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The Millionaire Next Door

By Thomas Stanley & William D. Danko

What does it take to be a Millionaire? Most people get this wrong here. It is not always luck or inheritance or advanced degrees or exceptional talent or pure genius that enables people to be rich and become millionaires.

Wealth is more often the result of a lifestyle of hard work, perseverance, planning, and, most of all, self-discipline.

In “The Millionaire Next Door”, authors Thomas Stanley & William D. Danko examine the common characteristics of millionaires, debunk the myths associated with millionaires, and provide a detailed perspective of what a real millionaire looks like.

Using real-life data and examples, the book analyses the habits of the wealthy and wheedles out their common attributes, practices, and ways of life.

8 key learnings from this book
Who is a Millionaire - Seven traits?

He is a compulsive saver and investor. And he has made his money on his own. Affluent people typically follow a lifestyle conducive to accumulating money. In the course of our investigations, they discovered seven common denominators among those who successfully build wealth.

1. They live well below their means.
2. They allocate their time, energy, and money efficiently, in ways conducive to building wealth.
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.

Millionaires don’t live a Hi-Flying life and they budget wisely.

Most Millionaires don’t wear expensive gadgets or drive flashy cars. And contrary to the popular belief, they spend less on expensive items and they are happy doing this too. These millionaires also practised long-term thinking and planned for their future.

A survey of millionaires found that more millionaires are thinking and budgeting and planning about their future.

Definition of Wealthy

One way we determine whether someone is wealthy or not is based on net worth- "cattle," not "chattel", net worth is defined as the current value of one's assets. In this book, we define the threshold level of being wealthy as having a net worth of $1 million or more. This book was published in 1996 i.e., around 25 years back. In current terms, wealth would mean 1.71 million today, adjusted for inflation.

Millionaires Live “Below Their Means” – They Are Frugal

Webster's defines frugal as "behaviour characterized by or reflecting economy in the use of resources."
Authors experimented with and created lavish gourmet food and expensive wines at a posh restaurant. During the subsequent two-hour interview, the nine decamillionaire respondents shifted constantly in their chairs.

Occasionally they glanced at the buffet. But not one touched the plate or drank our vintage wines. We knew they were hungry, but all they ate were the gourmet crackers. Unfortunately, some people judge others by their choice of foods, beverages, suits, watches, motor vehicles, and such. To them, superior people have excellent tastes in consumer goods. The opposite of frugal is wasteful. We define wasteful as a lifestyle marked by lavish spending and hyper-consumption. Being frugal is the cornerstone of wealth-building.

Millionaires know where and how to spend their cash

Although frugal, these millionaires know how and where to spend money and do it wisely. They invest in buying investment advice, tax consultations or medical care services. They also invest in assets that will make them more productive. For example – buying more office space or upgrading software.

They also plan smartly and get expert advice so they can use it to their advantage while investing.


PAW - Prodigious Accumulator of Wealth.
If you are in the top quartile for wealth accumulation, you are a PAW.

UAW – Under Accumulator of Wealth
If you are in the bottom quartile, you are a UAW.

Difference between PAW and UAW

1. PAWs allocate nearly twice the number of hours per month to planning their financial investments, as UAWs do.
2. PAW has nearly 4 times the wealth accumulated by UAW.
3. UAWs tend to live above their means; they emphasize consumption.
4. Members of the UAW group have a higher propensity to spend.

Children of Millionaires

In most cases, millionaires don’t raise their kids with much financial support. UAWs tend to produce children who eventually become UAWs themselves. What is expected of children who are exposed to a household environment predicated upon very high consumption, few-if any-economic constraints, little planning, or budgeting, no discipline, and pandering to every product-related desire? Like their UAW parents, as adults, these children are often addicted to an undisciplined, high-consumption lifestyle. Further, these children typically will never earn the incomes necessary to support the lifestyle to which they have grown accustomed.

The Norths consume at a level that is more congruent with a household earning less than one-third of their income. This living below their means is precisely why PAWs throughout the income spectrum tend to produce children who are economically disciplined and self-sufficient adults. PAWs tend to produce children who become PAWs.

Rules -
1. Always focus on teaching discipline with money and the art of being frugal.
2. Never use cash as part of a negotiation, especially with your adult children.
3. Never see your children as competition.
4. Remind yourself that each one of your children is their individual, independent person.


The children of Millionaires who are more financially dependent receive more inheritance comparatively. For example, women who stay at home as unemployed adults receive more inheritance. Parents perceive these children require more independent support and hence require more financial support.

Final summary – Many millionaires don’t live a flashy Hollywood life. They usually live below their means, invest wisely, and budget intelligently. They are careful about their spending behaviours and patterns. Every person who wishes to be a millionaire should follow these simple yet effective steps.


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