on December 13, 2001
The book is a kind of research paper. The authors are, after all, academics. They have attempted to provide a "composite" picture, based on extensive research, of the average American Millionaire. What they have found is that such an individual is difficult to identify. In general, though, they are self-employed, hard-working, thrifty, etc. They do not drive expensive cars, live in mansions on golf courses, and wear a Rolexes.
One of the biggest contradictions in the book is this: The authors have found that most millionaires will die rich. But they have also found that most people who inherit great wealth end up as good-for-nothing parasites, rarely accomplishing much in their own lives. My tongue-in-cheek analysis, then, is that these millionaires shoud try to die broke.
The book is filled with statistical information about the habits, professions, and lifestyles of millionaires. At times, the reader will feel somewhat bored as a point is driven into the ground. Overall, though, the book is worth reading. We can all benefit by adopting some of the implied suggestions of this book. Work hard, plan for your retirement, live within your means. Just don't get carried away. Stop and smell the roses from time to time; strive to be rich in experience. When you're on your death-bed, I seriously doubt that you will say, "Gee, I sure wish I'd spent more time at the office." Ask a dying person what they would give for another year or two of life. The answer: everything they have. The sunset on Maui is beautiful. Life is short and precious; enjoy it.
on December 29, 1999
The Millionaire Next Door by Thomas J. Stanley and William Danko is a fun to read book for anyone interested in understanding America's wealthy, defined by Stanley and Danko as those people who have net worth of $1 million dollars or more.
The Millionaire Next Door claims that there are seven key factors that lead to wealth accumulation. Included are: 1. Living Well Below your financial means. In other words being frugal. Buying the reliable used car versus the shinny new BMW or Porsche.
2. Spending your time wisely and in ways that lead to building wealth, such as studying investment. 3. Being more concerned about financial independence rather than showing off how much wealth you possess.
This is a book that will make you feel good about yourself if you are a compulsive coupon clipper or if you keep telling your kids to shut the door as they are letting the heat out of the house and it is costing you money. The book claims that it will teach you how to join the ranks of America's millionaires. Who could resist reading such a book?
To get rich, you must first learn not to be a hyperconsumer. In other words don't buy a lot of expensive stuff you don't need. You need good "offense" or generating earnings of at least $60,000 or more a year. Then you need good "defense" or saving a goodly portion of what you earn. Then you need to get old.
In fact, even if you don't have a million dollars, you can still be "rich" by being a PAW. PAWs or "Prodigious Accumulators of Wealth" have more money than you would think they would based upon their age and income. In contrast are the wasteful UAWs or "Under Accumulators of Wealth." There are also AAWs (Average Accumulators of Wealth) but they aren't discussed much. No mention is made of how much EWOKS tend to accumulate. But, I'm betting those furry little fellows save a lot.
So even athletes worth tens of millions of dollars can be UAWs. There is something reassuring in that! There is a lot of interesting knowledge to be gleamed from this book. We learn that 3.5 of every 100 households in America have a net worth of $1 million dollars or more. But that 22 of every 100 households headed by Russians have a net worth over $1 million dollars.
We also learn that self-employed people account for over 2/3 of the wealthy in America. But Stanley and Danko do not tell everyone to start their own business. That's too risky, the authors say. In later chapters they do mention some businesses that they believe are poised for growth in the future. Businesses that cater to millionaires.
Danko and Stanley seem to see a glimpse of successful businesses when they suggest starting professional businesses. Such businesses tend to need to generate less revenue to make an equivalent level of profits. But this is equivalent to starting a business with high net margins. Many non-professional businesses also have relatively high profit margins. Many college drop outs have built computer-programming based companies, for example.
Despite having studied wealth for decades, and holding PhD's, Stanley and Danko seem to have some misunderstanding about the nature of wealth building via entrepreneurship. It is pointed out that many corporate businesses fail to report profits in any given 12 month period. No allowance is made for businesses like amazon.com which are growing rapidly and establishing themselves. The implied message seems to be that running a business is just too risky. And, it is pointed out that many businesses demand considerable resources like land for coal mining. But, before this the authors are toting investing in assets that appreciate. Land is one of those assets.
