The Millionaire Next Door Review
The Millionaire Next Door is a book that analyzes the spending habits, behaviors and characteristics of millionaires.
Here is a quote that sums up the book nicely: “It is seldom luck or inheritance or advanced degrees or even intelligence that enables people to amass fortunes. Wealth is more often the result of a lifestyle of hard word, perseverance, planning, and most of all, self-discipline.”
The authors, Thomas Stanley and William Danko found an interesting fact about millionaires. They discovered that most millionaires live humble lives and don’t spend their money on big houses and fancy cars. Instead they buy used cars, cut out coupons and save their money. In other words, they live well below their means.
Most people think this book is just about being frugal and saving money.
Well, there’s a lot more to the book than that. The authors give their take on 6 issues with modern American society:
Student loan debt is a even bigger problem now than when this book was written. We see way too many people wasting their money at college and getting useless degrees. The authors found that millionaires are less likely to have advanced degrees.
“High-income Prestigious Accumulators of Wealth are significantly less likely than Under Accumulators of Wealth to hold graduate degrees, law degrees, or medical degrees. Millionaires typically indicate on our survey ‘business owner’ with ‘some college,’ ‘four-year college graduate,’ or ‘no college.'”
“Doctors and other well-educated professionals get a very late start in the earnings race. It is difficult to accumulate wealth when one is in school. The longer one stays in school, the longer one postpones producing an income and building wealth.”
“Another reason very well-educated people tend to lag behind on the wealth scale has to do with the status ascribed to them by society. Doctors, as well as others with advanced degrees, are expected to play their parts.” Doctors are “supposed” to drive nice cars and have a big home, and will spend more money to live up to the expectation.
Millionaires tend to not get divorced. They tend to not have materialistic wives.
“A self-made millionaire stated it best when he told us: ‘I can’t get my wife to spend any money!’ Most people will never become wealthy in one generation if they are married to people who are wasteful.”
“Affluent couples have a divorce rate that is less than half the norm”
3) American Hyper-Consumption Society
“The advertising industry and Hollywood have done a wonderful job conditioning us to believe that wealth and hyper-consumption go hand in hand. Yet, as I have said many times, the large majority of the rich live well below their means.”
The rich “believe that financial independence is more important than displaying high social status”.
The book even mentions how immigrants tend to be better accumulators of wealth because they are not yet indoctrinated into the American hyper-consumption lifestyle.
Although they don’t use the word ‘welfare’ in the book, some of the quotes in the book give off an anti-welfare vibe.
“And in general, the more dollars adult children receive, the fewer they accumulate, while those who are given fewer dollars accumulate more.”
5) Unfulfilling work
Many Americans do not like their jobs. They work a safe 9-5 boring office job. As the authors mention, entrepreneurship might be a good choice for someone wanting a way out.
“If you hate the thought of being outside the corporate environment, entrepreneurship may not be your calling. The most successful business owners we have interviewed have one characteristic in common: They all enjoy what they do. They all take pride in going it alone.”
“Self-employed people are four times more likely to be millionaires than those who work for others.”
6) Don’t spoil your kids
There are many successful entrepreneurs who are successful because they were poor immigrants who had to work super hard and work super long hours and take huge risks.
What is interesting is that these successful entrepreneurs forget what made them successful.
Many of them move to a nice neighborhood and have kids. The kids grow up with lots of money. The parents, not wanting their kids to take lots of risks, send their kids to college to get an advanced degree. The kids never become rich and free because they get indoctrinated into the American lifestyle.
In my review of Elon Musk’s book, Elon understands this and mentioned how it bothers him how his kids aren’t suffering as much he did.
The authors mention one thing most millionaires have in common is being frugal, saving money, not being obsessed with status etc. While these things are good habits to have, they will not make you rich. For every millionaire that cuts out coupons and buys used cars, there are probably thousands who cut out coupons and buy used cars that are not millionaires. I wish this book talked more about making money.
This book certainly offers a different perspective on the rich.
I definitely like the overall message of not wasting your money on materialistic possessions.
This book was a famous bestseller and it is a must-read for people who want to improve their spending habits.