The Millionaire Next Door by Thomas J. Stanley and William D. Danko
Authors Thomas J. Stanley and William D. Danko write about how people become wealthy based on a 20-year long study, as well as inner case studies. This group of people who are wealthy are followed along and go through numerous studies and interviews, being recorded of what they purchase, drive, and do for a living. The people in the study are worth one to ten million dollars. The books specifically focus on seven common characteristics to explain why they are so stable:
- “They live well below their means
- They allocate their time and money efficiently, in ways conducive to building wealth.
- They believe that financial independence is more important than displaying high social status.
- Their parents did not provide economic outpatient care.
- Their adult children are economically self-sufficient.
- They are proficient in targeting market opportunities.
- They chose the right occupation.” (Danko, Stanley 3)
This book is meant to break the expression of looks can be deceiving. They use an example of a Texan man who owned a big diesel business. When he went to a meeting, the other people just thought he was one of the truck drivers. He said “I don’t own big hats, but I own a lot of cattle. (8) The Texan man was making fun, because he doesn’t dress in a lavish suit, with expensive shoes, and a name brand watch. He looks like any normal guy. “Big Hat No Cattle”
In Chapter 2 called “Frugal Frugal Frugal” focuses on the idea that becoming the wealthy needs discipline and it’s all in your behavior. Why would a millionaire need a budget? Most people who jog every day already look good, and in shape. But that’s why they jog, to stay in shape. (40) He relates it to the wealth of people. Millionaire doesn’t just quit their jobs just because they seem to have enough to be finally fit. They continue to work and budget necessities so they can stay in that finally fit status.
As mentioned previously, the book breaks the message of looks can be deceiving of the wealth. The people that we think are the millionaires are much more likely to be in debt, just like anyone else. In Chapter 4 “You Aren’t What You Drive” 30 percent spent That guy driving down the street in the decked out in the luxury car, may secretly be in so much debt that’s the last month he’ll be able to lease it. It’s not what you spend, it should be about what you save.
Another section of the book that I really feel is important to talk about when reviewing is Chapter 6 “Affirmative, Family Style”. The author’s talks about children, and that as a parent you should discipline and encourage them to learn how to be independent and financially healthy. Some quick points made is never telling your children you are wealthy, teach them to be frugal (mentioned previously), limit talking about the inheritance and gifts to them, and never give cash as gifts to your adult children. The goal is for your children to grow up with their own careers, and be mentally and financially independent.
Moreover, the family style in the chapter it discusses the inheritance and gifts to the children from their affluent parents. They used an example of housewives, Type A and Type B. Type A is a stay at home mother, with no job but married a wealthy significant other. This type helps their parents out and take the leadership role as the parents get older. The affluent parents will give more gifts and estates’ because they see leadership qualities in Type A housewife. There is trust, and the inheritance will be in return for helping out the family.
On the other hand Type B housewife will not receive as many gifts and inheritance from her affluent parents. They are adult children who still need their parents emotional and economical support. This type has a low-income job married to a low-income husband. They depend on others, and are less educated than Type A. “Type Bs are cared for by their parents instead of the other way around.” (178) Type Bs are less likely to get as much inheritance and gifts from their affluent parents than Type A because the parents are scared of the inheritance being poorly managed. The book points this out because it goes to show that being independent, for a woman, goes a much longer way.
The final chapter of “The Millionaire Next Door” relates to us, the readers as “Find Your Niche” Chapter 7. Choosing the right occupation does have something to do with your wealth, which we all know. The millionaires of that time took advantages of different strategies and business opportunities America has. The book was written in 1996, but they estimated in the next 10 years (so 2006) that there would be a surplus of money and opportunities serving the wealth would be greater. It’s true looking back on it now. There’s an increase in jobs like dentistry, plastic surgeons, dermatologists, pawn brokers, accountants, mortgage lenders, etc. (220-224) And this book predicted it.
I highlighted the main chapters of the book because I thought they were relevant and very interesting.
“The Millionaire Next Door” is a book I would recommend to my fellow colleagues. This book is all meat and potatoes, no side dishes. Although for the young audience I think it is much because at this young age with no assets we should be focused on getting a set foundation. It has so much useful information and gets straight to the point with a logical perspective. I would even call it a quick read because it was very easy to pick up and put down and jump right back into it. The only concern I have is that this book was written in 1996, and I feel millionaires are a little different in today’s society. I would love to see some updated material of the same studies. I’m sure a lot has changed.
This is a book made for everyone to read. We have questions, Danko and Stanley give us the answers. I enjoyed reading this book because it helped me think in a realistic way. Even though I’m getting a good education, staying in school, and hold a decent job at the age of twenty I understand there’s a slim percentage of me having a net worth of one million dollars. I have no interest in the jobs that have the highest salaries like being a lawyer, doctor, etc. It’s fine, I’m okay with that. But just to know that there’s a chance for me to build my wealth consistently rather than actively (ex. Big salary) is eye opening.