When we were married in the early 90’s, my new wife and I hatched a plan.
We knew that time together would be scarce (we both worked and my hours were especially brutal) so the limited time we had we wanted to spend together.
We also wanted to help other people and volunteer through our church.
After asking several older and wiser people for their advice, we decided to join a program that offered financial help to those in need.
We took the training (which would resemble Dave Ramsey’s Financial Peace course today) and before long we were counseling people with major money problems. Mostly we worked on creating budgets, getting them out of debt, and the like.
Even with the big drop off between “person with a problem” to a “person meeting with us” that I’ve discussed previously, we still had many people to serve.
Over and over we saw the results of over-spending and living way above your means. For several years we saw examples of what not to do with money. It was very good training for us. We could learn from others’ mistakes without actually making the mistakes ourselves.
But that was only part of what we needed. We could see what not to do — the things to avoid — but what should we do? What actions should we take to grow our net worth?
I began to look around for guidance. I read several money books that offered “ok” suggestions but nothing really stuck. Then in the mid-90’s I ran into a book that would change my life: The Millionaire Next Door
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My Money Life is Changed Forever
I think it was the down-to-earth message that resonated with me. Becoming wealthy wasn’t that difficult. In fact, the book showed that a lot of “average Joes” were millionaires. All you had to do was apply a few, simple principles (seven to be exact), give it time, and wealth would be yours.
We started applying those principles to our lives (with me playing good offense and my wife playing good defense) and the rest is history.
Over time I would run into several other life-changing money books, but I always had a special fondness for The Millionaire Next Door. It was the book that opened the others to me. I often told people to, “Read the book, do what it says, and then become wealthy.”
And while I never met him, I always considered the book’s author, Dr. Thomas J. Stanley, as a mentor of mine. And why not? He had given me something that had changed my life in such a positive and dramatic way. I’ve always been thankful for what he did for me.
Dr. Stanley was planning on updating his book for its 20th anniversary, but tragically he was killed by a drunk driver in 2015. His daughter, Sarah Stanley Fallaw, then took up the task of looking at The Millionaire Next Door 20+ years later to see how millionaires today compared to those in the 1990’s.
Her findings are in the new book The Next Millionaire Next Door
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I can’t remember when I was this excited to get a book. When it finally arrived, I was thrilled!
I don’t want to spoil the excitement for you, so I won’t share all the details. But I would like to point out a few highlights to give you a flavor of what to expect.
The Average Millionaire
As you might imagine, the book calculated another round of major stats on millionaires. Here are some of the factors that make up today’s “average” millionaire:
- 61-year-old man
- He’s either married (69%) or remarried (25%)
- Median income of $250k
- Median net worth of $3.5 million.
I’m closing in on my 100th millionaire interview. When I hit the century mark I will be summarizing what we’ve learned about millionaires so far.
A preview: the millionaires highlighted in this book look a lot like the millionaires I’ve interviewed.
What It Takes to Become Wealthy
Like the original, the new book offers advice on what people can learn from millionaires to become wealthy.
It lists six activities as “requirements for those who seek financial success” which include:
- Ignoring the myths of wealth, including the confusion between income and net worth, and the barriers for creating self-made wealth.
- Recognizing the influences others may have on financial attitudes and behaviors, and learning from those who are equally committed to financial success over and above appearing to be rich.
- Making consistently good consumer decisions, starting with the neighborhood, understanding its potential effect on reaching financial goals.
- Assessing strengths and weaknesses related to finances to improve where possible in areas such as frugality, owning responsibility for financial outcomes, and confidence to make decisions based on knowledge.
- Deciding early on a philosophy for work and careers and not assuming that the traditional view of work, one that seems to dictate an 8 am to 6 pm existence from ages 25 to 67, is the only path.
- Recognizing that successful investing behaviors can be learned and improved and that the fruits of effectively investing what is saved over time provide security for the more important aspects of one’s life.
There’s some really good stuff in each one of these and the book dedicates a chapter to breaking down each thought into details.
My Take on the Six Activities
As you might imagine, I have some thoughts related to the above:
- There are many myths (some I would call excuses) around wealth accumulation. A couple examples: “You can judge a person’s wealth by what he drives, buys, and wears” and “I can’t get ahead on my own.” For many reading this site, these are probably not an issue. But they are still barriers for the vast majority of the American population — even with so much financial “knowledge” available these days.
