The Millionaire Next Door Summary: William Danko and Tom Stanley

The Millionaire Next Door Summary

The Millionaire Next Door Summary provides a free book summary, key takeaways, insightful review, best quotes, and author biography of William Danko and Tom Stanley’s book.

Authors William Danko and Tom Stanley went to study how people become rich. During their study, they got some odd findings. Many people living in high-end neighborhoods and driving luxury cars didn’t have extreme wealth. Most people who’ve immense wealth, don’t live in such neighborhoods. The book The Millionaire Next Door offers insights on what can one do to get rich. Plus, it also tells how wealth isn’t what you spend. Instead, it’s what you amass. The millionaires this book discusses, are all financially free. They can sustain for years without getting a monthly pay-check. Do you wonder who becomes rich in our world? A business has a small factory and resides in the same city for several years now. He is a disciplined saver and investor. Besides, he made all his money through his hard-work.

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

Seven Common Characters of Wealthy People

  1. They lead their lives below their means. Millionaires, in general, are quite economical. Not just they self-identify as economical, but they lead their lives that way. They do extraordinary things to save money. Theirs’ isn’t a lavish lifestyle. They pay for quality, instead of the image.
  2. They divide their money, time, and energy effectively in ways helpful to create wealth. Millionaires work on a budget. They even plan their investments. Wealthy people start earning and investing early on. The authors say, “there’s an opposite relationship between the time spent deciding your financial future and time spend buying luxury.” So, the more time you spend on getting things which look good, the less time you spend on personal finance.
  3. They feel that financial freedom is more crucial than showing high status. The authors focus a lot on this point. Millionaires usually don’t own fancy cars or home. They drive the basic models and maintain them for years. (There’s a 31-page chapter on how millionaires buy cars. It’s boring. Perhaps, it’s the worst chapter I’ve read in any book on personal finance. Plus, the authors go to the lengths of discussing average price per pound of different cars. There’s also an appendix showing such price for very famous models.)
  4. Their parents didn’t give monetary outpatient care. This means, most millionaires didn’t have the financial support of their parents. The authors say, “the more money adolescents get from parents, the lesser they save. In contrast, children who get lesser money save more.”
  5. Their elder children are financially self-supportive. This is an exciting chapter. The authors think that giving pocket-money to adult kids hampers their ability to flourish.
  6. They’re efficient in finding market opportunities. “Many-a-times, the ones supplying the affluent, also become wealthy.” The authors explain how one of the ideal ways of making money is selling things to those who’re rich. They list down several occupations they think have potential in this field.
  7. They pick the correct occupation. “Self-employed are four times more likely to become millionaires than people working for others.” There’s no secret list of professions from where wealth is obtained. People can get success in any business. Most wealthy people make their money in routine industries. They’re dentists. They sell shoes or build cabinets. Some make boxes or their bowling alleys. But, there isn’t any magic bullet.

“Good health, longevity, happiness, a loving family, self-reliance, fine friends … if you [have] five, you’re a rich man….” 

The Millionaire Next Door Summary

The basic idea of the book is that the pop-culture concept of a millionaire is false. It believes that most real millionaires lead a simple life. The authors did extensive outlining of individuals whose net-worth classified them as millionaires. They then also did profiling of people whose age and salaries classified them as potential millionaires. Them using this data, they built an extensive profile of who is a typical millionaire. From there, detailed interviews with such typical millionaires made a more detailed image of the real meaning of today’s millionaire.

Most people earning high incomes aren’t necessarily wealthy, the authors claim. Many people having huge incomes don’t collect any enduring wealth. They spend their money quickly and lead a hyper-consumer lifestyle. To accumulate wealth, one should not just earn a lot, but also cultivate frugal habits. In Stanley and Danko’s words, they should play both good offense and good defense. Most books show just one aspect of the wealth equation. That is, earning more or spending less. It’s good to read a book which makes it clear that you need both to succeed. It’s as if individuals can be grouped as per the below table:

  1. High Income
  2. Low Income

Broke High-income, Economical wealthy breaking-even (Spartans), Spender breaking-even (Lavish) stay in a house of cards. Yes, they do have the funds now to take care of the hyper-consumer lifestyle. But what happens when this money is all spent? It’s also hard for low-income economical people to accumulate wealth. They ought to learn financial “offense.” But, the one having low income, yet spending a lot are the most in trouble.

