(The Millionaire Next Door) by Thomas J. Stanley, William D. Danko [Book Summary]


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Millionaires are rich people with eccentric behaviors. They are showy people who tend to purchase products and services just because they are expensive.

They have an extravagant lifestyle which cannot be easily matched by many, which includes: buying fast motor-vehicles, expensive yachts, and living in huge mansions in places such as the luxurious Hollywood Hills.



This is the point of view from the ordinary middle-class man and those further below in the economic ladder. But, is it all true? The truth is most millionaires living in America actually do not live such an extravagant lifestyle. On the contrary, they have a humble way of living which, when further thought is invested in, made them the rich people they are in the first place.

The following chapters, if followed upon keenly, can also teach you the means of becoming a millionaire. If one is determined enough to manage their finances well, then the path to becoming a millionaire shall be walked on by them too.


Wise budgeting, as opposed to living an extravagant lifestyle, is the way millionaires sustain their wealth.  


Many people think being a millionaire entails purchasing clothes from high-end brands such as Prada. Or even coupling your breakfast with expensive champagne every morning. But contrary to popular belief, this is not the case. In fact, most millionaires do the opposite by buying less expensive items than most people do. This, coupled with a content attitude while doing so.

If becoming a millionaire is what you wish for, then you have to acquire the skill of responsible saving. This is vital especially once you start earning more than you need to spend on survival.

Most self-made millionaires have ‘earned’ their money by self-disciplinary monthly savings. Owing to that they come from humble backgrounds, this is an effective method for them to sustain their money. This is a means that you too can use to become a millionaire without actually earning a million dollars a year.

People become millionaires and sustain their wealth in the same way. This is by keeping a watchful eye on their incomes and spendings. Coupled, with this is their ability to avoid being myopic i.e they think about the future and plan for it.

According to a survey, for every 100 million millionaires who were not keen on their budget and considerate of their financial future, there were 120 million millionaires who were.



If a person wants to become a millionaire, it is important that they plan ahead and organize their finances. A good exercise to start with is through setting a goal. For example, this can be a specific desired amount of money one wants to set aside for retirement. With this target in mind, budget accordingly. Which means monitoring your expenses, daily expenditures, and investments.


There is a millionaire couple in Mr. and Mr. Rule. The two of them, despite being rich now, plan on being financially free by their retirement. For their goal, they set out to have saved $5 million.

To actualize their dream, the two intelligently organize their time and money in such a way that it not only allows them to continue investing in their current business but also to keep up with the savings they make from their earnings. Their goal is to be capable of using this money for real estate purchases or home renovation projects.


Financial freedom is way better than a showy social status. This is the attitude held by true millionaires.


A lot of real-life millionaires are more focused on attaining financial freedom than they are on having an elevated social status surrounded by flashy cars and houses.

The importance of financial freedom cannot be stressed enough. For those individuals living on the same income bracket, it can bee is seen that those who are financially free are better off in terms of well-being than those who are not. Financial freedom does have a vital impact on a person’s well-being.

Recently there have been increasing mentions of financial independence, but what is this concept exactly? Basically, if one is financially free it means that once they retire they will be able to maintain the same lifestyle they are living right now, and in case of a future financial crisis, they would be able to survive.

Characteristics of financially free people include the capacity to be certain and crystal-clear about one’s future goals. This, coupled with the ability to organize and stick to a household budget that fits one’s own individual priorities.

If we take another look at the Rule family again, we see that Mrs. Rule is a happy, financially independent woman. She is financially secure which means that in the case where she suffers from a physical injury or illness, she does not need to be dependent on anyone for financial aid. She’s so secure to the point that it allows her to allocate savings for her own grandchildren, whom she hopes will graduate from college one day.



A lot of us can imagine classical American millionaire. The one who looks like they have too much money than they actually do, resembling a rancher who actually has no cattle on his farm. They are the flashy ones who tend to drive extravagant cars on average incomes. Or those who struggle to sustain their riches even though they earn decent incomes.

We cannot define such people as ‘true millionaires’. In truth, they do not have as much money as we would have expected them to have. There is a simple equation that can be utilized to calculate the expected wealth of a person. This equation is: the person’s age multiplied by the pre-tax annual household income, divided by ten.


For instance, if Mr. Friend earns $221,000 one year and he is 48 years old, his expected wealth would be 48 multiplied by 221,000, then divided by ten, which equals $1,060,800.

But since Mr. Friend prefers to waste his money on extravagant products and services, his real net worth is no more than $260,000. This disqualifies him from being a millionaire. As a matter of fact, it makes him a rancher with no cattle on his farm. We can label Mr. Friend as an under-accumulator of wealth.

We can clearly see that his worth is not as much as it could be.


Knowledge of where and when to spend money is a trait of millionaires. It is wise to invest in what you know!


Do millionaires always know what to invest in? The answer is yes. Smart millionaires would firstly sort out and acquire medical care for their family. Also, they would invest in means that would effectively make their business more productive and assure growth.

Even though they acquired their millions by being economical on costs, smart millionaires would splash a lot of cash on receiving advice on taxes, purchasing investment services or spending on medical care for themselves and their families.

In addition to this, they know the products to invest in that would lead to the growth and development of their businesses. This may include additional office space, computer software or even specialized staff.

Mr. South is a millionaire whom we could take as an example. As opposed to buying a Rolls Royce and being so flashy, he chooses to invest in his grandchildren’s dental care package. For him, financially, this makes more sense as opposed to buying an extravagant car. After all, in his lower-middle-class neighborhood, the purchase of such a flashy would attract too much attention.



