The Millionaire Next Door: The Surprising Secrets of America's Wealthy Paperback – November 16, 2010

If you are not an avid reader this is a very difficult book to keep picking up, however, it was probably one of the most effective financial books I have read in my young adult life. It calls me out on my spending habits, how I treat/view money, and even how I raise my family to treat/view money. I believe every young adult needs to white knuckle themselves through this book to understand *how* to discipline yourself and your spending habits. Fantastically deserving of 5 stars.

Ask anyone about the lifestyle of millionaires not just in America but in any country in the world, he / she will most likely tell you about yachts, luxury travels, expensive cars, dream homes, heavy consumption, expensive jewelry etc. Very few people are likely to talk about frugality and a modest lifestyle as the characteristic lifestyle of millionaires. After all who spends all the money on luxuries if not millionaires ? Do you think the answer is millionaires ? Wrong : it is high income generating and / or high debt hyperconsumers. But aren't high income generators also millionaires ? Answer : not most of the time. In this book the authors Thomas J. Stanley and William D. Danko explain with examples that most millionaires are self made ; they are not necessarily inheritors of wealth. In fact inheritors of wealth are usually hyperconsumers who spend it all away and do not end up becoming millionaires like their parents. The number one characteristic of the millionaire lifestyle is frugality ; living below their means and investing the surplus wisely. Many people do not know the difference between income and wealth. High income is good in building wealth if it is not all spent away but some of it is invested. The problem is that this requires delayed gratification which requires self discipline that most high income people don't have. So following years of upper middle class standard of life characterized by hyperspending they end up retiring with no wealth.The wealthy on the other hand delay luxurious consumption and invest a certain percentage of their incomes into income generating assets. When their accumulated wealth reaches a certain level they purchase luxuries without endangering their wealth. So most of the people you see on yachts, wearing expensive watches and jewelry are high income generators who will most probably end up with no wealth in their older years. The people in the process of becoming millionaires which could take 30 years or even more live in modest neighborhoods, drive ordinary sometimes even second hand cars, dress and in short live modestly in everyway. Some of them may have high incomes but a vast majority of them have learned to get by on a modest income and generate wealth from that average income by saving and investing about 10 % of their income every month for about 30 years or so. It doesn't matter where they invest ; stocks, Treasury Bills etc. Compounding small income streams over 30 years buids enormous wealths.One very striking thing that the authors mention is how adults receiving financial support from their affluent parents develop weak characters in terms of wealth building ability. They are in fact adult children, because they haven't developed the self discipline to be frugal and build wealth. Their well meaning parents unknowingly make them weaker by supporting them financially. Their children are often adults in their 30's, 40's and sometimes even 50's and surprisingly many of them have careers ; some are professors, doctors, lawyers etc. Their common trait is that they enjoy an upper middle class lifestyle through hyperconsumption financed in part by their own incomes but to a great extent by financial support provided by their wealthy parents who may be in their 80's by now. They think their parents' wealth is their income. In reality their parents are wealthy but they are not. What is even worse is that their children also get accustomed to the upper middle class living standard. But once the financial support and / or inheritance from the grandparents is all consumed away the grand children risk falling into a poor lifestyle. Because nobody other than the grandparents knew how to build wealth. In fact, many of these adult children are aware that they can not generate wealth and therefore worry and are very anxious about their future. In summary, when the affluent provide for " financial outpatient care" by financially supporting their adult children they prevent the development of the character qualities such as frugality in them. So their children and or their grandchildren are often doomed to a poor lifestyle following an irresponsible hyperconsumptive life funded by parental financial help. Although the authors have written these for the USA I would like to add that this is the situation in many countries including the USA. I just didn't know that it was as prevalent as the authors explain.We can learn a lot from this book / CD but the sad thing is that it is probably difficult to change our lifestyles and habits if it turns out that our present consumption / saving habits are not making us millionaires ; if for example your family's lifestyle is hyperconsumptive and there is no frugality, you may have a hard time after reading this book in changing the habits of all the family members so that everybody will become frugal and thereby increase the chances of you and your family becoming millionaries.

This is the second time I read this book. It does provide a lot of tips and financial advice. The reason I give it a four star review instead of a five is because the book provides a lot of statistics and trends from the 90's. I think otherwise is still a very good book to read.

Are some of the illustrations out of date? Yes. Do some of the ideas such as men with long term marriages most likely to be millionaires non PC? Yes. Save instead of spend obvious? Yep. Uncomfortable mirror if you belong to a country club, drive a brand new luxury car, have a Rolex, send your kids to a private prep school and then get derided as a UAW (under accumulator of wealth) repeatedly? Ouch cause the real millionaires quoted make fun of you as all hat no cattle, repeatedly. And not one of those criticisms matter at all because this book is such an eye opener about who becomes wealthy and how. For the most part they don't inherit it, they don't win it, they don't have a secret formula. What they do is avoid living by rich people, live below their means, earn well, and save/invest over a lifetime. The only thing missing is how the millionaires get decent careers or businesses - three things I can help you with. One - every college is a business so they will tell you "follow your dreams" not "4% of our undergrad degrees are biology of which we can only place 30% in biology jobs (what are we to do, fire 70% of the biology department to help undergrads and then tell you the whole truth about our business?)". Two - never work for someone else unless they are teaching you how to become their competitor or skills that will help you open your own business. Three - the business world is littered with closed cupcake stores so don't do what you love; instead do a SWOT analysis, do your due diligence, identify the barriers to entry (better be some!), know your first two years cash flow, find a ready market, don't be late to said market, get your spouse working because that extra revenue stream will buy you time, calculate your exact burn rate on one income and save two years worth, and if at all possible start your business part time while still working. So you can discount the criticism of this book as most negative reviewers haven't read it in full, don't like the political insinuations, are defensive big spenders, or wanted some secret that would make them rich. Here is a simple trick to start spending less - look at everything you do in 10 year cost. Hulu $6 per month/ $72 per year / $720 per 10 years - for me worth it. Specialty coffee $5 per day / $150 per month /$1800 per year /$18000 - that right $18,000 over 10 years - no way. Just set two simple goals - first get in the top quartile of household income, and second save 20% of pretax income. If you are under 35 and do those two things (oh and read/follow this book) you may retire in comfort and be in control of your life because you won't be scampering from one bill to the next, in perpetual fear that you might lose your job, always and forever on the wheel.

Great book to study how millionaires think

The book profiles the true wealthy individuals highlighting their frugal habits .it also studies those who appear rich due to their high consumption lifestyle but often require economic support from say parents. The lesson is for parents to teach their offspring economic independence from an early age.