Book Review: The Millionaire Next Door: The Surprising Secrets of America’s Wealthy

The Millionaire Next Door: The Surprising Secrets of America’s Wealthy

  • Stanley, T. J., & Danko, W. D. (2016) The Millionaire Next Door: The Surprising Secrets of America’s Wealthy.
  • Category: Budgeting
  • Recommended Financial Literacy Level: [Novice]
  • Recommended Audience:
    • Great entry level book for people looking to understand what actual millionaires across the nation are doing to save money and build wealth.

If you want to be a millionaire, you need to know what it takes to live like one. What I probably enjoyed most about The Millionaire Next Door is the entire book is based on a research study conducted over 20+ years by authors, Dr. Thomas Stanley and Dr. William Danko. Many “financial books” can often times be based purely on anectodal evidence, but every claim in The Millionaire Next Door is based on the reports of the research study’s participants. Who were the participants? Over 500 millionaires were interviewed and over 11,000 high-net worth and/or high-income individuals were surveyed. A quick reminder, which the authors also bring up on a multitude of occasions, before we dive more into the book:


Just because you have a high-income does not mean you’re wealthy. You can’t build wealth if you spend all (or more) of your money! Adversely you don’t NEED a high-income to build wealth or become a millionaire. The authors use a simple formula to split their participants up into two categories: Under Accumulator of Wealth (UAW) or Prodigious Accumulator of Wealth (PAW). Most millionaires are PAWs. Their formula is income-based, meaning the more money you make the more you need to have saved/invested to be considered a PAW.

Are you a UAW or a PAW?

To determine where you fall simply multiply your age by your pre-tax income and then divide by 10 (age x income / 10). If you’re above the threshhold you’re a PAW and if you’re below you are a UAW. As I write this post, I am a UAW (current income ~$49k) since my individual net worth is a bit lower than the $142,100. I was not surprised given some of the mistakes I made early on. What’s interesting, though, is if I use my average income since I started teaching (~$41k), then I would cross into PAW territory, since my invididual net worth is over $118,900. Regardless, it’s a decent assessment of your savings rate.

Each chapter of the book compares the lifestyles of UAWs and PAWs using case studies and data (often provided in chart format) to dive into the choices each made and how those choices impact their financial success (or lack thereof):


  • Chapter 1 – Meet the Millionaire Next Door
  • Chapter 2 – Frugal Frugal Frugal
  • Chapter 3 – Time, Energy, and Money
  • Chapter 4 – You Aren’t What You Drive
  • Chapter 5 – Economic Outpatient Care
  • Chapter 6 – Affirmative Action, Family Style
  • Chapter 7 – Find Your Niche
  • Chapter 8 – Jobs: Millionaires versus Heirs
  • Appendix 1 – How We Find Millionaires
  • Appendix 2 – 1996 Motor Vehicles: Estimated Price Per Pound
  • Appendix 3 – Businesses/Occupations of Self-Employed Millionaires

Jack’s Biggest Takeaways:

  • I particularly enjoyed Chapter 4 – You Aren’t What You Drive. Listen, cars are expensive and aren’t really an investment given they depreciate over time for the most part. PAWs tend to pay cash for their cars and a surprising amount buy used. UAWs typically finance their car, replacing them often. PAWs tend to not drive the luxurious, high-maintenance vehicles. UAWs generally do. I found the case studies presented very relatable. In fact, I plan to test out one of the methods a participant shared when trying to obtain the most competitive quote with the least hassle. The more into the FI movement I get, the more I realize every dollar I don’t spend on my car is a dollar I can put toward building wealth.
  • Some other tidbits I found valuable:
    • “Never purchase a house [or finance/borrow an amount for a house] worth 2x or more of your realized income.”
    • “A household divided in its financial orientation is unlikely to accumulate significant wealth.”
    • “Operating a household without a budget is akin to operating a business without a plan, without goals, and without direction.”
    • “Even the best financial plans are innaffective if you don’t follow them.”

Final Thoughts

There is an interesting dichotomy between looking wealthy and being wealthy. Most millionaires don’t live excessively – they actually have very modest lifestyles and often times their neighbors aren’t aware of their wealth. Most of us just need to ask ourselves then, Do I want to LOOK wealthy, or do I want to BE wealthy? I’ll leave you with this quote from the authors:

“The majority of people do not have the ability to increase their income significantly. Yet income is a positive correlate of wealth. What, then, is our message? [How do you become financially independent?] If you cannot increase your compensation significantly, become wealthy in some other way. Do it defensively. Inoculate yourself from contracting the high-consumption lifestyle that many have adopted.”

If you’d like to support our mission and are interested in purchasing The Millionaire Next Door: The Surprising Secrets of America’s Wealthy, please click here for your purchase!

Have you read The Millionaire Next Door? What are your thoughts, likes/dislikes, and biggest takeaways? Do you know anyone who spent too much on their education?

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