- The confusion between income and net worth is one that especially irks me (even to the point where I mentioned it as a reason for starting this site). The author disses on the mainstream media (which is one of my favorite pastimes as well) and cites them using “income” when they mean “wealth” as a clear example of a myth they perpetuate (i.e. that people are wealthy if they have high incomes). If you don’t see the difference between income and net worth, then you’re probably fooled by the myth.
- A couple of the influences the book mentions that I especially like are: “Being frugal is the cornerstone of wealth-building” and “Stop caring about keeping up with the Joneses”. The former is a carry-over from the first book and one that was a key to us becoming wealthy (and is the “S” in “ESI”). The latter is so well-known in popular culture that you think most people would have conquered it already. And yet they haven’t.
- I like “learning from those who are equally committed to financial success over and above appearing to be rich.” I think this describes a lot of personal finance bloggers these days.
- The biggest spending decision that can make or break anyone financially is buying a home. I’ve noted that the house you buy determines your wealth — the more you spend, the less likely you are to accumulate wealth (on average). The book acknowledges this as well (which was a key part of Dr. Stanley’s book Stop Acting Rich
. - Millionaires self-report that “discipline” is a key factor in their success. It’s not on the list recently published here of the ten crucial qualities you need to reach financial independence, so maybe we need to re-visit that post. It is close to both “determination” and “perseverance”, so perhaps we have it covered partially.
- There are many ways to address work and its impact on a person’s financial life. It helps to “choose the right occupation”, of course. But whatever field you enter you need to take steps to make the most of your earning potential (review my career calculator to see what a difference earning more can make). You should also consider side hustles (the book calls this “moonlighting”) as a way to grow income.
- Millionaires spend lots of time studying about investing — far more than I would have thought. (I would have guessed the vast majority would have simply “set it and forgot it” with index funds). Whatever investing plan they did pursue, there was one key that always seemed vital to success: discipline.
.You’ll have to read the book and dig a bit deeper for even more insights — these are just the tip of the iceberg.
Two Odds and Ends
A couple other noteworthy mentions I want to share include:
- The author calls out the Financial Independence community (in a good way). She mentions that since the first book was published there’s now a FIRE movement. Then she…wait for it…mentions the list of FI bloggers at Rockstar Finance! I couldn’t love this book more!!! 🙂
- The book clearly recognizes that “there isn’t an exclusive path to financial independence.” There are many ways people become wealthy (which I’ve mentioned as well). Read five different blogs and you’ll see five examples of this.
Overall I would say that the book’s findings are similar to what The Millionaire Next Door told us all those years ago. But as thinking around money has changed, so have millionaires, their actions, and how they achieve wealth.
This book offers the perfect blend between the history of the first book and the changes of the past 20 years. I highly recommend it and hope you enjoy it as much as I did.
Awesome! I’ll have to check this one out. I delayed reading the original for some time and started reading it on the way to FinCon, actually. There were other books that opened my eyes along the way.
Great that they highlighted the FI community and Rockstar! Goes to show all the great work that Rockstar has done since it was created.
The Income versus Wealth myth is a huge problem in my world. Most physicians (and people who like to have an opinion about us) confuse this concept badly. I spend lots of time when talking to residents disproving this myth. Thanks for mentioning it.
TPP
Yes, I 100% agree about discipline as probably the most important element of financial success. Achieving a goal may not be possible without discipline. The key is to start making a certain behavior a habit or routine. Investing in knowledge and application through discipline is the key.
I’ve been looking forward to reading the update. I’ve enjoyed all of Dr. Thomas Stanley’s books- Millionaire Next Door, Millionaire Women Next Door, Millionaire Mind, Stop Acting Rich – great info in all of them. I’d love to see Millionaire Women Next Door updated, personally.
I didn’t realize the amazing data set you have created until you mentioned the 100 th interview is coming up. While it isn’t quite statistically valid results, it is intriguing nonetheless. If you tracked the esi scale folks over time and compared that with millionaire data, you would probably have a data set that is unique even to social scientists.
You could identify traits, careers, geolocations, education levels, political affiliations, religious identifications, bilingual, etc that have the greatest impact on upward mobility and lifetime success. Essentially this is what social anthropologists spend their life looking into. Considering the wealth gap that is happening globally, your data could be pivotal for the next generation, akin to how millionaire next door influenced you.
The original “Millionaire Next Door” also had a huge influence on me and how I viewed money. I’ve been waiting to give this to my daughter (college freshman) to read to hopefully open her eyes, as well as for her to put into context what she has been seeing me doing my entire life.
