The Millionaire Next Door

Picking this book

We were fortunate the week before last to take a quick trip down south to enjoy the sun and recharge before entering the very busy Holiday Season. Before we were about to set out I knew I wanted to take 2 things for the trip. First I wanted a game to play on the plane (I chose Diablo 3 for the switch) and an audio-book to listen to by the pool and for shorter bursts while traveling.

I had recently heard two books floating around the first which was this book and the second being Passive Income Factory. A quick look at Spotify and luckily enough the Millionaire Next Door was on there for premium members. A nice and easy choice.

My Thoughts

So right off the bat this book by Thomas J Stanley and William D. Danko dives into stats that they have gathered after interviewing 500+ millionaires and surveying thousands of high-net-worth individuals. When they throw out dollar figures especially in terms of the cost of things it will seem quite low as this book was published back in 1996. However, the core concepts still hold true to this day and you can always to a quick conversion in your head.

One of the first concepts that is presented is the the wealth equation. You simply take your Gross Income, also known as pre-tax income, multiply that by your age then divide by 10.

• If your net worth is under the resulting number you fall into the UAW category or are an Under Accumulator of Wealth
• If you are right around the number you are an AAW or an Average Accumulator of Wealth
• Finally if you are above the number than you are a PAW aka Prodigious Accumulator of Wealth

Personally I think this is a great simple way to get a baseline and see how you are doing. If you are freshly out of school or just landed your first big job you’ll most likely be in the UAW category but with some discipline you can likely make it to AAW before you know it.

12 Commonalities of Successful Wealth Builders

1. They live well below their means
2. Belief that financial independence is more important than living the high life and showing off
3. Their parents did not coddle them or provide much economic support
4. They are deliberate and allocate their time, energy, and money efficiently in ways conducive to building wealth
5. Their adult children are self-sufficient
6. They are proficient in find their niche (when being entrepreneurial)
7. They chose the right occupation for themselves.
8. They save at least 15% of their income.
9. 80% are first-generation millionaires
10. The majority build frugal habits from the early years
11. Millionaires of the survey are all investors (not all necessarily in stocks but most were)
12. 97% are homeowners which I wrote about more common stats a few weeks back here

Quotes that spoke to me

• “Most people will never become wealthy in one generation if they are married to people who are wasteful. A couple cannot accumulate wealth in one of its members is a hyperconsumer. This is especially true when one or both are trying to build a successful business. Few people can sustain profligate spending habits and simultaneously build wealth.”

• “After twenty years of studying millionaires across a wide spectrum of industries, we have concluded that the character of the business owner is more important in predicting his level of wealth than the classification of his business.”

• “You can’t predict if someone is a millionaire by the type of business he’s in.”
  • I forget which chapter but in one chapter they speak of a man who runs a successful janitorial business whom lives in a very affluent neighborhood. Most of his neighbors did not think he belonged and even thought having him in the neighborhood devalued it especially when he had work trucks parked in his driveway. Meanwhile he was likely the most wealthy individual in the neighborhood and purposely lived well below his means so his staff wouldn’t think differently of him
• “Millionaires rarely trade and don’t follow the ups and downs of the market day by day. Most don’t call their stock brokers each morning to ask how the London market did.”
  • While this statement definitely shows the age of the book the important piece is they set and forget while going about and living their life.
• “Children who received wealth from their parents tend to have 19% lower net worth than those who have not received a gift and 9% lower annual income.”

Final Thoughts

All in all this was a great listen and likely an even better read as you could quickly glance back at the numbers and stats. I found myself rewinding a few times to ensure I heard the correct stats. Part of me wishes this book was more current but aside from that it was fantastic. Many examples / short stories and I am sure at least a few with connect with you.

Thomas J. Stanley also has a blog The Millionaire Next Door Blog

That’s all for this week I hope you give the book a shot and wish you a Happy Holidays. WE are looking forward to seeing family and friends over Christmas!