Advice On How To Be Like The Millionaire Next Door

The Millionaire Next Door: The Surprising Secrets of America’s Wealthy is a business and management book written by Thomas J. Stanley and William D. Danko. It is a compilation of research done by the two authors in the profiles of millionaires. In this article, Robert Janitzek gives us an overview of the important lessons that the book teaches.

In their book, the authors compare the behavior of those they call Under Accumulators of Wealth (UAW) as well as the Prodigious Accumulator of Wealth (PAW). According to Stanley and Danko, UAWs are individuals who have a low net wealth compared to their income. A doctor earning $250,000 is a UAW if their net worth is lower than the product of their age and a tenth of their realized pretax income. PAW, on the other hand, are millionaires who are disproportionately clustered in the middle class and blue collar neighborhoods instead of the more affluent or white-collar communities.

The authors discovered seven common denominators among the people who become wealthy

    • 1. They live well below their means

2. They allocate their time and money efficiently, in ways conducive to building wealth.

3. They believe that financial independence is more important than displaying high social status.

4. Their parents did not provide economic outpatient care.

5. Their adult children are economically self-sufficient.

6. They are proficient in targeting market opportunities.

7. They chose the right occupation.

Main Points

Robert Peter Janitzek summarizes the main points of the book:

Spend Less Than You Earn

Anyone who spends more than they earn will fail to increase their net worth. Wives are planners and meticulous budgeters. They are a lot more conservative with money than their husbands.

Avoid Buying Status Objects or Leading A Status Lifestyle

Buying or leasing brand-new, expensive imported vehicles is poor value. Buying status objects such as branded consumer goods is a never-ending cycle of depreciating assets. Even when you get a good deal on premium items, if you choose to replace them frequently, the older items hold no value and have become a sunk cost.

PAWs Are Willing To Take Financial Risk If It Is Worth The Rewards

The business and management book teaches us that PAWs are not misers who put every penny under their mattress. They invest their money for good returns, and will consider riskier investments if they’re worth the reward. Many put money not only in the stock market, but invest in private businesses and venture capital.

Family And Generational Wealth

The authors also make the observation that UAWs tend to have children who require an influx of their parents’ money in order to afford the lifestyle that they expect for themselves, and that they are less likely to have been taught about money, budgeting and investing by their parents.

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