The Millionaire Next Door: The Surprising Secrets of America's Wealthy

The Millionaire Next Door: The Surprising Secrets of America's Wealthy

by Thomas J. Stanley

The incredible national bestseller that is changing people's lives -- and increasing their net worth!


Who are the rich in this country?

How did they get rich?

Get the answers in The Millionaire Next Door, the never-before-told story about wealth in America.

  • Language: English
  • Category: Economics
  • Rating: 4.02
  • Pages: 258
  • Publish Date: October 1st 1998 by Gallery Books
  • Isbn10: 0671015206
  • Isbn13: 9780671015206

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I learned that there are seven characteristics or common denominators among millionaires in America. You can display high social status all you want, but if you're still dependent on active income then you're one very vulnerable fella. 4.Their parents did not provide economic outpatient care - Pretty good training ground, don't you think? We need to learn the lessons.

UAW = Under Accumulator of Wealth (1/2 of AAW) AAW = Average Accumulator of Wealth PAW = Prodigious Accumulator of Wealth (2 * AAW) To figure out what category you are in - do the following formula: Age/10 x Income Example: Age 30, Income $45,000 30/10*45000 = $135,000 This person should have net worth of $135K. UAW = $67,500 AAW = $135,000 PAW = $270,000 To figure out your actual net worth - do the following formula: Assets - Liabilities Example: Age 30, Income $45,000, Credit Card Debt $12,0000, Car Loan $20,000 45000-(12000+20000) = $13,000 This person has Net Worth of $13K.

The point of this book comes through loud and clear, the people that we think are millionaires are more than likely swimming in debt. Just because you live in a fancy neighborhood and drive an expensive car does not make you rich.

Most Americans believe "wealthy" and "high-income" are synonymous. Surprisingly, most high-income earners are not wealthy; although they earn a lot of money, they don't keep much of it. The book categorizes people as PAWs or UAWs; Prodigious Accumulators of Wealth (PAWs) achieve, create wealth, become financially independent, and build from scratch. Under Accumulators of Wealth (UAWs) simply display a high-status lifestyle. This book explains 7 factors that contribute to wealth-building. Also, 80% of American millionaires are 1st-generation rich, people who earned their wealth rather than inheriting it. I liked the comparison between budgeting and dieting or exercising. They believe that financial independence is more important than displaying high social status.

The rest of the book is filled with awkward, pedantic number-twisting to prove that people who spend less on houses and cars will have more left for retirement. Wouldn't the $65,000 he spent on a Porsche have felt just as good in an IRA account?

According to this book, there are two kinds of people: under-accumulators of wealth (UAWs), who spend everything they earn as soon as they get it (to say nothing of credit cards); and prodigious accumulators of wealth (PAWs), people who live frugally, save, invest, and end up becoming millionaires. So when you see someone who lives in a fancy house and drives a fancy car, chances are, hes not a millionaire. Now thats an inspiring idea, one that made me go into this book with some hope of getting rich someday, but I didnt have to read very far to realize that Im in a hopeless UAW rut. This was the longest section of the book, and I found it a bit repetitive, but then again, perhaps thats part of my shame reaction.

I think they completely lost my interest on page 75 when they write: "How else does one explain why two experts on wealth are not wealthy? Because they spend a whole lot of time enumerating some pretty sound steps that millionaires take to get wealthy (1. 2. they allocate...) Most importantly, there were 5.3 million households in America in 1997 (when the book was written) that were millionaires. On page 249, they review that they chose the millionaires they surveyed based on geocoded neighborhoods- but this goes against what they spent 248 pages proclaiming! They spend the entire book professing that millionaires don't live in certain neighborhoods, then go on to say they only know this because they surveyed certain probable high-net-worth neighborhoods. So I reluctantly recommend people read the book just to glean that bit, but with hesitance because I understand they will have to sort through boring charts, stereotyping, and bad writing to get advice. Readers would be better off reading a Ramsey book, which is captivating and not doesn't drown out the message with boring stats.

However, this can be used as a great parental tool to ensure parents teach their kids the right money tactics, whether starting rich or not. In essence, the lessons from the book are to remain frugal, save money and to ensure you keep your money wherever possible.

i.e. Rolls Royce as a gift was denied by a millionaire because all his accessories, clothes etc things would needed an upgrade to match that status symbol. Millionaires don't care about status symbols. Frugal millionaires have less worries in general. Household net worth = Household Income + Investments - expenses. Worth of a person should be >= Age / 10 * Annual earnings before taxes (no investment). If you are rich, your kids could have less net worth if you get into a teaching of spending or supporting them financially. Never give cash or other significant gifts to your adult children as part of a negotiation strategy. Tell your children that there are a lot of things more valuable than money I, however, would rather have that questions hanging over me than having worries of how to sponsor my brother's / kids' education while carrying a $500 Nokia phone and driving a 8 cylinder fancy sports car...

This book talks mainly about self employed people but everyone with a decent household income living frugal and investing money can become a financially independent.

His Millionaire Women Next Door was selected as a finalist for the business book of the year by the Independent Publishers Association and was on several business best sellers lists. Dr. Stanley served as chairman of the Affluent Market Institute through which he has developed research based marketing and selling strategies for identifying, attracting and retaining wealthy clients.