The Millionaire Next Door Summary
| | |

The Millionaire Next Door Summary, Review and Quotes | Thomas Stanley

The Surprising Secrets of America’s Wealthy


Millionaires live lavishly. They fly private jets, drive sleek Bentleys, and wear the newest designer clothes. They also live in expensive houses in Beverly Hills and Atherton. Or is that all fantasy? The reality is much different. Thomas J. Stanley and William D. Danko claim to have discovered the greatest secret of America’s real millionaires. In their book, The Millionaire Next Door, they reveal their discoveries about the simple lifestyle of America’s millionaires.

The Millionaire Next Door has one core premise. You can become financially successful too if you avoid spending more than you earn, commit to investing, and plan your finances well.

“The implication of The Millionaire Next Door…is that nearly anybody with a steady job can amass a tidy fortune.”

– Forbes

About Thomas J. Stanley and William D. Danko

Thomas J. Stanley (1944-2015) was an American author and business theorist. He authored and co-authored several books on America’s wealthy class. The list includes the New York Times bestseller, The Millionaire Next Door, with William D. Danko.

Stanley earned a doctorate in business administration from the University of Georgia. After graduating, he served in different corporate leadership capacities. He was also a chief advisor at Datapoint Corporation. Founded in 1968, Datapoint was a technology company that manufactured computer terminals. Later in his career, he lectured in marketing at the University of Tennessee and the University of Georgia.

Dr. William D. Danko is a faculty member at the State University of New York. Over the past three decades, he has studied consumer behavior and wealth formation extensively. In addition to The Millionaire Next Door, he has also co-authored Richer Than a Millionaire: A Pathway to True Prosperity. Dr. Danko is a published researcher in the US, Australia, Canada, Germany, Poland, and Switzerland. He completed his Ph.D. at Rensselaer Polytechnic Institute’s (RPI) Lally School of Management.

Stanley and Danko spent 20 years studying how successful Americans gained and spent their money. They engaged around 1,000 respondents, who answered 200 questions each. Many authors spend a lot of time studying and writing about how to get rich. But Stanley focused on understanding how the rich live a life different from ordinary Americans. Stanley passed away in a car crash in 2015.

Join us to learn the key insights of The Millionaire Next Door.

StoryShot #1: Millionaires Don’t Spend as Much as They Earn

As a millionaire, you may have imagined driving the newest Tesla model and drinking the finest wines. But in reality, many millionaires are frugal. 

This is not the perception that the media has created about millionaires. Instead, the media displays content that glorifies spendthrifts and moneyed lifestyles. There’s a reason the media markets movies like Crazy Rich Asians and TV shows such as Billions and Gossip Girl. It is because extravagant lifestyles are much more entertaining than financial prudence. 

But if you want to achieve financial success, don’t follow the media’s image. You must plan your spending and learn how to save when you start making more money than you need.

The American millionaire is not necessarily a tech professional living in Beverly Hills. They are often the people living a modest life right next door. They spend every dollar buying goods that add value to their lives. Millionaires also don’t necessarily own the most expensive cars. Instead, they may even own second-hand ordinary vehicles.

How Millionaires Practice a Frugal Lifestyle

Effective budgeting and practicing a frugal lifestyle are key to building your wealth. Earning a six-figure salary doesn’t mean you’re wealthy. Even if you’re among the highest-paid employees, taxes will take away a large part of your income. After deducting living expenses, you will have some money to support yourself until the next pay.

But you don’t have to earn millions to save for your future. A simple wealth rule is saving as much as possible when you make more money than you need to live. 

An essential strategy millionaires use for frugality is developing an atmosphere of scarcity. Although they can afford a $200 dinner, they opt for a $50 meal. Instead of going for the most expensive vehicle, they choose a decent, affordable one.

StoryShot #2: Millionaires Devote Time and Energy to Building Wealth

Patience, passion, and perseverance are essential values among people who have accumulated wealth. Stanley and Danko found millionaires invest time and energy in planning their financial future. They focus on building financial assets over other things in life. This often takes years, if not decades. 