We are told that one key factor of the rich is that they minimize their tax bite. The rich tend to pay a much smaller percentage of their overall wealth in taxes than most people. But, here it seems Stanley and Danko are mixing up cause and effect. Yes, the rich think about taxes. But, it is precisely because they have already saved a lot, and have retained wealth that is not taxed, that they pay a smaller percentage of their wealth in taxes.
But Stanley and Danko can be excused for any oversight as they hold PhD's and "being well educated has certain drawbacks" with regard to the creation of wealth.
The flaw of pursuing spending to show you are affluent and have financial status is very thoroughly trashed, as it rightfully should be. All successful people tend to be achievement oriented. But, I think the book could do a better job of following up upon the fact that 2/3 of America's wealthy are small business owners. It seems an injustice to just sweepingly say that likelihood of success in business is tenuous, and imply you should get a professional degree so that you have high earnings to save. Maybe this is what some business owners tell their children, but it is not how they acquired their wealth. To really understand wealth creation, you need to understand business, and I feel Stanley and Danko could do a better job expanding upon this.
Finally, there is some very interesting food for thought about how wealth will affect your children. I like this book a lot and recommend it. Peter Hupalo, author of Thinking Like An Entrepreneur.
on December 30, 2001
I received this book as gift, and after reading it, I am glad I didn't spend any money on it. This book is a classic example of taking a few simple concepts and restating them in every imaginable form to reach a decent book length. The useful information could be summed up into a small pamphlet.
The basic premise of the book is how the average Joe and average millionaire may not be too terribly different. The author interviewed hundreds of millionaires and then analyzed the data from the interviews. They repeatedly comment about how "Mr. penny-pinching trailer park owner is far better off with $1.5 million in the bank than Mr. Doctor with a great house and lifestyle, who only has $750,000 saved up."
The authors constantly rant about how being incredibly frugal and watching every penny spent will make you wealthy. While this may be true, none of the information presented ventures far beyond common sense.
Another tactic, which I found very annoying, was that various charts and data tables were listed multiple times but in varying ways. For instance a whole page may be taken up by a table dedicated to whether or not millionaires worry about things like cancer, their children's financial future, and the stock market. Three pages later, the same table may be listed, but with percentages rather than raw data scores. There are many instances where the same information is presented in what appears to be nothing more than an attempt to lengthen the book. I found myself wanting to pound my head against the wall.
I would not recommend this book to anyone looking to make good use of his or her time. I kept reading only in hopes that there would actually be a few pearls of knowledge to be gained. In the end, I wish I had put the book down shortly after reading the great discussion about millionaires and their ancestry. I truly could care less that there is a larger proportion of millionaires from Scottish descent than from Algerian roots. How is this helpful to me??
Don't waste your time reading this book in hopes that you'll come out of it with a great insight into financial well being. It just won't happen. This book seems more like a doctoral thesis gone commercial than a truly useful guide to financial security.
Thanks for your time...
on May 21, 2000
Ok so you have made it to the final question in the TV show WHO WANTS TO BE A MILLIONAIRE! For your chance at $1M Dollars, please answer the following question:
According to the author Dr. Thomas Stanley's best selling book, The Millionaire Next Door, what traits do most typical millionaires have? Do they
a. Spend most of their time working instead of enjoying their money
b. Prefer to vacation with the family by visiting Aunt Mildred in New Jersey instead of sailing in a private yacht in the Caribbean
c. Drive a used Ford pickup truck instead of a Rolls Royce
d. Shop at Sears and Wall Mart instead of Sak 5th Avenue
e. Cut coupons out of the newspaper to save on groceries each week instead of paying for butlers and maids
f. All of the above.
What, your not sure and you want to ask the computer to eliminate some of the wrong answers? Ok. The computer leaves you with two choices. Do typical millionaires:
e. Cut coupons out of the newspaper to save on groceries each week instead of paying for butlers and maids
f. All of the above.