To spend smart, one needs to plan smart. It is the habit of successful millionaires to spend a large amount of their time on planning investments. More often than not, this leads to them earning more from their investments than those who ignore their planning phase.

In addition to this, the value of expertise cannot be neglected. Especially when you are planning on elevating your wealth by investing in a specific line of businesses. In this case, planning, on its own, is not sufficient but also requires expertise. Each person is well-skilled in at least one field. If you are planning to invest and get millions, you should your expertise in that particular field to your own advantage.

Mrs. Smith, for instance, is an auctioneer who specializes in commercial real estate. Therefore it would be wise for her to invest in commercial real estate, of course.

As for Mr. Long, who is a specialist in antique furniture, it would be unwise for him to invest in high-tech securities. Rather he should invest in what he familiarly knows.


Sharing the wealth with their own children is another characteristic of millionaires, despite the fact that this could potentially hamper them.


So far we have discussed the lifestyle and traits of millionaires, but what about their children?

It is not an uncommon thing to find out that most millionaires bring up their children without much financial support.

Despite being frugal, millionaires do actually spend a lot on economic outpatient care. This translates to their children receiving monthly cash gifts, having the costs of medical treatments and education covered, and more.

However, the more money the adult children of these millionaires receive, then the less likely they are to save. On the other hand, the less money they receive then the more likely they are to save.

When the children of millionaires are constantly supported by their rich parents, it could prevent them, the children, to be financially independent. By being constantly supported, they do not need to engage their minds intensively on the same methods that their parents utilized to acquire and sustain their millions. This, in turn, prevents the adult children from developing the ability to budget intelligently.

If you did not know, 46 percent of wealthy Americans actually support their adult children and/or grandchildren by giving them cash or gifts of at least $15,000 each year. This could result in children and/or grandchildren to develop the habit of dependence.

For instance, take Mary who receives $15,000 yearly from her parents since she got married. Mary and her husband are in the dawn of their 50s and they live in a great neighborhood, own luxurious, extravagant cars, are members of a country club and take part in several non-profit organizations.



Judging from their lifestyle, they seem like millionaires. However, this is not the case. In actuality, the couple never earned more than $60,000 annually.

A child’s buying habits are affected by how their parents deal with the spending and saving of money. It is normal to find that different families have different tendencies and attitudes with regards to purchasing and investing. The children who take up after their parents’ financial habits are therefore influenced by their parents’ budget policies.

So, it is wise to teach your children good habits of spending, saving and investing.

Take John for instance. John is an under-accumulator of wealth (UAW). This is due to his spending habits since he spends his money on purchasing designer clothes. His habit is linked to his parents who used to go shopping every Saturday, buying items just for the sake of buying, and now John exhibits the same qualities.


It is the most non-financially independent children who tend to get the biggest slice of the family inheritance.


After we die, we will have to leave our material wealth with someone. The question is who? Although the claim by most millionaires is that they will equally divide their wealth among their children, it is not the case in reality. In reality, there are those children who are more likely to receive more than their counterparts.

Let us take a look at housewives. Millionaires, or in this specific case, wealthy parents already know that in society men tend to earn more than women. As a result of this, they opt to share a larger portion of their wealth to their daughters.

This is more likely especially when one of their daughters is a housewife and has a close bond with her parents. Or if she is in a compromised position such as not being able to complete a college education. They are more likely to get a considerable amount of inheritance.

In this case, we have Alice who was her father’s favorite. Alice’s father commenced economic outpatient care for her ever since she got married to a man with a modest income.

In addition to this, Alice had to quit school to be at home with her two children. Her father would not allow Alice to live in a home that was not as good as his upper-middle-class image so he started the outpatient care for her.



Unemployed children can also be compared to housewives. They tend to receive more money, gifts and eventually inheritance than their working siblings. The children of millionaires, in several situations, tend to be either unemployed or ‘professional students’ – which not only means that they have never had any jobs but also that they do not work.

Instead, they can be described as ‘students for life’ as they choose to study all their lives. Most parents see these children as not being financially independent and therefore feel the need to support them more than their financially independent siblings.

Another of cash gifts stems from over-funded college savings accounts which are pointless once a child decides to stop school.


Paul and Peter are the children of millionaire parents. Paul dived into entrepreneurship, moved far from home, became financially independent and declined cash gifts or support from his parents.

Peter, on the other hand, moved back to his parent’s home after graduating from college. This is because he did not want to seek out full-time employment. As a result, now Peter gets allowances for his housing, food, clothing, and transportation necessities from his parents.

After the death of Paul and Peter’s parents, it was not odd to see that Peter – still being financially dependent –  is the one who received his parent’s inheritance.


The Millionaire Next Door: The Surprising Secrets of America’s Wealthy by Thomas J. Stanley, William D. Danko Book Review


As we have seen, the average millionaire does not live a flashy and extravagant lifestyle.

Contrary to this, many live a modest life. Spending way less than they earn, saving, planning, budgeting wisely and making intelligent decisions on the use of their acquired wealth. If you desire to be a millionaire one day too, it is quite possible if you follow these principles and traits of millionaires.


It is no doubt that being financially independent is better than being flashy and extravagant but without any real financial backing.

When you start earning a decent amount of money, perhaps more than you need for survival, it would be wise to employ the strategies of planning ahead and budgeting as opposed to spending it all on ostentatious products. A healthy bank account is a key to a healthy life!


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