Contrary to the media-perpetuated belief, building wealth isn’t a rapid or one-time event. Instead, it’s a slow, systematic one that takes time to mature.

High income is not a guarantee for building wealth instantly. Most high-income earners classify as either a PAW or UAW:

  • Prodigious Accumulators of Wealth (PAWs) are masters of saving money and growing wealth. They have a net worth of around four times higher than many people with a similar income. They focus on attaining financial independence.
  • Under Accumulators of Wealth (UAWs) perform below average in saving money. Hence, they fall much behind PAWs despite similar incomes.

How Do You Know if You’re a PAW or a UAW?

Unfortunately, many UAWs are highly educated professionals making high incomes. Yet, they spend their money maintaining luxurious lifestyles. They also try to sustain the standards that society expects them to hold. 

But how do you determine whether you are a PAW or UAW? Stanley developed a formula you can use to check your PAW or UAW status.

[Your age] x [Your realized taxable annual income – inheritance]10%

The answer you get represents what your net worth value should be. For instance, imagine you’re 41 years old with an annual income of $200,000, $15,000 of investment income, and $50,000 worth of inheritance. You can calculate your net worth using the following formula.

41 x [$200,000+$15,000 – $50,000]10% =$676,500

If your net worth is less than half the value you get, you’re a UAW. If the figure is double your value, you’re a PAW.

StoryShot #3: Millionaires Rank Financial Independence Over Luxe Social Status

  • Save

We live in a world of social media where people often have a desire to display moneyed lifestyles for fame. If this is a weakness you have, you’re not alone. Unfortunately, suppressing this urge can be daunting. To appear rich in the outside world, most young people go beyond their means to fit into the perceived wealthy online community.

It’s credit cards that fuel many luxurious lifestyles today, not actual earnings. People want to have the latest designer clothes, lease sports cars, and get a large mortgage on homes. Yet, their financial strength does not allow it. Chasing this lavish life, you can’t have the peace that comes with financial independence. Instead, deep down, away from the public eye, you know you’re not financially successful.

The ideal American millionaire feels no pressure to prove they live a lavish lifestyle to the world. Instead, they prefer gaining financial independence to looking wealthy. They view financial sustainability as the ultimate prize for growing wealth. Even if they face financial constraints in the future, they wouldn’t be under pressure to sustain their lifestyles.

The Millionaire Next Door shows that financial independence contributes to well-being. Millionaires are happier and more confident in their current and future financial sustainability. They have clear short and long-term goals and objectives, allowing them to plan and budget their needs depending on priorities.

Everyone values the well-being of their families over other things. Focus on financial independence and avoid the social media perception of the “rich.” This way, you can enjoy financial freedom with your family like the ideal millionaire.

StoryShot #4: Millionaires Don’t Perpetuate Economic Outpatient Care (EOC)

Young men and women with rich parents often throw lavish parties and show off their expensive lifestyles. However, that’s not good for the youth’s own financial future. In fact, that can be a financial disaster in the making.

Many wealthy parents spend a lot of money on their children through cash gifts and financing non-business travels. Yet, the more money adult children receive, the less they save. This is quite ironic as the basic logic argues that the more you receive, the more you can accumulate. Unfortunately, human beings aren’t logical beings.

Millionaires claim that giving money to adult dependents prevents them from investing. They don’t learn important life skills like saving and using money on things that add value.

Practicing frugality in your life teaches your children to adopt the same lifestyle. Being a spendthrift encourages your children to embrace a lavish lifestyle instead of growing wealth.

Teaching your children the importance of frugality is key to wealth. It helps them develop plans to achieve financial independence.


We rate The Millionaire Next Door 4.2/5.

Our Score

Disclaimer: This is an unofficial summary and analysis.

Editor’s Note: This article was first published on September 14, 2022.

Related Book Summaries

Rich Dad Poor Dad

I Will Teach You To Be Rich

How to Make Money in Stocks

The Business of The 21st Century

Money: Master the Game

The Psychology of Money

Think and Grow Rich


The 4-Hour Workweek

The Millionaire Next Door summary review
  • Save

Similar Posts

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.