaires live below their means.  This is a key theme throughout the book.  At the end of the day, even if you earn a six-figure income but don’t save any of it you aren’t truly wealthy- you just have a high income.  And as soon as that income goes away, you are left with nothing.
  2. Millionaires spend timing planning and working to grow their wealth.  Millionaires know what they want to achieve financially in life and they work hard to accomplish those goals.  They understand where they stand and what they need to do to improve.  Investing in and growing your knowledge of personal finance is key to setting yourself up for the future.
  3. Millionaires understand that financial independence is more important than showing off their wealth. A key learning from “The Millionaire Next Door” is understanding that those who show off high levels of wealth may not actually be wealthy.  While status icons appear important in the moment, they provide momentary happiness.  Achieving financial independence will ultimately provide you freedom from the fear of not knowing where your next paycheck may be coming from.
  4. Millionaires teach their children to be financially independent. Another important theme in the book revolves around how prodigious accumulators of wealth pass down those savvy skills to their children.  “The Millionaire Next Door” even provides a list of rules for affluent parents on how to talk to your children about wealth.
  5. Millionaires understand and pursue economic opportunities.  Through continued education in personal finance, millionaires are able to identify opportunities that can help grow their wealth.  Because they regularly save, they have money available to pursue opportunities as they arise.

Best advice from the book.

“Wealth is not the same as income.  If you make a good income each year and spend it all, you are not getting wealthier.  Wealth is what you accumulate, not what you spend.”

What to do next?

Now that you’ve read “The Millionaire Next Door” Summary, use the practices and techniques in the book to gauge where you are at on your financial independence journey.  Are you a prodigious or under accumulator of wealth?  Use this book to break bad habits and start working towards financial independence.

Purchase “The Millionaire Next Door” here.

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