In contrast, the wealthy usually have high-income plus a frugal mindset. They also share other traits.

  1. 80% of the millionaires in the US are 1st generation wealthy. This contrasts with those who’d make you believe that wealth is generally inherited.
  2. 50% of millionaires have their own business
  3. 20% are retired

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Chapter 1: Meet the Millionaire Next Door

The first section of this chapter reviews the typical millionaire in an American household. What would a typical millionaire in the US tell you about himself?

  1. Most of the businesses we have are defined as boring-normal. We’re paving contractors, rice farmers, auctioneers, welding contractors, and pest controllers.
  2. Around 80% of us are 1st generation rich.
  3. We’ve collected enough money so that we can go without working for a decade or more.
  4. Around 2/3rd of us work for 45-55 hours a week.
  5. We’re selective investors.
  6. “I’m my preferred charity.”

Well, the authors’ definition of wealthy is different than most American. Most Americans define wealth as abundant material possessions. The people whom Stanley and Danko identify as wealthy don’t believe in buying many materials. Instead, they seek pleasure from owning a considerable number of appreciable assets.

One way of defining a person’s wealth is through their net worth. Net worth is the current value of a person’s assets minus liabilities. Over 90% of American millionaires possess a net-worth between $1-10M.

A different way of defining if a family is wealthy is via their anticipated level of net worth. The greater one’s income, the greater their net-worth is likely to be. Hence, the longer you generate income, the wealthier you tend to become.

Chapter 2: Frugal Frugal Frugal

Frugal means the “attitude reflected through our prudence in the use of resources.” Wasteful is the opposite of frugal.

Being frugal is the ground-work of being wealthy. Promoters enhance the picture of millionaires of wasteful people or a lavish spender. While in reality, most millionaires are frugal people.

The lavish lifestyle works for the entertainment industry. People love watching their peers win money and materials. They desire instant gratification. People don’t want stocks or scholarships. That’s why the quiz shows don’t keep those as rewards.

The average life of an American millionaire isn’t what the masses think it to be. An average millionaire is in his 50s, married to the same woman and resides in a middle-class society. He’s more likely to get $50 pair of shoes instead of a $400 pair even if he can afford it.

Another aspect of American millionaires is their spouse. Usually, the spouses of millionaires are more economical when compared to their counterparts. Most people are never going to be wealthy in one generation if their spouses are wasteful.

Why aren’t you rich? Can it be your offense or defense? You may have an incredible offense ($80,000-$100,000 income), but is your defense good? Most millionaires in the US can work both offense and defense to the maximum. Their good defense often allows them to outsource their competition, or those having a greater offense.

Millionaires become a millionaire by budgeting and monitoring their expenses. They maintain their wealthy status in the same manner.

The typical millionaire in Stanley and Danko’s surveys has a total yearly income of below 7% of his wealth. This means that 7% of his wealth is chargeable under some income-tax.

Income-tax forms the single most significant yearly expenditure for many families.

Various high-income families in the US are asset poor. The reason is that they increase their realized incomes to afford their luxurious lifestyle.

A typical US family realizes nearly $35,000-$40,000 or 90% of its net-worth. It pays 10% of its wealth every year in income tax. In contrast, the millionaires in the US pay only 2%. This is how they stay financially secure.

Let’s suppose you trade in most of your existing and future income. You do this only to stay in a house in an upscale area. You earn $100,000 annually. Still, you’re not accumulating much wealth. Why? Because clearly, you’ve to maximize your realized income only to afford your lifestyle. If you live in cheaper neighborhoods, you’ll have less money to spend and more to invest.

