The Millionaire Next Door Summary

This post was originally going to be a book review but to be completely honest I found the book so boring I could not finish it. Don’t get me wrong the information in the book is excellent but it is delivered in such a way that reading more than 5 pages at a time was putting me to sleep. So what I did was purchase a summary version of the book detailing the key takeaways from the book. I have compressed this summary down into this blog post to save you having to try and get to the end of the book yourself.

When Tom Stanley and William Danko the authors of The Millionaire Next Door went to investigate on how people get wealthy, they found something odd. Many of the people who live in upscale neighbourhoods and drive luxurious cars do not have a large amount of wealth. In fact, a lot of those people are in debt and living month to month. They also found that most millionaires do not live in upscale neighbourhoods. The book gives insights on what you can do to become wealthy and how wealth is not what you spend but instead the assets and wealth you accumulate.

The Millionaire Next Door Book Summary

The primary reason that millionaires are economically successful is that they think differently. Most of them do not have all of their wealth tied up in their stock portfolios or in their homes. Controlling one’s investments is crucial; you can’t control the stock market. But you can control your own business (and any private investments).

Contrary to popular belief, wealth and hyper-consumption don’t go hand in hand. The majority of the rich live well below their means, in modest homes situated in middle-class, even working-class neighbourhoods, rather than in upscale neighbourhoods. The only difference between the millionaire next door and an average person is that the millionaire is financially independent.

This book answers the questions:

  1. Who the wealthy really are?
  2. Who they are and are not?
  3. How can ordinary people become wealthy?

Identifying the difference between wealth and income is essential. Good income doesn’t necessarily make you more prosperous. If you spend everything you earn, instead of accumulating wealth, you are just living high.

Affluence generally comes as the result of a lifestyle of hard work, perseverance, planning, and self-discipline. It has nothing to do with luck, inheritance (more than 80 percent are ordinary people who have accumulated their wealth in one generation), or even intelligence.

The people who will benefit most from this book are the ones who live from salary to salary. Even though some of these people can be characterised as “good income” earners, too many of them have small levels of accumulated wealth and therefore are not financially independent.

The Seven Factors

A typical wealthy individual is a businessman who has lived in the same town and has been married to the same person for all of his adult life. He is the owner of a small factory, a chain of stores, or a service company. This person lives next door to people with a small part of his material goods. He is first-generation rich who has made money thanks to the habit of compulsive saving and investing.

There are seven common denominators among affluent people.  

  • They live well below their means.
  • They allocate their time, energy, and money efficiently, in ways conducive to building wealth.
  • They believe that financial independence is more important than displaying high social status.
  • Their parents did not provide economic outpatient care.
  • Their adult children are economically self-sufficient.
  • They are proficient in targeting market opportunities.
  • They chose the right occupation.


Surprisingly, the average American millionaire doesn’t look and doesn’t act like a millionaire. He doesn’t fit into the cliché created by people who are not wealthy.

Portrait of a Millionaire

Here are some interesting facts about a typical American millionaire:

  • He is an elderly male, married with three children.
  • He is self-employed (two-thirds of American millionaires are self-employed).
  • The business he is in is not glamourous. Most millionaires are welding contractors, auctioneers, rice farmers, owners of mobile-home parks, pest controllers, coin and stamp dealers, and paving contractors.
  • His wife is not employed or she is a teacher.
  • He and his family live on less than 7 percent of their wealth.
  • He did not receive any inheritance and had never felt injustice because of that fact.
  • He lives well below his means, wears inexpensive suits and drives an American-made car.
  • His wife is a planner and meticulous budgeter.
  • He has accumulated enough wealth to live without working for ten or more years.
  • He is at least a college graduate and possibly holds an advanced degree.
  • He spends heavily for the education of his offspring.
  • He works between forty-five and fifty-five hours per week.
  • He invests nearly 20 percent of his household realised income each year, and makes his own investment decisions.
  • He holds nearly 20 percent of his household’s wealth in transaction securities such as publicly traded stocks and mutual funds, and holds even more in his pension plans, while 21 percent of his household’s wealth is in his private businesses.
  • He feels that his daughters are financially handicapped in comparison to his sons, and would not hesitate to share some of his wealth with his daughters.
  • He believes his children should consider providing affluent people with some valuable service, and recommends accounting and law as ideal occupations.

“Wealthy” Defined

Most of the people who earn a lot and display a high-consumption lifestyle are not wealthy, because they don’t accumulate wealth, have no investments and income-producing assets. What makes one wealthy is a net worth of $1 million or more, and this amount can be reached in one generation.

Not everyone’s expected level of wealth is the same. Older people and/or people with higher income are supposed to have greater net worth than younger people with lower income. Whatever your age, whatever your income, you can easily calculate how much should you be worth at the moment: multiply your age times your realised pretax annual household income from all sources except inheritances. Divide by ten. This, less any inherited wealth, is what your net worth should be.


