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Book Summary – The Millionaire Next Door: The Surprising Secrets Of America’s Wealthy

The Millionaire Next Door - Book summary

Many people dream of becoming millionaires and enjoying a lavish lifestyle. In The Millionaire Next Door, Thomas Stanley and William Danko present the surprising findings (based on 20 years of research) of how the majority of self-made millionaires truly live and build their wealth.  In this free version of The Millionaire Next Door summary, you’ll learn the key ideas from the book.

Most people define wealth as having plenty of material possessions. However, a lavish lifestyle is merely a sign of high expenses and not necessarily wealth. The authors identify a “millionaire” as someone who owns significant assets (including cash, investments, appreciable assets), with a net worth of at least US$1 million.

Defining Wealth

Contrary to popular belief, the process of accumulating wealth is not a flashy, rapid process, but a slow one that takes years. This is the typical profile of a wealthy, financially independent person from the study:

“(He is) a businessman who has lived in the same town for all of his adult life. This person owns a small factory, a chain of stores, or a service company. He has married once and remains married. He lives next door to people with a fraction of his wealth. He is a compulsive saver and investor. And he has made his money on his own.”



How much net worth should be expected, given your current age and income? Use this formula to calculate your expected net worth:

The Millionaire Next Door_Calculate Networth

To know where you stand relative to your peers (given your age and income), look at your actual net worth versus your expected net worth. The authors compare those they call PAWs (Net ) and UAWs (Under Accumulators of Wealth).

  • A PAW is in the top quartile for wealth accumulation, and has twice the level of net worth expected for his age/ income level.
  • A UAW is in the bottom quartile, and has half the level of net worth expected.
  • PAWs usually have at least four times the amount of the wealth accumulated by UAWs. For example, if you are 50 years old with a total household income of $90,000, your expected net worth is $450,000 – A PAW in this case may have a net worth of $1 million, while a UWA may have a net worth of only $250,000.


The 7 Denominators of Truly Wealthy People

From their research, the authors found that most self-made millionaires are PAWs, and they share 7 common denominators. Essentially, they live frugally, ensuring that they adhere to a strict household budget and invest prodigiously. They may not earn huge incomes, but they accumulate wealth by living well below their means.

Obviously, there are also millionaires who inherited their wealth, and/or earn such a high income that they have a net worth of over $1 million after deducting their high expenses. However, they tend to be UAWs, living lavish lifestyles but feeling quietly insecure about sustaining it. Yet, the mass media tends to focus on such sensational, flashy lifestyles, shaping our mistaken perception of “how the wealthy live”, and promoting the high-consumption culture that impoverishes many of our younger generation.


The Millionaire Next Door summary - 7 denominators of wealth

Here’s an overview of the 7 denominators. You can get more details from the full 12-page version of The Millionaire Next Door summary.

Living Well Below your Means

It is a myth that millionaires drive fancy cars, live in huge mansions in ultra-rich neighborhoods and wear designer clothes. Frugality was found to be a crucial foundation of wealth-building. The authors share the 4 common practices of wealthy households, and how the millionaires play offense with income-generation, and play defense with their spending.

Using Time, Energy and Money Efficiently

Time, energy, and money are finite resources, and wealthy people channel these resources efficiently to build wealth. They start earning and investing as early as possible in their adult life. Read more from the book or book summary on how the PAWs plan and manage their finances carefully, tracking their expenses closely and minimizing their “realized income” to reduce taxes.

Financial Independence, Not Wealth Artifacts

Wealthy people prioritize achieving financial independence over displaying a high social status. Find out from the book why staying in a prime neighbourhood or owning a luxury car sets you back in your wealth accumulation. Being financially-prudent also doesn’t mean being miserable – Most PAWs love what they do and how they live; despite their simple lifestyles, these financially independent people are actually happier than their UAW counterparts with a high-consumption lifestyle but no financial security.

