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Book Review - The Millionaire Next Door

Updated on November 21, 2009

The Millionaire Next Door - the Surprising Secrets of America's Wealthy by Thomas J Stanley, Ph.D. and William D. Danko, Ph.D. is definitely an eye opening book. Everything I thought a millionaire would be is not the case at all, at least not your typical case. The secrets aren't anything bad and certainly not anything to be ashamed of. You will be surprised at how the wealthy live as well.

Before reading this book I often pictured wealthy people living in large houses, driving fancy cars, wearing expensive clothing and traveling often. How wrong I was! The Millionaire Next Door does a great job of detailing how the wealthy live and how they became wealthy. By wealthy they are not talking about people who have a high annual income. In many cases the opposite is true. As they say in their book, it is not how much money you make, but how much money you save.

In most cases the people you see living in mansions, driving fancy cars, wearing expensive clothing and traveling often do not have very much money at all. These people make a very high income to support their expensive habits, but put very little money into savings. Many of these people work extremely long hours to support their families spending habits. They believe they are wealthy because they earn a high income. They are wrong though.

This book talks about two types of people - prodigious accumulators of wealth (PAW) and under accumulators of wealth (UAW). PAWs work hard to build up their wealth and UAWs work hard to spend their money. PAWs live below their means and UAWs live above their means. My favorite quote in the book is this-

"What are three words that profile the affluent?" - FRUGAL, FRUGAL, FRUGAL p 28

So what exactly does a millionaire next door look like? Well the average American millionaire as of 1996 when this book was published is a fifty-seven-year-old male, married to the same woman for many years, with three children. About 20% are retired and 66% of the rest are self-employed. The average millionaire is a homeowner, has an average household income of $247,000, and has a net worth of $3.7 million. The average millionaire also lives well below their means, wears inexpensive suits, drives average American made cars and invests at least 15% of their income. There are other characteristics as well, but I think this sums it up nicely.

Does this surprise you? Did you think that you were going to get rich by making more money? Of course that helps, but it really boils down to the choices you make with the money you have. If you didn't save any money when you made $50,000 a year, you probably won't save any money when you make $100,000 a year. If you put a priority on wearing the latest expensive fashions, driving a new foreign luxury car, sending your kids to the best private school around, and taking expensive trips the chances of you becoming a millionaire are slim.

The people that become millionaires are tedious planners and investors. They put a priority on budgeting and saving. This doesn't mean that they spend hours each day, or even each week. Typically they spend an evening or two at the beginning of each year outlining a budget to guide them. They will refer to this often throughout the year making sure they are staying within the budgeted amounts. This is a priority for them. They take time each month to manage their investments. Yes they put a priority on these things, but it does not consume them. They worry far less than the average person who isn't a millionaire.

Thomas Stanley and William Danko have done extensive research and have the statistics and graphs to back it up in this book. For me, it was a little too much information along those lines, but you can easily skim over those parts if you would like. This book is definitely worth the read! It makes me believe for the first time that maybe we are doing something right. It is motivating to an average person, knowing that most millionaires are just average people that lived below their means and saved their money.

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    • readtoawakecom profile image

      readtoawakecom 

      6 years ago

      Great Review of a Great Book, I think everyone should read this book.

      The Millionaire Next Door is written after many years of research done by the authors (Thomas Stanley and William Danko). This book reveals that most of the millionaires became rich not by chasing get-rich-quick schemes instead they have followed a particular path to reach their destination of becoming millionaires.

      If you want to become successful and financially free then you should read good books like this one. I have started a blog where I publish short summaries of Best-selling books.

      You can read a Bestseller Book in Only 10 Minutes. Visit my Blog

    • MarloByDesign profile image

      MarloByDesign 

      7 years ago from United States

      Jennifer, the point of "average people that lived below their means" is so appropriate in this economy now!

    • dgicre profile image

      dgicre 

      8 years ago from USA

      Very true and great info. Most of us tend to live within our means.

    • U Neek profile image

      U Neek 

      8 years ago from Georgia, USA

      Slow and steady wins the race, if you will live within or below your means and GIVE & SAVE!

    • MrSpock profile image

      MrSpock 

      8 years ago

      Great book. Won't tell you everything that you're looking for but it's definitely worth reading.

    • brianjohnson951 profile image

      brianjohnson951 

      8 years ago

      I have read that book and the one thing that I pick up from that book is that you can be rich without looking like one.

    • Create Your Dream profile image

      Mary Gallagher 

      10 years ago from Folsom

      THanks, Jennifer, for the review of this book. I read it a while ago and was also a little surprised. I used to think that those who used their money lavishly had so much of it they could do that, but I have learned that it is the people who unobtrusively earn, live well, keep much and give much who are the truly wealthy.

      It would be interesting to read what the authors found in similar research since the publication date. I wonder if much has changed over 12 years in this area. That could bring up a lively discussion...

      I do like how simple a plan toward prosperity can be, when you look at what you keep as wealth and what you spend smartly as living and enjoying life with what we do have. There are many great ways to enjoy frugality these days and I am glad to learn more about them on a path to discovering true wealth, of money, time, freedom, happiness and relationships. All of that figures in it, too.

      Best, Mary

    • MarloByDesign profile image

      MarloByDesign 

      10 years ago from United States

      Jennifer,

      I love this book and skipped over the statistical parts as well, but the rest of the book was excellent. You are spot on, it is not how much you make, but how much you save and living frugally. What a great book. You review 'sums' it up nicely.

    • clickurway profile image

      clickurway 

      10 years ago from Reno

      A great review and so true, I had a friend that worked with me at Northrup Aircraft he had started working there in 1951 I remember because that is the year I was born. he bought a house in Buena Park CA. near a farm called Knotts Berry Farm yes it was a real farm then. Anyway his house was on 60 acre's he bought it for $5,000. he lived conservetive and invested in the company stocks and any other invest ment the company offered. He asked me to look at his porfolio! yes his net worth was well into the 7 digits. Your review of the book was great thanks.

      http://www.advancedtrends.com

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