I have such a fondness for the original book, but am curious if you think the update version is more appropriate/better for such a scenario?
It’s hard for me to say.
I loved the first one so much I’m not sure I can make a valid judgement for sentimental reasons.
I guess if you force me to choose I’d take the new one as it seems more contemporary.
I’m in the same situation with my daughter, but I recently reread the original, and it is quite dated as 20 years of inflation make the numbers difficult to translate into today’s dollars.
Give her both! Or give her the new one only. I am reading the original now and it is very had to give credence to some of the numbers because I know inflation has changed things.
I also wonder how the technology era has impacted millionaires actions.
I also gained a lot from reading The Millionaire Next Door. It was a real eye opener and informed how we have lived for the past twenty years. We have been pleased with the results.
I was not aware of the new book and look forward to checking it out. It might be the perfect book to give my young adult daughter and her fiance.
Nice breakdown!
I am currently reading the book right now, and it’s refreshing to read that the majority of the principles of building wealth haven’t change. It still comes down to mainly discipline and ignoring what your neighbors/friends/family are doing (buying).
Embarrassingly I have yet to read the original Millionaire Next Door. Would you recommend reading both or is there a lot of overlap in basic content?
I would read the first one first and then this one. They work together quite well.
I always felt like I had a special kinship with Dr. Stanley since he lived in my suburb of Atlanta (Marietta). His death was so tragic. I have read every book he’s ever read and can’t wait to get my hands on this one. The advice about the house you buy has stuck with me, because it’s really easy for your neighbor’s financial habits to become your own.
Great review ESI. Thank you.
Millionaire Next Door helped us/me shape our current position.as it relates wealth accumulation.
My wife and I have been able to follow most of the teachings/research outlined in this great book —— I’m so proud I found this book 20 years ago—- mixed with the focus that Larry Burket and Dave Ramsey gave us, our future looks bright.
Now, I’m even more excited to read the follow up research that Dr. Stanley’s daughter has for us.
Lastly, now that I’m part of the ESI team, I feel confident (more each day) that retirement will be just as fruitful as our wealth accumulation journey.
Quick Question: After many , many years of learning how to accumulate wealth, does anyone have any real concerns about shifting over to become consumers, or is it just me? I don’t read too much about how to make this shift, actually—— help me learn more about this concern?!?
First of all, no matter how much you have, I think you’ll be nervous. Almost anyone would be. I know I was. It’s the unknown and it feels like you’re taking a step off a cliff even if you’ve worked out the numbers a thousand times.
Second, you probably read this post, but if not, perhaps it can help:
https://esimoney.com/how-to-get-up-the-nerve-to-retire/
Third, I think the shift is easier the more you have above what you need. For instance, if you need a $50k income to live in retirement and you have just enough to make that, you’re probably nervous (and should be).
If you need $50k and have $60k a year you’re probably less nervous.
If you need $50k and have $100k, you probably aren’t nervous at all.
I’m closest to the last group and find that the margin of safety has helped me make the transition fairly easily.
Hope this helps.
Thank you, ESI. Yes, I read the article you listed, but will read it again. My wife and I have 26 1/2 months left to retire and I’m working hard to help us get all the final pieces in place properly—-
We’re closer to the last group as week, but still a bit nervous about the next 25 or 30 years : called retirement
Thanks for reaching out and helping me.
Thanks for the review. I look forward to reading the new book.
I, like “M” and “KD” say they would like to give book to their adult daughters to read. I hope your daughters will read the book and heed the information and advice. Mine hasn’t lifted the cover of the books I’ve shared. Some have to learn the hard way.
When I read the original “Millionaire Next Door”, many, many years ago….I realized that was the way my husband & I were already living. It just takes time, discipline, and perseverance along the way. We also raised three kids and cash flowed their college education. One done….two in college at present time.
Hey ESI: I didn’t know that a new “Millionaire Next Door” book was out but I purchased it (using your affiliate link :))
It’s funny that you mention the original book as I’m currently going through the process of re-reading it. The first time I read it was back in ’96 when I was a senior in college. I didn’t really “get” many of the concepts then like I do now.
The main reason I wanted to reread it was to compare it to Chris Hogan’s new book on Millionaires that is going to be released soon. Now I have another book to compare to as well. Thanks for sharing.
I just got Chris’s book in the mail the other day and am really looking forward to reading it as well!
How’d you get a copy so early?
I attended an event with him at FinCon, met his marketing people, and requested a review copy.
