The Millionaire Next Door Summary

The Millionaire Next Door By Thomas J. Stanley and William D. Danko Summary

This book was first published in 1995, and the business and societal landscape has obviously changed significantly in today’s internet age. However, these findings are a powerful reminder of how the average person can become a millionaire through a few (timeless) disciplines and principles, and how accumulated wealth can easily be lost by those who inherit them.

The book is presented mainly through examples and excerpts of the authors’ numerous interviews and surveys, giving the reader good insights into how the first-generation self-made millionaires think and make their decisions. The book also includes numerous tables and statistics, breaking down the income and expenditure amounts, time allocation, mean earnings, types of businesses etc. associated with the millionaires studied.

The 7 Key Lessons Of The Millionaire Next Door

The book’s authors discovered seven common denominators among those that they interviewed who successfully built wealth.

1) They live well below their means.
2. They allocate their time, energy.
3. They believe that financial independence is more important than displaying high social status.
4. Their parents did not provide economic outpatient care.
5. Their adult children are economically self-sufficient.
6. They are proficient in targeting market opportunities.
7. They chose the right occupation.

Read Also: The Science Of Getting Rich Summary BY WALLACE D. WATTLES

1) They live well below their means.

In the book, they discuss some of the interviews they had with what they called “decamillionaires”, or people worth at least $10 million dollars or more. Frugality was found to be a crucial foundation of wealth-building. The authors share the 4 common practices of wealthy households, and how the millionaires play offense with income-generation, and play defense with their spending.

 

2. They allocate their time, energy, and money efficiently. 

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.

They start earning and investing as early as possible in their adult life. Read more from the book or book summary on how the PAWs plan and manage their finances carefully, tracking their expenses closely and minimizing their “realized income” to reduce taxes.

3. They believe that financial independence is more important than showing high social status.

One would naturally think that if you are a decamillionaire and worth over $10 million dollars, that you might spend a little extra money on looking good or driving expensive and fancy cars. Wealthy people prioritize achieving financial independence over displaying a high social status. Find out from the book why staying in a prime neighbourhood or owning a luxury car sets you back in your wealth accumulation.

4. Their parents did not provide economic outpatient care.

What is “Economic Outpatient Care?”  In The Millionaire Next Door, this refers to parents who provide their kids money whenever they need it. The book gives an example of a married couple who outwardly seemed like they made a healthy living.

The authors caution against such handouts, and share their advice on the best ways to offer these gifts without inculcating poor financial habits.

5. Their adult children are economically self-sufficient.

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. As a father of two young boys, I feel that teaching them about how to make and handle money is one of the most important gifts we can give them.

6. They are proficient in targeting market opportunities.

The affluent surveyed in this book – especially the self-made ones – accumulate wealth because they actively target and pursue market opportunities. Millionaires aren’t just independent in their job roles, but they are also able to notice market opportunities to make money. The Millionaire Next Door mentions that often times this means they follow the money and are often selling products and services.

7. They chose the right occupation.

A common denominator among the many interviews and studies of millionaires in America is that they choose a profession where the ability to make money is apparent. 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.

 

 

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