If you aren’t wealthy yet and wish to be someday, then do one thing. Never buy a home which demands a mortgage double the times your family’s total yearly realized income.

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Chapter 3: Time, Money and Energy

Efficiency is among the most crucial mechanisms of abundant wealth. A wealthy American family allots their money, energy, and time wisely to increase their net-worth.

Under-accumulators worry more than over-accumulators in terms of:

  1. Not having enough money to retire with ease.
  2. Never accumulating considerable wealth

These are critical questions. But under-accumulators waste too much time worrying. Hence, they are unable to take steps to fix these problems.

Planning and controlling are critical elements when collecting wealth. Over-accumulators invest time in planning their budget. In contrast, under-accumulators don’t have any control over their household consumption.

Many wealthy people in the US worry about the government’s decisions. They’re scared of the forces on which they’ve no control. The main concerns of wealthy Americans regarding their government are:

  1. Paying high income-tax.
  1. The federal deficit and growing government expenditure.
  1. High inflation rate
  1. Tightened government policies for industry and business.

“I am not impressed with what people own. But I’m impressed with what they achieve. I’m proud to be a physician. Always strive to be the best in your field…. Don’t chase money. If you are the best in your field, money will find you.” 

Chapter 4: You Are Not What You Drive

A lavish car may be out-of-place for someone who prefers outdoors or a factory owner. With such a vehicle, you may distance some of your employees. They may feel that their employer is exploiting them. You need to understand that many status symbols could be burdens to gaining financial freedom. Life already has a burden. Why add more baggage?

Around 81% of millionaires buy their cars. Only 23.5% buy the latest models. 25% of millionaires haven’t purchased a car in 4 years.

50% of millionaires never spend over $29,000 in their whole lives on vehicles. Around 1 in 5 never spend $19,000.

What do they drive then? Below are the cars tanked in order of their market shares:

  1. Ford (9.4%)
  1. Cadillac (8.8%)
  1. Lincoln (7.8%)
  1. A tie between three: Lexus, Jeep, and Mercedes (6.4%)
  1. Oldsmobile (5.9%)
  1. Chevrolet (5.6%)
  1. Toyota (5.1%)
  1. Buick (4.3%)
  1. Nissan and Volvo (2.9% each)
  1. Chrysler and Jaguar (2.7% each)

The leading manufactures are GM with a 26.7% share, Ford Motors with 19.1% and Chrysler with 11.8% share.

A growing number of wealthy people are buying US-made cars. The rising number of sport utilities launched by GM, Chrysler, and Ford Motors shows this trend.

Various US millionaires tend to buy full-sized vehicles which have a low cost per pound. The average price per pound for all new cars is $6.86.

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Chapter 5: Economic Outpatient Care

Economic Outpatient Care (EOC) means “acts of kindness” or “monetary gifts” parents gift their children. Or grandparents give their grandchildren.

Most of today’s givers of EOC earned wealth early in their own lives. Hence parents feel bound to give economic support to their children. But, parents who give EOC are less wealthy than parents having financially independent kids.

Over 46% of the wealthy in USA practice EOC. Almost half of the big children of the affluent who’re less than 35 years, get yearly cash gifts. When these kids get older, the gifts reduce. Nearly 1 in 5 adult children in the mid-40s to mid-50s don’t get such gifts.

Kids of the affluent who wait for their next EOC aren’t very productive. So, does this mean that all kids of the rich would end up like this? Not necessarily. The wealthier a parent is, the more financially disciplined their children may turn out to be.

Chapter 6: Affirmative Action, Family Style

Many millionaires having big children want to reduce the size of their property before their death. People who’ve two children find it easy to divide the estates (50/50). Some have four kids, and for them, too it’s easy (25). Such an easy division method gets complex when kids mature. Parents find that some of their kids have more demands than others.

In the US, the odds aren’t in favor of females earning high salaries. Daughters of the affluent usually don’t have their careers. In over 80% of married couples having kids, the wife doesn’t have a full-time job. This gives the daughter an excuse to not work as “mommy didn’t.” Many wealthy parents don’t encourage their daughters to work and be financially independent.