A Foundation for Building Wealth

Some people judge others by their tastes in consumer goods, and the amounts they spend. However, an actual economic superiority is something completely different. The three words that define the lifestyle of the affluent are: frugal, frugal, and frugal.

Frugal is the opposite of wasteful, which is a way of life marked by lavish spending and hyper-consumption.

The common belief encapsulated in the phrase “if you don’t show it, you don’t have it” simply isn’t true. The people who build wealth are hardworking, frugal, and not glamorous whatsoever.

There certainly is a market for excessively expensive goods, but the majority of individuals who own suits that cost $1000 are not millionaires at all. Typically, they are corporate middle managers, attorneys, sales and marketing professionals, or physicians. Most of them have considerate annual incomes, but their shopping habits prevent them from becoming wealthy.

For every millionaire who purchases a product from the “highest price” category, there are at least eight non-millionaires who buy the same product.

The popular media tells a different story, in which the wealthy spend abnormally. According to that picture, living high is the primary reward for becoming rich. We need to be aware that the millionaires from the headlines are exceptions. The majority of millionaires and their habits are largely ignored by media because they are perceived as ordinary. A millionaire doesn’t care about expensive products. He is not acting or trying to impress anyone with his possessions. His priorities include financial independence, discipline, and harmonious family life.

The spouses of millionaires are frugal, too. It is almost impossible to become accumulate wealth if you are married to someone who is wasteful.


People who become wealthy use their time, energy, and money wisely in order to increase their affluence. Regarding achieving wealth, under accumulators of wealth (UAW) share nearly the same goals as prodigious accumulators of wealth (PAW). However, their concerns and habits are completely different when it comes to the time they actually spend working on building wealth.

PAWs devote two times more hours a month to investment planning. UAWs spend more time worrying about their economic well-being, instead of taking proactive steps to change their tendencies to over consume and underinvest. They are mostly concerned about a significant reduction in their standard of living and not having an income high enough to satisfy their families’ purchasing habits.

It takes a team to plan and control consumption. Most high-income households consist of traditional married couples with children. If a family generates a moderately high income and both spouses are frugal, they have the base for becoming wealthy. On the contrary, when a home is divided in its financial orientation, or when both spouses are compulsive shoppers, there is almost no chance that they would ever be able to accumulate significant wealth.


PAWs and UAWs have different sets of beliefs. The number one goal for PAWs is financial independence. UAWs tend to highlight the importance of work and career, they often work hard and produce substantial income, but they work to spend, not to accumulate and become financially independent. For them, life consists of a series of compromises with the purpose to achieve some degree of luxury. Most often, money changes values of these individuals. They purchase status products to fill up the socially conspicuous puzzle.

PAWs, on the other hand, don’t need status products. Money doesn’t change their values. They enjoy a rather simple yet highly efficient lifestyle and would not let money change the way they live.

Self-aware millionaires know that an extravagant car might be inappropriate for a factory owner or someone whose lifestyle includes various outdoor activities. Owning a luxury car might lead to alienation from your’s workers, who might feel they are being exploited.

Buying status artefacts, such as expensive cars, can prevent you from becoming financially independent. That’s why only 23.5 percent of millionaires own new or recent models, while 25 percent of them have not bought a car in 4 years. Fifty percent of most millionaires never spend more than $29,000 in their entire lives on motor vehicles. About one in five never spend $19,000.

Car-buying behaviour serves as an excellent explanation why some people are wealthy, and others are not. Ironically, individuals who are not wealthy devote less time and energy trying to find the best deal, and they spend more money. Affluent people, on the contrary, take time and energy to plan and negotiate. It is interesting that the individuals who usually buy used vehicles are the ones with the lowest average incomes, yet they have the highest ratio of net worth dollars for each dollar of income, and they are able to accumulate substantial sum.

There is a strong set of beliefs behind this kind of behaviour. They are not willing to compromise financial independence. They understand that the key factor to achieving independence is frugal behaviour.

It’s easier to earn a lot than to accumulate wealth. The main reason for this is the fact that we are a consumption-oriented society, and the greatest spenders among us are non-millionaires with high income.  


Helping adult children financially is the most important factor that clarifies why the adult children of the wealthy are less productive. Although the gifts of money are perceived as temporary, they tend to permanently affect the recipient’s way of thinking and diminish their initiative and productivity. That is how consumerist habits are formed.

Giving leads to more consumption than saving and investing. Wealthy parents often help their children buy a home. Their intentions are good, and most often they think that, after that occasion, there would be no further need to help their children financially. Equally often, they are wrong. The receivers of economic outpatient care achieve less and spend more than the ones who never received such help. Notice that luxury homes are usually located in high consumption neighbourhoods, while the income of the help receivers can hardly support fitting in such neighbourhoods. Overall, this leads to continued dependence on the wealthy parents.

Even though they are dependent, the receivers of financial help typically think they are financially well-off, and tend to spend carelessly. They are also dependent on credit, and typically have a habit of spending tomorrow’s economic outpatient care today. Instead of gaining wealth, they are focused on the expectation of the generous inheritance coming their way.