Your still not sure and you want to use one of your remaining lifelines to call a friend? Ok then read the following friendly review.
According to the author, the answer is "F", all of the above. If this surprises you then so will some of the other traits that these millionaires apparently have in common. According to the author they also prefer being cramped like sardines and fly economy class instead of flying in a private Lear Jet. They also frequent well know five star restaurants that serve only the finest cuisine including McDonalds and Pizza Hut. And they prefer purchasing off the rack suites from J.C. Penny's instead of custom made ones and they typically resole their shoes.
Basically, these millionaires have millions but no "airs" about them. In fact they are transparent and indistinguishable from your typical blue-collar, middle-class American family. They are the "Millionaire Next Door". So what sets them apart and makes them so different? Well, the for one thing, they have a bank account, investments and total assets that exceed the total earnings of most individuals in their entire lifetime...and then some.
To see if you qualify as being wealthy, use the following formula:
Your Total Wealth should equal your age times your total annual income (combined if your married) divided by ten.
(If you are unemployed, congratulations, you qualify as one of them.) Well, all of this is very interesting but I am afraid that there is a VERY major flaw in this author's treatise. This flaw can be found buried in the back of the book under Appendix 1. Let's face it; millionaires represent only a small fraction of the entire population of 100 million people in the US so finding them isn't easy. What makes his task even more daunting is trying to separate out the real millionaires or what the author calls PAW (prodigious accumulators of wealth) from those pretending to be millionaires or UAW (under accumulators of wealth). Since it wouldn't be very practical to go door to door and say, "excuse me, are you a millionaire" or "may I please take a look at your portfolio and assets", the author decides to employ the use of a demographer who supplies him with the names and addresses of potential millionaires. Next a questionnaire is sent out to these individuals and the responses are tabulated and analyzed.
Here is the author's Achilles' heel. The author has SELECTIVELY sampled through the use of demographics, only 384 millionaires out of an estimated 3 million! The entire book and all of his data rests on this biased data and shoddy statistics that are the equivalent of those commercials on TV that inform us, "3 out of 5 doctors survey recommend". Amazing!
Basically the author is telling us what we want to hear. That typical, everyday, working middle-class, garden-variety, every day people can fulfill the great American dream through hard work, determination and frugality. I will grant you that these people do exist, apparently there are at least 384 of them, but I am skeptical about this picture accurately representing the typical average American millionaire.
Although this book fails to deliver a scholarly profile of a typical American million, it still makes for surprisingly interesting reading, up until about page 50 or so. After that the book becomes painfully repetitious. You can achieve the same affect by sitting quietly cross-legged on the floor with a penny in your hand in repeating the words, "Frugality, Frugality, Frugality...." for a period of a few hours.
The author also did mention one very important trait that some millionaires have which this author apparently possesses and that is ingenuity. Hey, you have to give Dr. Stanley some credit for his ingenuity. At least this book got him rich and it was one step up from those advertisements that say, "send me $1 and I will tell you how you too can become a millionaire".
on January 5, 2000
The Millionaire Next Door comes across as a decent book that does not attempt to fool its readers in get quick rich scheme, yet at the same time provides implications that violate scientific inquiry.
If all you are desiring is to describe the "typical" millionaire than this book may be of interest to you. If, instead, you read this book in finding out "how you too can be a millionaire" than you'll be (or should be) disappointed.
Cause and effect are debased in this book. By living frugal, having devoted relationships to children, having certain beliefs, etc. the authors would like to imply that being a millionaire is well within your reach. This ascertain can be verified if by studying all people we determine that only frugal people become millionaires and millionaires are the only frugal people on earth. If millionaires are the only people who have devoted relationships to children and the rest of "us" do not, than the authors can start claiming cause and effect. If the rest of "us"; however, are also frugal (or at least a good portion of us) and we have not become millionaires, than cause and effect can be thrown out the window. One part of this book that is distressing is how it conveys the message that those who are wealthy have the "merit" to be wealthy, and those who are not have character flaws. This ignores realities of structural barriers, sociological influences etc. Yep, this book best belongs in pop psychology books or People Magazine. For a serious study of wealth in America I'd go someplace else.
on August 14, 1999
This book is a simple read of how a few millionaires acquire wealth. They have an above average income and are incredibly frugal/tight. Now, they can retire better instead of being in poverty. But basically between ages 20-50 they were in poverty (no spending). And then from 50-80 you can spend your money.
