Here’s The Millionaire Next Door summary. Learn that most of the millionaires don’t actually live in expensive homes and own luxurious cars. They live simply but they have great wealth.
The Millionaire Next Door authors Thomas Stanley and William Danko studied the common traits of the America’s wealthy. They have learned that the truly rich live below their means, pursue the right occupations and opportunities, and ignore conspicuous consumption.
The authors also highlight that most of the truly rich look like common people. They are not star athletes or celebrities. They maintain a low profile. Maybe the person next door in your neighborhood is already a millionaire.
About the Authors
Thomas J. Stanley wrote over 40 published articles about the affluent. He appeared as a featured guest in The Oprah Winfrey Show and other shows. He has been cited in The Wall Street Journal, Fortune, The New York Times, and other media publications.
William Danko spent over 30 years in the marketing faculty. He also extensively studied consumer behavior and wealth formation. His academic publications have appeared in the Journal of Business Research, Journal of Consumer Research, and other reputable journals.
Main takeaways: The Millionaire Next Door Summary
Let’s discuss the key takeaways from their book:
- Frugality is one of the keys.
- Financial freedom is more important than displaying high social status.
- Use accumulation to your advantage.
Frugality is one of the keys
Most of the truly rich live below their means. Well, if you’re always spending more than you earn, it’s unlikely you’ll get rich right? The truly rich learned that the moment they start earning their own money.
Being frugal is a discipline. If you have children, you should somehow teach them to save money. As an adult, you should serve as a model for the younger. Frugality is one of the habits that will serve all of us for life.
Look at how much money we can save if we start being frugal right now. If we continuously save and invest 10 percent of our earnings, it’s likely we would be millionaires before our retirement.
Being frugal is hard. Once you start using your credit card to buy your wants, it’s difficult to stop. You’ll get into debts and you’ll be paying more in the interest. It becomes much harder to save money in that situation.
There are times we should still spend for our wants and getting into out-of-town vacations. But make sure that you still have some money saved for your future. Decades from now you’ll be thankful of what you did. Your children will also benefit because they saw you as their role model.
Financial freedom is more important than displaying high social status
This is a continuation of being frugal. We live in a consumption-driven society. We feel the “need” to try all the foods and go to all the known restaurants. We also feel the “need” to go to different places so people can call us “adventurer” or “traveler.”
We often want to take pictures of our food and places we visit so we can show them to friends. It becomes a contest where the winner is the one with the most number of places visited. It’s a competition which causes stress to everyone.
Some of us also buy a new car just to look cool. Right after buying the car, we post a picture of that in Facebook. It’s a nice feeling to have when comments start pouring in congratulating you for that new car.
It’s all right to buy a new car, travel, and try different cuisines. Just make sure that you still have money left for your savings. Also make sure that you’re not sinking in debt. It becomes more stressful if you’re piling thousands of debts in your credit card and salary loan. That stress often leads you to buy more things you don’t need.
For the truly rich, achieving financial freedom is more important than displaying high social status. They understand that displaying high social status often causes problems down the road. They know that they’ll regret their lavish lifestyle years or decades later. They imagine the hundreds of thousands of pesos wasted on the nonessential.
Use accumulation to your advantage
Being frugal has a cumulative advantage. Instead of spending the money, you invest it. That investment actually compounds, especially if you invest wisely. You’ll accumulate wealth much faster. Time becomes your ally.
Accumulation works best if you start early. If you start investing now, decades later you’ll have a sizable amount of money. If you start learning how to use your money, a year from now you’ll gain much financial intelligence.
You won’t see much rewards at the beginning. But after several years, you’ll see the numbers grow. Making and growing money is actually addicting. Once you see the results, it’s difficult to stop. You’ll explore more ways on how to grow your net worth further.
Instead of accumulating debt, accumulate assets. Instead of paying the interest, earn interest from your investments. The accumulation leads to further accumulation. That’s one of the secrets of the rich. The rich gets richer because they know how to use accumulation to their advantage.
There you have it. Start early. Live simply. Still enjoy life but make sure you still have money left for savings. This way you truly enjoy life. You won’t suffer unnecessary stress. You’ll start your way to becoming the millionaire next door.