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The Millionaire Next Door Paperback – October 1, 1998
There is a newer edition of this item:
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Forbes The implication of The Millionaire Next Door...is that nearly anybody with a steady job can amass a tidy fortune.
The Washington Post [A] REMARKABLE BOOK.
USA Today A nerve has been hit....[For] people who want to become wealthy.
Boston Globe A primer for amassing wealth through frugality.
San Francisco Business Times Offers a valuable message to today's spendthrift baby boomers.
Rush Limbaugh 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!"
Business Week An interesting sociological work.
Lexington (NC) Dispatch A fascinating examination of the affluent in American society.
Cox News Service These, for the wise, are tips for all of us....A very readable book.
U.S. News & World Report Debunks the image of the rich as high-living spendthrifts.
About the Author
Thomas J. Stanley, Ph.D., is an author, lecturer, and researcher who has studied the affluent since 1973. His work is frequently cited in the national media. He is the author of Marketing to the Affluent, a bestselling book selected as one of ten outstanding business books in America by the editors of Best of Business Quarterly. Dr. Stanley was formerly a professor of marketing at Georgia State University, where he was named Omicron Delta Kappa Outstanding Professor, and was on the faculty of the University at Albany, State University of New York. He lives in Atlanta.
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Top Customer Reviews
I grew up in a super-affluent suburb. My friends' lived in big houses and mansions with luxury cars and country club memberships. We lived in one of the smallest houses in the suburb. My mom was so frugal. I thought it was such a drag!! But when she died (too young), she'd saved enough so that my dad, who lived another 30-some years, was comfortable in retirement. I wonder now if any of my high school friends' parents were actually living on the edge in trying to keep up with the Joneses.
Years ago, I used to charge like crazy. Now I save like crazy, just like my mom.
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.
My husband and I read it 10 years ago and here's what we've changed- The book heavily influenced where we bought our home and how big (or in our case, small) it is. Cable went out the window (we use digital bunny ears that cost $50 for local channels and got Netflix). Saved $2,000/year. We haven't purchased a new car since. We try (and often do) save at least 10% of our annual income and we're slowly trying to invest it- not as impressive as many in the book but it's a start. We negotiate like crazy for our annual propane purchase and save $1,800/year. I clip coupons. We buy name brand clothes but absolutely never at full price. Frequently clothes will be purchased for next season for the kids while they're on sale at the end of this season. We are surgical about turning off the lights when we leave a room and every week our menu is planned so we don't waste food. Do some of these things sound extreme? Maybe they are, but here's what we haven't changed after reading this book...
We still take great vacations, usually two a year. We go out to eat once a month but rarely more. We drive one nicer car and one beater. We like really good food so despite all the coupons, we don't compromise on the quality of meats or fruits & veggies.
In short, The Millionaire Next Door has been a defining part of our lives. Whenever I start to feel myself slip into a mode where I want to spend more we remind ourselves of the freedom financial stability provides. At our age (34) people are flashing money everywhere- Wow, hot car! Love the house upgrade- we all need 4000 sq ft right? Ohhhh, the beach house is tempting. Expensive camps for the kids. Expensive weekly dinners for the parents. A tree exploding with presents. I could go on and on and on.....
We've developed a keen eye for detecting people that we think live "The Millionaire Next Door' lifestyle....but we'll never know for sure. If nothing else, this book has taught us to be cognizant and aware of every penny we spend.