Katie Zastrow
FIN 1050-045
Joseph Howell
December 1, 2011
The Millionaire Next Door by Thomas Stanley and William Danko: Book Review
The Millionaire Next Door: The Surprising Secrets of America’s Wealthy by Thomas
Stanley and William Danko is a non-fiction book in which Stanley and Danko report their
findings on how to become a wealthy individual. Ultimately they researched millionaires and
then told us (their audience) how they live and how we too can become such. Interestingly
enough, they started their research in the wrong neck of the woods – an upscale neighbourhood.
They thought, just like the majority of people that millionaires lives in upscale neighbourhoods
with perfectly manicured yards and more than one fancy car. Surprisingly, they were wrong.
Throughout this journey they took themselves on they, “discovered who the wealthy really are
and who they are not. And most importantly, [they] determined how ordinary people can
become wealthy” (p. 1).
I appreciated that they started off the book with a definition of wealth. To Stanley and
Danko, the distinction of what is true wealth and the portrayal of wealth are two completely
different things. In their own words that describe that, “wealth is not the same as income. If you
make a good income each year and spend it all, you are not getting wealthier. You are just living
high. Wealth is what you accumulate, not what you spend” (p.1). This makes a ton of sense.
The wealthiest people in the world are living way under their means and therefore saving loads
of money. As a result, you would not know a wealthy millionaire if you tripped over one
because they do not look like what everybody would expect a millionaire to look like. By the
same token, the people who society deems wealthy are probably not so at all because they have
spent most of their money on their mansion and their luxurious rides that their net worth is low
when their income is taken into consideration.
Throughout The Millionaire Next Door, Stanley and Danko make it clear that, “most
people who build wealth in America are hard working, thrifty, and not at all glamorous” (p.29).
It is all about being frugal. Becoming wealthy happens only when you live below your means –
way below. You cannot care about how others think of you because of your material
possessions. And you cannot want to portray the “millionaire” look. At the end of the day you
need to ask yourself, “Would I rather have a mansion and pretty cars or financial security?” In
order to obtain financial security you need to sacrifice and be disciplined with your money.
I was shocked to find out how much time wealthy individuals spend on budgeting,
researching and planning when, where and how their money is going to be allocated. It takes a
lot of time and energy to become wealthy. On average, wealthy individuals are spending ten
hours a month budgeting and then another twenty hours a month to study the stock market and
other investments. It is a lot of work. I found it quite surprising how many people in America
have the opportunity to be wealthy but choose all of the “stuff” over financial security. And it is
all because they are not willing to put in the hours to manage their money. Personally, I would
rather be able to retire than have nice cars and have to work until the day I die. Stanley and
Danko describe wealthy individuals as people who, “believe that financial independence is more
important than displaying social status” (p.109). In other words, at the end of the day, “if your
goal is to become financially secure, you’ll likely attain it... But if your motive is to make money
to spend money on the good life... you’re never going to make it” (p.110)
Wealthy individuals take the time to get to know what they are getting into. When it
comes to investing, they research, study and ask financial experts their opinions on stocks and
other investments. Millionaires educate themselves on everything there is to educate themselves
on money and how to build, accumulate and maintain wealth. In the words of Stanley and
Danko, “their capital is their intellect” (p.237). Most millionaires are first time millionaires. In
other words, they did not attain their wealth from their parents. They worked hard for every
penny earned and they learned how to do it on their own. This offers a little bit of hope for all of
us because most people think that wealthy people had their wealth dropped on their lap. While
this is true for some millionaires, it is not the case most of the time. We can all become wealthy.
It just takes a lot of hard work. “A label does not make a varsity player. Nor does an industry
label make the business owner wealthy. It takes talent and discipline to generate profits and
ultimately wealth” (p.229). No Major League Baseball team ever won the World Series without
practicing. No Olympic athlete was ever awarded a gold medal because they were simply good
looking. All successes take hard work – and that is exactly what millionaires put into their
financial planning – a lot of hard work. The level of commitment that millionaires have towards
their money and wealth will only ensure a financially secure future.
Stanley and Danko emphasize the importance of teaching our children frugality and
discipline, regardless if you are wealthy or not. They believe that a huge factor in whether or not
an individual will become wealthy falls on the parents’ shoulders – did they or did they not teach
their children good money habits? Stanley and Danko suggest a few things in order to assure
that your children will develop and maintain money habits that will help them to become
wealthy. One thing they mentioned was to “assure that your children won’t realize that you’re
affluent until after they have established a mature, disciplined, and adult lifestyle and profession”
(p.205). Think about it. If you children know that if they really get into a pickle that Mommy
and Daddy can bail them out, then your children won’t ever try to build their own funds in case
of emergencies. Secondly, “minimize discussions of the items that each child and grandchild
will inherit or receive as gifts” (p.205). If your descendants know that they are getting some sort
of inheritance they will not plan for their financial future on their own. Not the last, but another
thing Stanley and Danko mention is to, “tell your children that there are a lot of things more
valuable than money” (p.208) Money is a great thing and financial security can take a lot of
stresses away, but the most important things in life money cannot buy.
Overall, Stanley and Danko realized that wealthy individuals save, not spend, their
money. The characteristics of these wealthy individuals are that they are frugal, hardworking
and disciplined – especially with their money. In order to become wealthy you need to live far
below your means in order to accumulate savings. While reading the book, I cannot say that
there was anything that I disagreed with when it came to the research and viewpoints of Stanley
and Danko. When you consider the lifestyle of truly wealthy individuals, it is not hard to
comprehend why they are wealthy. Likewise, when you look at a person who looks wealthy
because of all of their possessions and then you find out that they are not wealthy, it is very easy
to see where all of their money went. I realize the importance of teaching our children good
money habits and after reading this book, I feel like some sort of finance class needs to be
implemented at a much younger age than in college. Taking this class for the first time in my
twenties, I have a hard time fathoming that my poor money habits will ever change because they
have been instilled in me for such a long time. I will definitely attempt to teach my children
money habits such as frugality and discipline that The Millionaire Next Door emphasizes. At the
end of the day, in order to accumulate wealth, you need to work hard. It will certainly not be
easy, but it will absolutely be worth it.
Works Cited
Stanley, Thomas J., and William D. Danko. The Millionaire Next Door: The Surprising Secrets
of America's Wealthy. Atlanta, GA: Longstreet, 1996. Print.