It’s common for “the media” to do this.
I have a feeling Chris Hogan’s book is going to be pretty similar to TMND.
I can’t say enough about how Dr Stanley’s books ( all of them) changed the way I look at consumption – choice of occupation – and balance sheet totals. I read the first book in 1996 at the beach when I turned 30 and opened my first business. I had been very frugal – I have a healthy fear of being “broke” – but the book just affirmed my approach to frugality. It became a way of life. We never did without – ever. But tips about public schools, vehicles , taxes and avocations became habits that have made all the difference. The second book was even better – “The Millionaire Mind “ but I have always kept a copy of Millionaire Next Door at hand ( my first copy).
I was really sad to hear about Dr Stanley’s death. While I never met him I became a part of his survey group for the 20th anniversary book and I was quoted in the book – just found out 2 weeks ago when the book dropped. Kinda cool.
Great page and it’s great to connect with like minds here.
I agree with discipline being very important and it’s something I’ve been focusing on. Whether it’s keeping your spending in check, cutting out bad habits or investing consistently, it all really adds up over time. In many cases, people can be their own worst enemy when it comes to money, as much as or more than all the external forces working against you.
Impressing others is part & parcel of the fiesta of consumption we call “The American Way”. But it makes for psychological & financial pain down the road. So it’s great that we’ve all found a site where like minded people can share our own version of The American Way. And I was pleased and astounded to see how close I matched up to the avg. millionaire. 61 years old. $3.7M net worth. My income only about 40% of the avg but I’m in pre-tirement these days. Good on all of us.
I have a special fondness for the original MND as well. I was fortunate to have read it at 18 and it had a significant impact on my twenties and the decisions I made, especially in relation to my peers. I can’t wait to read the updated version. Thanks for sharing this, ESI.
Two comments, one of the commonalities I have seen from the ESI Millionaire Interviews is the importance of a spouse or partner and their contributions to the family net worth. A partner who is “equally-yoked” in terms of following the ESI principles, and a similar, solid work ethic and savings/spending discipline as the other partner, can significantly escalate net worth and the chances of achieving FI. Of course, the opposite is also true. One bad marriage leading to divorce can wipe out a lifetime of savings and put you right back to square one. In summary, I feel choosing the right partner has to make the top 10 of anyone’s list of what it takes to be successful and achieve your financial goals more quickly. Not that it can’t be done as an individual; it just can be done easier when two people are rowing together and sticking together for the long haul.
Second, I agree with the comment about how much house you buy being an influence on your overall wealth (too much house being a negative). As I mentioned in my interview some time ago, I made the mistake of purchasing more house than we needed. Had we purchased half the house we have, which still would have been a nice house, and used the other half of the mortgage payments toward investing, rather than the mortgage, our net worth would be sizably higher. My only saving grace is that when we originally purchased our home, we intended it to be the home we would retire in. We have now been here 14 years and while not fully retired, we do hope and pray for another 25-30 years in this home. Should that remain the case, I will probably feel less concerned about our original decision.
Hi ESI how can we take part in the interview?
What interview?
The average millionaire is a:
“61-year-old man
He’s either married (69%) or remarried (25%)”
Is there a reason given in the book why the wealth is attributed to the man in the 69% and 25% of married millionaire couples? If 94% of millionaire households are comprised of a married couple (I am going to assume the majority of those are not same sex male couples since only about 2-3% of American men identify as gay) why are the women in those couples not considered millionaires as well?
Yes, i was wondering the same. Shouldn’t it be households instead of attributing the entire wealth to only the man of the house?
I agree; actually brought up this point when discussing the article with my husband about this last night. Even in the case of high earners like male cardiologists, the wife often worked while her husband was in med school/residency, resulting in tens of thousands of dollars less debt, at a point in the earning/investing cycle where this makes all the difference.
FYI, I asked the author to stop by and clarify this, but she’s traveling today, so it will be a day or two before we get an answer.
I saw a few similar comments over the last couple of days, so I did a short blog post to clarify the issue. In our data sample for this, book a majority of households reported the male as the financial decision maker in the family (and therefore was the respondent to our survey). We see a different designation of “household financial manager” in our research with broader samples (e.g., younger, emerging affluent). Hope this clarifies a few things. http://www.thomasjstanley.com/2018/10/millionaire-status-why-so-many-men/
Thanks for the review ESI, I’m dropping it into my Kindle queue right after I post!
