Book – The Millionaire Next Door (Summary)
Author – Thomas J. Stanley & William D. Danko
Genre – Non-Fiction
Published in – 1996
As, Robert Kiyosaki states in the Book Rich Dad, Poor Dad – “There is no freedom without Financial Freedom”. Even though, earning determines the speed at which one becomes rich, it is HOW one spend, save and invest that determines wealth and true financial independence.
The Millionaire Next Door will change the way you perceive millionaires and how to become one. The number one rule is “You can’t become wealthier by trying to look one.”
Don’t confuse look for riches. Looks can be deceiving. Many people, who look rich are far from wealthy or becoming one. All their shiny objects are on EMI. This is against everything The Millionaire next door proposes.
About The Book –
The Millionaire Next Door is not written for the benefit of rich people. It is designed to enlighten those who are confused and misinformed about what it means to be rich. Most people have no idea about the true inner workings of a wealthy household.
According to the Authors, Real wealthy people get much more pleasure from owning substantial amounts of appreciable assets than from displaying a high-consumption lifestyle.
Another misunderstood concept is better off. Most people who come from humble backgrounds consider getting better off means having an expensive house, cars, shiny cloths, fine dines but not financial security. They keep compensating for their poor childhood.
The Millionaire Next Door divides people into two categories PAW (Prodigious Accumulator of Wealth) and UAW (Under Accumulator of Wealth). The book describes the lifestyle of these people and the choices they make that keep them in their respective categories.
Few Key Points From the Book
I) Frugal LifeStyle –
- Being frugal is the cornerstone of wealth-building. Yet far too often the big spenders are promoted and sensationalized by the popular press.
- It is unfortunate that some people judge others by their choice in foods, beverages, suits, watches, motor vehicles, and such.
- Many People, especially those in the under accumulator of wealth (UAW) category, know how to deal with increases in their realized income. They spend them! Their need for immediate gratification is great.
- Millionaires in research conducted by authors spend way less on suits, auto mobiles, accessories than one can imagine for millionaires.
- Offense – Defense Strategy – Author states income generation as playing offense and spending as defense and claims that real wealth accumulation is the combination of both. Your income may depend on your offense, whereas your defense will determine your wealth.
II) Time, Money, Energy –
- It is unfortunate that society has tagged certain profession with so much glamour, and people in these industries has to maintain the status, whether they can afford or not to sustain and grow in business, or so they think.
- Millionaires spend more time on budgeting. Keep tab of their daily, monthly and yearly expenses and have well-defined budget segment wise.
- As, they say unless you know where your money is going, you won’t know where to cut, how to save and invest.
- Less than 25% Millionaires drives same year model, rest drive little old models. PAW spends way too much time in narrowing down the car in oppose to UAW.
III) Affirmative Actions, Family Style –
- Leaving will is also of great significance and determines, how the money will either empower or deteriorate life of recipient through making them dependent on this money.
- How different people approach will, what is a ideal way to set up will and transfer assets gradually to be sure of better use of it.
- Few Rules of affluent parents and productive children –
- Never tell children that their parents are wealthy.
- No matter how wealthy you are, teach your children discipline and frugality.
- Assure that your children won’t realize you’re affluent until after they have established a mature, disciplined, and adult lifestyle and profession.
- Minimize discussions of the items that each child and grandchild will inherit or receive as gifts.
- Stay out of your adult children’s family matters.
- Tell your children that there are a lot of things more valuable than money.
IV) Seven Common Denominators of Millionaire –
There are 7 common denominators authors found amongst 1st generation millionaires, who made it own their earnings, which are being discussed in detail in the book.
1. They live well below their means.
2. They allocate their time, energy, 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.
I have also created a video of a few quotes from the book – Hope you like it. Please do subscribe to my YouTube channel – Myread4change
The Millionaire next door empower you with the fact that it is the way you spend what you earn determines your Financial well-being. And we may not have control over our earnings all the time, but we can always control the way we spend our earnings.
Hope this summary encourage you in some way to take control of your financial well-being.
Thank you for Reading. Please share your thoughts in the comment. I would love to hear from you.