Everything You Need to Know About The Millionaire Next Door
This post may contain affiliate links. Please see my full disclosure policy for details.
There are tons of personal finance books out there, and to be honest, it can be hard to know where to start.
With so much to do and so little time, you’re probably wondering what books are worth your time.
Well, lucky for you, I LOVE reading. So, I’m here to help you decide whether or not to invest your time for a particular book a little easier.
Without further ado, I present to you the first post in my financial literacy series with a review of The Millionaire Next Door.
If you are ready to get reading, be sure to grab your copy of The Millionaire Next Door.
Summary
In The Millionaire Next Door Dr. Thomas Stanley and Dr. William Danko, experts in the field of business and economics, inform their readers of the habits of American millionaires.
They obtained the information shared in this book through years of research!
This research consisted primarily of focus groups with multiple millionaires. The authors’ findings are often surprising for the typical American worker.
Under Accumulators of Wealth
The authors found that many individuals who appear to be rich, are in fact high earners with low net worths.
They spend all their money leading them into a spiral of “earn more spend more”.
This cycle in turn results in increased stress and worry regarding finances despite their high earnings. That is, money doesn’t buy them happiness.
These under accumulators of wealth are often highly concerned with their appearances and the need to “look” rich. Ironically, this leads to them not actually being rich.
Prodigious Accumulators of Wealth: The Millionaire Next Door
Millionaires on the other hand, often blend in to typical middle class neighborhoods.
No one is the wiser to their skill at accumulating and maintaining their wealth. That is because they focus more on building their wealth than on showing it off.
Interestingly, some of the millionaires next door have salaries significantly below those of high earning, low accumulators of wealth, and yet their net worths are vastly greater.
The millionaire next door achieves and maintains his/her wealth by being frugal in terms of their purchasing habits and investing their money wisely.
Dr. Stanley and Dr. Danko dissect these millionaire habits extensively throughout the book.
What’s the Difference?
The authors present multiple case studies of various high earners (as well as some moderate earners with significant amounts of accumulated wealth).
Through these case studies, Stanley and Danko analyze the habits and values of both under accumulators of wealth and prodigious accumulators of wealth as they refer to them.
These contrasting personalities allow the reader to see how some fall into the trap of consumerism and the desire to “look rich”. On the other hand there are others who maintain, rather than show off, their wealth. The authors also discuss just how prodigious accumulators of wealth manage to save so much.
The authors also offer insight on how parenting styles impact future generations for both under and prodigious accumulators of wealth which would benefit all parents.
Practical Applications
So, how can you apply the information in this book?
Well, we know that while earning more money can help you save more, it is not a requirement.
That means, regardless of where you are in life right now, you too can become a prodigious accumulator of wealth. The best way to do that is to make a budget.
Does that mean you will be a millionaire? Not necessarily, but what it does mean is that you will be better off than you should be based on your age and income.
It will mean that you have worked hard and saved hard to get ahead of your station in life.
The most important thing to do if you want to become rich is to spend less than you make. This principle applies regardless of how much money you make.
Recommendation
The Millionaire Next Door is based on the information Dr. Stanley and Dr. Danko collected for various research studies they wrote over the years.
While the book reads more easily than a scientific paper, it is still pretty dense.
This book provides some great insights, but just know that it should be approached more as an academic study rather than a casual curl up with a blanket and be swept off to another land kind of book.
You definitely need to focus when reading this book as if you let yourself drift you might be left feeling confused.
One drawback was that there were a few sections in the book which I felt were somewhat repetitious.
If you can skim through these though, they definitely aren’t a deal breaker in terms of whether or not you should read the book.
If you are a parent seeking information about instilling financial skills in your children, this book doesn’t offer much advice.
While Dr. Stanley and Dr. Danko discuss the impact of parental spending/gift giving on one’s children, they offer little in the way of suggesting how parents can best teach their kids to be financially responsible.
Another book would likely be needed if you are looking for specifics in this area.
The Millionaire Next Door Conclusion
All in all, this book is worth the read, but do so at a time when you can fully commit to engaging in the material to get the most out of it.
It may be better to start out with an easier read
If you are more advanced in your personal finance knowledge, be sure to get the book here and start reading!
0 Comments