The rich who have economically free adult kids gave the authors tips on how they brought them up. Below are some guidelines:

  1. Don’t ever tell your kids that you’re wealthy.

Under-accumulators are mostly the outcome of their parents who led lavish lifestyles. They conducted their lives in ways they believed suitable for the rich to act.

  1. Regardless of how rich you’re, teach your kids frugality and discipline.

Over-accumulators of the US teach their kids about good role models. People who led their lives with discipline and prudence.

  1. Ensure that your kids don’t realize you’re wealthy until they are disciplined and mature.

The remarkable rich create trust funds for their kids. But, they don’t plan on distributing the money until their kids become 40 or more.

  1. Reduce discussions of things that your children/grandchildren will inherit.

Don’t ever make verbal or light promises.

  1. Don’t hand-out cash or other huge gifts to your kids to negotiate with them.

Give out of kindness, love, or even obligation. Adult kids lose respect for their folks who surrender to pressing negotiation strategies.

Chapter 7: Pick Your Niche

There’re many opportunities for people who target the wealthy, or their children or their widows. Quite often, people supplying the wealthy, themselves become wealthy.

The frugal wealthy tend to be price-sensitive about consumer products/services. But, they aren’t as sensitive when they’ve to buy legal, accounting, or tax services. As most of the wealthy are self-employed owners of businesses, they’re also buyers of industrial items.

In the coming decade, there’ll be a rising amount of cash flow in the US than before. Opportunities for serving the rich will be higher than ever. Those who’re expert in meeting those demands of the wealthy are likely to be in high demand.

Specialists having the most skills will benefit more than those not having those skills. People who’ll benefit include:

  1. Chiropractors
  2. Dentists
  3. Allergists
  4. Plastic Surgeons
  5. Psychiatrists
  6. Dermatologists
  7. Psychologists

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The Millionaire Next Door Quotes

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

“Good health, longevity, happiness, a loving family, self-reliance, fine friends … if you [have] five, you’re a rich man….” 

“I am not impressed with what people own. But I’m impressed with what they achieve. I’m proud to be a physician. Always strive to be the best in your field…. Don’t chase money. If you are the best in your field, money will find you.” 

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

“Many people who live in expensive homes and drive luxury cars do not actually have much wealth. Then, we discovered something even odder: Many people who have a great deal of wealth do not even live in upscale neighborhoods.” 

“It’s easier to accumulate wealth if you don’t live in a high-status neighborhood.” 

“If you’re not yet wealthy but want to be someday, never purchase a home that requires a mortgage that is more than twice your household’s total annual realized income.” 

“One of the reasons that millionaires are economically successful is that they think differently.” 

“If your goal is to become financially secure, you’ll likely attain it…. But if your motive is to make money to spend money on the good life,… you’re never gonna make it.” 

“The foundation stone of wealth accumulation is defense, and this defense should be anchored by budgeting and planning.” 

“Money should never change one’s values…. Making money is only a report card. It’s a way to tell how you’re doing.” 

“Great offense and poor defense translate into under accumulation of wealth.” 

“Multiply your age times your realized pretax annual household income from all sources except inheritances. Divide by ten. This, less any inherited wealth, is what your net worth should be.” 

“Be tough … life is. In other words, there is no promise of a rose garden.” 

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

“Have you ever noticed those people whom you see jogging day after day? They are the ones who seem not to need to jog. But that’s why they are fit. Those who are wealthy work at staying financially fit. But those who are not financially fit do little to change their status.” 


The authors discussed which businesses/professions are most likely to assist people in getting financially stable. They also discuss the philosophy of investing, instead of just spending, or helping by “giving.” They even point out the interesting tendency of millionaires to invest in income-generating things.

If you already have financial stability, congrats! But, you’d surely know someone who can benefit from this book. Gift it to them.


After reading this The Millionaire Next Door Summary, do you have any comment to share with us? We hope this summary can help you understand more about the characteristics of becoming a millionaire!

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