“Millionaires spend lots of time studying about investing — far more than I would have thought. (I would have guessed the vast majority would have simply “set it and forgot it” with index funds).”
Interesting insight. I enjoy studying investing but fortunately, my actions follow the “set it and forget it” rule using a combination of index funds, ETFs and other reasonably low cost funds (that I bought long ago and don’t sell due to taxes on gains). I set aside about 10% of my portfolio as “gambling money” to test theories resulting from my studies but staying at 10% or less limits self-inflicted injuries. So far, I’ve been happy with the results.
You know it’s funny but I think cutting the cord to cable tv has been a big help to me in terms of saving money. I do not buy as much now that I don’t see as much advertising.
For me, the story is good income (software engineer) and finally learning the value of saving. I think the good income is a huge thing. Saving more, and spending less will only go so far.
In my case, I just wish I started learning and saving younger!
Same for me —— starting younger would’ve been a huge help ——- just didn’t know what to do and I had very little access to information—-
As a working educator, most of my career (over 30 years), my wife (teacher too) and I learned how to live WELL below our means (beans and rice stuff) ——- so, saving came easy to us, and then we focused on learning how to invest properly.
Earning as much as we could with added side hustles, we’ve been able to hit the “millionaire team” —— and we’re all set to retire (in very good shape) in 2020.
So, my hope is to see more and more educators do the same. “The millionaire educator” —— wonder how many are out there? I’m guessing a lot ——???
Thank God for the many blessings that have come our way during this journey—-
Agree that “millionaire couples” or “millionaire households” might be a better representation. I realize that while I am not the bread winner in the household, much of what we were able to save was the results of my efforts; I was a SAHM for 8 years. So even though I wasn’t working outside the home, we also didn’t incur daycare expenses. Just wish we had thought to contribute to my IRA as a spousal IRA during those years. Now I’m working to make up for those years. And I view every $ I don’t spend as a Roth $.
I didn’t know that they created a new Millionaire Next Door book. Thanks for letting me know! The first one was one of my favorite books. That is very exciting that your website is mentioned in the new one! Is there anything that you would change about your lifestyle after reading the newer one?
Different lessons here . . . read through the first book, learned enough, moved on. Very young I learned that almost all humans lie, distort, misrepresent, starting with your parents, usually to cover their own ‘business,’ rightfully sketchy. Christianity was the first to go. Some family. Many friends, if you’d call them that; mostly acquaintances and unnecessary liabilities beyond one good partner. No saving the world; it’s always been hell with a few bright spots, the occasional golden age. Most recently, financial bloggers hit the chopping block. Once I get a sense, it’s finished . . . Budgets are Sexy, now toast, MMM stale, also struggles here, though I’m forcing a full read, if only to grasp what others possibly think, for practice. Seems to be a phase, this great outpouring, blogging phenomenon, and yet the masses remain swallowed by greater forces and problems and can not seem to help themselves. Money to be made there, and at least the topic IS money, not always silly feelings and revisions in a ridiculous quest for normalcy. Some nice passages to be sure, but generally too myopic for my blood; just endless survivor tales, a microphone generously placed in front of the rare few. Nine billion on this planet, right? The dead have remarkably little to say, as usual, the living, plenty. Only thirst remaining is more of the right things already assimilated, then undiluted knowledge of a certain quality, more honest than usual. From this I’ve built an expanding empire with the gf, firing on every cylinder now EXCEPT for chasing after any of those high net incomes and the (usually) crippling lifestyle that comes with it, followed by an almost proverbial premature death. Plenty of history there, so little coverage. No thanks. A couple of honest comments here and there, moments of clarity, absorbed, rarely forgotten. I choose life over hard labor; time is too valuable. So be strong, healthy, wise, and self-disciplined. Partner up . . . the rest is shifting sands, uncertainty. I play on. HL and Happy Halloween.
Savings rate: 57.5%. Shooting for 66%; next raise should cover it. Carefully chosen foreclosed home now worth twice what we paid, four years on. Booming market, WA coast.
Cash protection up the yin yang. 401(k), 100% S&P 500 index fund, .19 expense ratio. Four days on, three off. Fully paid vacation 7 days away. Twelve days long and no plans, really, beyond the pleasure principle, multiplied. I still think life is pretty ugly, but you can’t have it all. The earth remains beautiful, for now. Still love my girlfriend. No marriage, though; wouldn’t be prudent. No kids, no more pets. Creature comforts. Peace and quiet . . . that’s it.
Well said.