There is a better way of spending money on one’s children. The most frequently mentioned gift that millionaires received from their parents were tuition. This is what you can give your children to boost the possibility that they will become economically productive individuals. The next best thing you can do for you children is to create an environment that honours independent thoughts and deeds, appreciates individual accomplishments, and rewards responsibility and leadership – and these gifts are free.


Wealthy parents with nonworking adult daughters and “temporarily” unemployed adult sons are highly susceptible to help them financially. The same children are most likely to get a significant share of their parents’ estates. The more economically successful offspring usually receive smaller amounts of EOC and inherited property. Following that pattern, the most highly productive children receive no wealth transfers whatsoever – and that is one reason they are wealthy.

Rules for Affluent Parents and Productive Children

  1. Never tell children that their parents are wealthy.

Adult UAWs tend to be the product of parents who lived in ways they thought appropriate for wealthy people to act. They lived the high-status/high-consumption lifestyle so popular in America today.

  1. No matter how wealthy you are, teach your children discipline and frugality.

The best way to teach your children is by example. Be a credible role model and follow the rules yourself.

  1. Assure that your children won’t realize you’re affluent until after they have established a mature, disciplined, and adult lifestyle and profession.

If you intend to distribute a significant amount of wealth to your children, wait until they are forty years of age or older. That way the money they receive will have little effect on their way of life.

  1. Minimize discussions of the items that each child and grandchild will inherit or receive as gifts.

Such promises often lead to disharmony and conflicts.

  1. Never give cash or other significant gifts to your adult children as part of a negotiation strategy.

Adult children tend to lose their respect and love for parents who submit to high-pressure negotiating tactics. Coercion of this type is often the product of the manner in which parents negotiate with their young children.

  1. Stay out of your adult children’s family matters.

Your vision of the ideal lifestyle may be completely different than that of your adult children and their spouses. Adult children resent interference from their parents.

  1. Don’t try to compete with your children.

You don’t have to boast of your achievements. Your children are wise enough to appreciate what you have accomplished.

Too many successful, achievement-oriented children of the affluent, accumulating money is not the superordinate goal. Instead, they want to be well educated, to be respected by their peers, and to occupy a high-status position. For many of these sons and daughters, the variations in income and wealth among occupations are much less important than they are for their parents.

  1. Always remember that your children are individuals.

They have different motivations and accomplishments. If there are inequalities, economic outpatient care would only make things worse.

  1. Emphasise your children’s achievements, no matter how small, not their or your symbols of success.

Show them that you are impressed with what people achieve, and not what they own.

  1. Tell your children that there are a lot of things more valuable than money.  

Tell them that, as long as they have good health, longevity, happiness, a loving family, self-reliance, fine friends – they are rich. Also, reputation, respect, integrity, honesty, and a history of achievements.

Teach them to be honest – that’s what matters in the long run, even in business.

Don’t try to protect your children from all difficulties they come across through their lives. The ones who achieve do so by experiencing and conquering obstacles – even from their childhood days.


Very often those who work for the wealthy become affluent themselves. Conversely, many people, including business owners, self-employed professionals, sales professionals, and even some salaried workers, never produce high incomes.

The affluent are often frugal and sensitive to the price variations in products and services. However, they tend to spend a lot on investment advice and services, accounting services, tax advice, legal services, medical and dental care for themselves and family members, educational products, and homes. They are consumers of everything from office space to computer software. Moreover, the affluent are not that thrifty when it comes to buying various products and services for their children and grandchildren. Nor are the children of the affluent frugal when it comes to spending the substantial gifts of cash that their parents and grandparents give them.

Who Are the Affluent?  

Most of the affluent in America are business owners, including self-employed professionals.

You can’t predict if someone is a millionaire by the type of business he’s in.  The character of the business owner is more important in predicting his level of wealth than the classification of his business.

Some industries tend to be more profitable than others. Thus, those who own businesses in the more profitable industries tend, by definition, to realize more income. But just because you’re in a profitable industry does not guarantee that your business will be highly productive. And even if your business is highly productive, you may never become wealthy. Why? Because even if you earn big profits, you may spend even bigger amounts on non-business-related consumer goods and services. You may have been divorced three times or have a habit of gambling on the horses. You may not have a pension plan or own any shares in quality, publicly traded corporations. Perhaps you feel little need to accumulate wealth. Money, in your mind, may be the most easily renewable resource. If you think it is, you may be a spender and never an investor. But what if you’re frugal and a conscientious investor and you own a business that is profitable? In this case, you’re likely to become wealthy.

Self-Employed Professionals Versus Other Business Owners

“They can take your business, but they can’t take your intellect!” Physicians, dentists, attorneys, accountants, engineers, architects, veterinarians, and chiropractors – these are the occupations held by a disproportionate number of the sons and daughters of the affluent throughout America.

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