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The Millionaire Next Door: The Surprising Secrets of America's Wealthy Paperback – November 16, 2010
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The bestselling The Millionaire Next Door identifies seven common traits that show up again and again among those who have accumulated wealth. Most of the truly wealthy in this country don't live in Beverly Hills or on Park Avenue-they live next door. This new edition, the first since 1998, includes a new foreword for the twenty-first century by Dr. Thomas J. Stanley.
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The kind of information that could lift the economic prospects of individuals more than any government policy...The Millionaire Next Door has a theme that I think rings very true..."Hey, I can do it. You can do it too!" -- Rush Limbaugh
[A] Remarkable book. ― The Washington Post
A nerve has been hit....[For] people who want to become wealthy. ― USA Today
A primer for amassing wealth through frugality. ― The Boston Globe
An interesting sociological work. ― Business Week
A fascinating examination of the affluent in American society. ― The Dispatch (Lexington, NC), (Nc) Dispatch
These, for the wise, are tips for all of us....A very readable book. ― Cox News Service
Debunks the image of the rich as high-living spendthrifts. ― U.S. News and World Report
I love the book, The Millionaire Next Door. It talks about how it is a myth that most millionaires in America have inherited their money. The fact is, we have created such a great country over 250 years. We have actually found the way for poor people to go from nothing to huge wealth and to create a life-changing opportunity for their children and grandchildren. We celebrate it, write movies about it, and our libraries are full of books about it. There is nothing wrong with that. -- Bernie Sanders
The authors mine reams of data to show the surprisingly frugal traits millionaires have in common. "The main lesson provided is that high income does not equal wealth," said J.R. Rosskamp, managing director of Veritas Partners, Inc., a business consulting firm. Rosskamp calls "Millionaire Next Door" a "must read, and the earlier the better." ― Chicago Tribune
The authors mine reams of data to show the surprisingly frugal traits millionaires have in common. "The main lesson provided is that high income does not equal wealth," said J.R. Rosskamp, managing director of Veritas Partners, Inc., a business consulting firm. Rosskamp calls "Millionaire Next Door" a "must read, and the earlier the better."
― Chicago Tribune
About the Author
Thomas J. Stanley is an author, lecturer, and researcher who has studied the affluent since 1973. He lives in Atlanta, Georgia.
William D. Danko is associate professor of marketing in the School of Business, University at Albany, State University of New York.
- Publisher : Taylor Trade Publishing; Reissue edition (November 16, 2010)
- Language : English
- Paperback : 272 pages
- ISBN-10 : 1589795474
- ISBN-13 : 978-1589795471
- Item Weight : 10.4 ounces
- Dimensions : 5.88 x 0.79 x 9.06 inches
- Best Sellers Rank: #1,683 in Books (See Top 100 in Books)
- Customer Reviews:
About the authors
Reviewed in the United States on June 20, 2020
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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.
The wealthy on the other hand delay luxurious consumption and invest a certain percentage of their incomes into income generating assets. When their accumulated wealth reaches a certain level they purchase luxuries without endangering their wealth. So most of the people you see on yachts, wearing expensive watches and jewelry are high income generators who will most probably end up with no wealth in their older years. The people in the process of becoming millionaires which could take 30 years or even more live in modest neighborhoods, drive ordinary sometimes even second hand cars, dress and in short live modestly in everyway. Some of them may have high incomes but a vast majority of them have learned to get by on a modest income and generate wealth from that average income by saving and investing about 10 % of their income every month for about 30 years or so. It doesn't matter where they invest ; stocks, Treasury Bills etc. Compounding small income streams over 30 years buids enormous wealths.
One very striking thing that the authors mention is how adults receiving financial support from their affluent parents develop weak characters in terms of wealth building ability. They are in fact adult children, because they haven't developed the self discipline to be frugal and build wealth. Their well meaning parents unknowingly make them weaker by supporting them financially. Their children are often adults in their 30's, 40's and sometimes even 50's and surprisingly many of them have careers ; some are professors, doctors, lawyers etc. Their common trait is that they enjoy an upper middle class lifestyle through hyperconsumption financed in part by their own incomes but to a great extent by financial support provided by their wealthy parents who may be in their 80's by now. They think their parents' wealth is their income. In reality their parents are wealthy but they are not. What is even worse is that their children also get accustomed to the upper middle class living standard. But once the financial support and / or inheritance from the grandparents is all consumed away the grand children risk falling into a poor lifestyle. Because nobody other than the grandparents knew how to build wealth. In fact, many of these adult children are aware that they can not generate wealth and therefore worry and are very anxious about their future. In summary, when the affluent provide for " financial outpatient care" by financially supporting their adult children they prevent the development of the character qualities such as frugality in them. So their children and or their grandchildren are often doomed to a poor lifestyle following an irresponsible hyperconsumptive life funded by parental financial help. Although the authors have written these for the USA I would like to add that this is the situation in many countries including the USA. I just didn't know that it was as prevalent as the authors explain.
We can learn a lot from this book / CD but the sad thing is that it is probably difficult to change our lifestyles and habits if it turns out that our present consumption / saving habits are not making us millionaires ; if for example your family's lifestyle is hyperconsumptive and there is no frugality, you may have a hard time after reading this book in changing the habits of all the family members so that everybody will become frugal and thereby increase the chances of you and your family becoming millionaries.
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The point of the book’s title is that many apparently affluent people (nice house, car, clothes, gadgets) may not have much in their piggy bank because they are driving, wearing and displaying it instead. People who do have a lot of wealth built up do so because they are living a very modest life - ‘the person next door’.
The only downsides for me were the repetitive facts and figures drawn from their research which pads out a booklet into a book. Pretty soon you might 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.
You also have to wonder ‘what’s the point?’. You can’t take the piggy bank with you when you die, no matter how big you get it. So of course there is a balance - which I don’t think the book strikes - in knowing the basic things you need for a sufficient life and then using your wealth to enrich your own and other’s lives.
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.