The Millionaire Next Door: Stanley and Danko on the Surprising Secrets of America’s Wealthy
Have you ever wondered why the rich get rich? What do they do differently throughout their lives? The Millionaire Next Door answers with interviews and data, and its answer is not the lavish lifestyle of the millionaires in films.
Authors: Thomas J. Stanley and William D. Danko
Title: The Millionaire Next Door: The Surprising Secrets of America’s Wealthy (1996)
Format: English paperback (Taylor Trade Publishing), 274 pages
Scope: Personal finance, research-based
Amazon: www.amazon.es/dp/1589795474 (ASIN 1589795474)
Interviews and Data
The book is built on interviews carried out for a study, supported by charts and tables with data from different US states. It compares the upper middle class with poor accumulators of wealth: their way of life, their routines, their finances and their use of credit cards.
Not Like the Movies
Our image of the rich is very different from the reality. Real millionaires promote saving, controlled spending and a minimalist lifestyle. They tend not to talk to their children or grandchildren about their money, to avoid envy, conflict and fights over inheritance; their children may grow up not knowing they are rich. The truly rich do not compare themselves with others, do not waste money, have healthy habits and live among everyone else, hence the title.
The Habits of Wealth
They rarely travel abroad except for work and do not buy luxury brands. The culture of saving is what sets them apart. Taking out loans to buy a car is what people who cannot manage money do; the best policy is always to spend less than you earn and avoid debt, to buy second-hand and not be fussy about brands, to buy a house rather than rent for ever, and to invest in property and low-risk funds. In the long run, quality of life is better.
The Authors
Thomas J. Stanley and William D. Danko were American academics who had spent years studying affluent households, originally for companies that wanted to sell them luxury goods. To their surprise, they found that most millionaires did not fit that market at all. Published in 1996, The Millionaire Next Door turned their research into a bestseller that has remained in print ever since. Stanley died in 2015; his daughter, Sarah Stanley Fallaw, continued the research in The Next Millionaire Next Door (2018).
PAWs and UAWs
One of the book’s most memorable tools is a simple formula for judging whether you are building wealth: multiply your age by your annual pre-tax income and divide by ten. That gives your "expected" net worth. Those with much more are "prodigious accumulators of wealth" (PAWs); those with much less are "under accumulators" (UAWs), often people with high incomes and expensive lifestyles who look rich but have little saved. The distinction is a useful wake-up call.
Big Hat, No Cattle
The authors borrow a Texan expression to describe people who display all the signs of wealth, the expensive house, car and watch, but own little: "big hat, no cattle". By contrast, the typical millionaire they surveyed was a self-employed business owner, married, living in an ordinary neighbourhood and driving a used car. Many had built their wealth in unglamorous trades, by spending carefully and investing steadily over decades.
Still Relevant?
Some figures and examples belong to 1990s America, and critics note that the survey focused on people who had succeeded, not on those who were frugal and still struggled. But the central lesson, that what you keep matters more than what you earn, remains sound.
Why Read It
A classic of personal finance whose lessons are simple and still relevant. It is especially useful for readers who confuse looking rich with being rich.
As an Amazon Associate, this site earns from qualifying purchases.
Part of the reading recommendations featured on books.sapiensverbum.com.