No “Parental Economic Support”

It is common for parents and grandparents to offer economic gifts and “acts of kindness”, such as paying for the children or grandchildren’s private school tuition fees, or home mortgages. The authors caution against such handouts, and share their advice on the best ways to offer these gifts without inculcating poor financial habits.

Nurture Self-sufficient Adult Children

Most affluent, well-informed parents would want to progressively reduce the size of their estate before they pass away, so they can share the wealth with their children without leaving them with a huge estate tax liability. Get tips on some best practices to raise economically successful offspring, from our complete book summary (or read the book).

Leverage Market Opportunities

The affluent surveyed in this book – especially the self-made ones – accumulate wealth because they actively target and pursue market opportunities. Read more to find out what are some of the opportunities you should look out for.

Choose the Right Vocation

Most of the affluent in America are business owners, including self-employed professionals. Yet, less than 20% of these successful business owners pass their businesses to their children, and many even advise their children against business. While there was no clear predictor of which types of business generated more millionaires, most of the affluent business owners interviewed were in “dull” but stable businesses.


In essence, it doesn’t matter how much you earn; it matters more how much you spend and invest relative to how much you earn. The average people next door became millionaires because they chose the right occupation, faced their fears courageously and handled their money well with great financial discipline and frugality. These were what made them the millionaire next door.


Getting More from The Millionaire Next Door

This book was first published in 1995, and the business and societal landscape has obviously changed significantly in today’s internet age. However, these findings are a powerful reminder of how the average person can become a millionaire through a few (timeless) disciplines and principles, and how accumulated wealth can easily be lost by those who inherit them.

If you’d like to become a self-made millionaire, do check out our full book summary bundle that includes an infographic, 12-page text summary, and a 24-minute audio summary.

The Millionaire Next Door summary - book summary bundle

The book is presented mainly through examples and excerpts of the authors’ numerous interviews and surveys, giving the reader good insights into how the first-generation self-made millionaires think and make their decisions. The book also includes numerous tables and statistics, breaking down the income and expenditure amounts, time allocation, mean earnings, types of businesses etc. associated with the millionaires studied. You can purchase the book here for more details.

Check out useful articles on the 6 jars wealth-management system, and our book summary for Rich Dad Poor Dad.

About the Authors of The Millionaire Next Door

The Millionaire Next Door: The Surprising Secrets Of America’s Wealthy was written by Thomas Stanley and William Danko.

Dr. Thomas Stanley (1944-2015) was an American writer and business theorist. He received a doctorate in business administration from the University of Georgia, and was on the faculty of the University at Albany, State University of New York. He taught at the University of Tennessee, University of Georgia and Georgia State University (where he was named Omicron Delta Kappa’s Outstanding Professor). Dr. Stanley wrote extensively on the affluent in America, including 40 published articles, and was also the author and co-author of several award winning books on America’s wealthy, including the New York Times’ best sellers The Millionaire Next Door and The Millionaire Mind.

Dr. William Danko is an author and associate professor and chair of marketing at the University at Albany, State University of New York. He is the co-author of The Millionaire Next Door, and his academic publications have appeared in the Journal of Consumer Research, Journal of Business Research, Journal of Advertising Research, and other leading journals. In 1973, Dr. Danko assisted Thomas J. Stanley with his first study of the affluent. Since then, he has collaborated with Dr. Stanley on numerous academic and consulting studies.

The Millionaire Next Door Quotes

“It’s much easier…to earn a lot than it is to accumulate wealth.”

“It matters less how much more you make than what you do with what you already have.”

“Teach your children to achieve, not just to consume. Earning to enhance spending should not be one’s ultimate goal.”

“Operating a household without a budget is akin to operating a business without a plan, without goals, and without direction.”

“Those who are wealthy work at staying financially fit. But those who are not financially fit do little to change their status.”

“Whatever your income, always live below your means.”

“Wealth is what you accumulate, not what you spend.”

Click here to download The Millionaire Next Door book summary and infographic

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