On a philosophical note, which is better, to spend your money when you can truly have fun with it when you're 20-50 or when your life is nearing it's end anyways 50-80.
I think that millionaires hoard money too much, they live "well below their means" and others (UAW..Under accumulators of Wealth) spend "far above their means". Live your life the best possible, it's far too short to let your life pass by without having the luxuries life has to offer.
This book has good advice however, which ranks it at 2 stars instead of 1. Unfortunately, it's only about 2 sectences worth of info, spanned into about 300 pages or so of CONSTANT repeatings. I found this book annoying as hell.
on April 29, 2015
I've read a lot of personal development and business books. I didn't find this to be among the best of them. I found some of it interesting, but not necessarily instructive. While I may concede that the study behind the book deserved the attention devoted to it in the book, most readers would find a quick summary more than adequate.
on August 3, 1999
Although I found some of the facts presented in the book interesting, this is yet another advice book that should have appeared as a magazine article. It's all just standard advice: don't spend a lot of money, drive a cheap car, penny-pinch, get a job that pays. Then after a number of years, you'll have some money.
What I personally found amusing was the overall mentality of the book that says having money and not spending it is better than having money and spending it too. This strikes me as reasonable advice in a world where the future is very uncertain, but in a growth economy this only serves to put the breaks on said growth, creating a self-fulfilling prophecy. And that with the added problem of spending your life living meagerly.
I don't plan to follow the advice of the book, i.e., sell wallboard (boring), go on cheap vacations (boring), drive a cheap car (single women really like that in a man), and eat thin gruel for dinner (ok, they didn't go that far). If having money is important to you, I'd advise focusing on your career so you can make a lot of money, spend a fair amount of money and still save a million.
On a more serious note, I know many first generation immigrants who tend to follow this book's advice. However, their children tend to be as self-centered and frivolous with money as any of the people whose parents were more free-spending and free-spirited.
on July 31, 1999
this book stinks. The lesson from the last ten years is that you need to be adaptable to the job marketplace, build your own career path, and take risks (investing also helps). Penny-pinching is all very laudable, but is only one small part of the equation. I was brought up in Scotland, and don't tend to spend money foolishly (I buy a car I can afford, not lease one to impress the neighbours, etc.), but that is not what makes me wealthy. What makes me wealthy is that I enjoy my life, I have a challenging job and a great family. If you are naturally tight, buy this book, revel in how much better you are than your neighbours given the authors formula for personal happiness (God knows, everybody around you probably isn't - have you noticed that?). Otherwise focus your self enhancement energy on what makes you happy, not somebody else. As one of my friends once told me - be successful - the money will follow. (BTW, there seems to be some personal attacks on the one-pointers, the thrust being that we are poor and therefore bitter - that is not the case with me, I'll accept smug, but that's all :).
on December 15, 2001
The whole book can be summed up in one phrase: save your money, be frugal and you too can be a millionaire. Really?!?! Although the studies are somewhat interesting the whole book seems to be a bunch of numbers that prove the same point in fifty thousand different ways. So, save your money. The authors do bring up a valid point when they say that most millionaires do not look and act the part of the "Hollywood millionaire," but isn't that obvious? If you spend all of your income on expensive, frivolous, luxury items, of course you are not going to have enough left over to qualify as a millionaire. I guess the book is good to read if you are one of those people that are given everything from your parents. If you don't have a budget plan and are constantly buying the most expensive items, then maybe this book will "change your life." However, I would hope that what is mentioned in the book is common sense to most people. Save your money and save your time.