★ Rockstar Book Review: “The Millionaire Next Door”

Posted December 2, 2016 6:00 am by with 17 comments

Book:
Thomas J Stanley and William D. Danko
Price:
$10.09

Reviewed by:
Rating:
5
On December 2, 2016
Last modified:December 17, 2016

Summary:

The quintessential personal finance book!

millionaire next door book

Welcome to our first Rockstar Book Review! Every Friday, we dive into one of our favorite books to help maximize your wealth, your career, and most importantly, your LIFE.

We’re bringing in financial book expert Hélène Massicotte to run this series (our new Curator of Books here at Rockstar Finance), and she’ll be covering everything from the classics, to the modern, to the up-and-coming and hot off the presses, in both personal finance and business. If you like books, or even just quick insights, you’ll love this series :)

We’re kicking it off today with the quintessential finance book… Take it away, Hélène!

“The Millionaire Next Door: The Surprising Secrets of America’s Wealthy” by Thomas J. Stanley and William D. Danko

rockstar rating 4 and a half stars
Who it’s for: Anyone who wants to become wealthy and is willing to do what it takes.

Readability: MEDIUM. Thomas J. Stanley’s writing is on the casual side, which is no easy task given he’s presenting summaries of 20 years’ worth of research. He also keeps it light and includes many stories and examples to make his points.

What I liked about it: “The Millionaire Next Door” (TMND), co-authored with William D. Danko, is the best book in Stanley’s series. (Other titles include: Millionaire Women Next DoorThe Millionaire Mind and Stop Acting Rich.)

What I didn’t like about it: The book focuses a great deal on millionaire families, as opposed to individuals, often with men as the primary earner in the household and his partner as the frugal shopper/household manager. In a number of cases, it becomes apparent that, were the couple to split up, they would no longer be millionaires. I think a more accurate title would have been “The Millionaire Household Next Door”.

Find it @ Amazon for $10.09 || Join our discussion in the forum

“The Millionaire Next Door” Proves That Being Practical is Sexy, for Your Net Worth at Least

This is THE book to help us understand how real people become millionaires, to debunk the myth that millionaires are either lucky or inherit their wealth, and to find practical advice on how we too can succeed with money.

Stanley’s findings revolve around three main themes:

  1. Live below your means
  2. Choose a partner with similar values
  3. Focus time and energy on wealth accumulation

#1. Live Below Your Means

Sounds simple enough. We’ve heard this advice ad nauseum, so much so that our eyes glaze over whenever we read the words. That said, in Stanley’s case, he offers practical examples of how millionaire households put this into practice:

  • Buy inexpensive but reliable cars and keep them for years (preferably Toyota four-door sedans)
  • Keep housing costs in check (remember, Buffett still lives in the same home he bought for his family in the 70s… and he’s a billionaire!)
  • Buy good value brands for your clothes and accessories (millionaires love Timex watches… for anyone who still wears one of those, oh and they usually carry a Sears card)

If you’re not yet wealthy but want to be someday, never purchase a home that requires a mortgage that is more than twice your household’s total annual realized income. (pg. 68)

Stanley also offers a way of measuring how we’re doing with our wealth accumulation that can help us put the Manolo Blahniks back on the shelf and walk out of the store:

([pre-tax income] x [your age]) / 10 = what your net worth should be right now

This calculation is valuable for one important reason: it matches what we need to have accumulated based on our current lifestyle. It assumes that we can live reasonably well on our current income in the future because we’re doing it now.

#2. Choose a Partner With Similar Values

A core theme in Stanley’s book is that the household functions as a unit, with members of the household having responsibilities in a number of different areas: earning, spending, investing and maintenance. If any member of the household is not playing their part, it doesn’t matter how good any one person’s intentions are, wealth accumulation becomes a whole lot harder.

If our partner wants the big house, the fast car, the lavish vacations and the bling and these don’t fit into what it will take to be comfortable financially, it means we’re choosing them over our own financial peace of mind. (It also means they’re choosing “stuff” over our comfort and security, and possibly a lasting relationship.) It’s no wonder money is a key driver in people’s decision to part ways.

Most people will never become wealthy in one generation if they are married to people who are wasteful. (pg. 37)

#3. Focus Time and Energy on Wealth Accumulation

What we focus on, we bring about. TMND is full of examples that support this statement. Millionaire households know:

  • How much they have
  • How much they make and, most importantly,
  • How much they SPEND.

time energy money pageWhile the majority of us worry about whether or not we “have enough”, millionaire households are focused on what they need to do to be successful. They focus their time and energy on being well-informed about all aspects of their finances and they set and achieve money-related goals, both at work and at home (see reference, right, pg. 71).

Interestingly enough, they’re not overly focused on being invested in the market—though they know what they have, where it’s held and how much it returns. Their primary focus is on what they can influence the most: the success of their business(es)/work/side hustles and how they spend their money. Not super sexy, but their net worth certainly is.

Bottom Line

If you want to know more about the above, including research summaries and some great real-life stories, TMND will not disappoint.

Where you can find the book: Amazon ($10.09)
Where you can find the author: ThomasJStanley.com

If you’re looking for other books about how to become wealthy no matter your salary, these are my picks: The Automatic Millionaire by David Bach, The Wealthy Barber by David Chilton and, for those who like books written by young men who think the whole world appreciates college campus humor, I Will Teach You to Be Rich by Ramit Sethi.

*Head to the forums to discuss this book further,
and for a chance to win a free copy!*

All book reviews include affiliate links to Amazon.com or other places they’re sold. Thank you to all those who support our site by going through these links!

Hélène is Rockstar Finance’s Curator of Books, and Blogger at FreetoPursue.com. A perpetual student, speaker, writer and coach, you’ll often find her reading, researching or writing. She also likes travelling and hanging out with her husband and their greyhound Belle.

17 responses to ★ Rockstar Book Review: “The Millionaire Next Door”

  1. Jon @ Be Net Worthy December 2nd, 2016 at 8:17 am

    Great review Helene! TMND is one of the first personal finance books I ever read and it is truly a classic! I’m looking forward to checking out your future book reviews!

    Reply

    • Hélène Massicotte December 2nd, 2016 at 8:22 am

      Thanks! Glad you liked it. We have a number of reviews of personal finance “classics” in the works. I’m sure there will be other favourites of yours. :)

      Reply

  2. Arrgo December 2nd, 2016 at 11:12 am

    Good focused review. I haven’t read the book but the concepts are all true. Cut out the non-sense purchases and wastefulness in your life and in general live smarter from an early age and you can put yourself in a great position or even financial independence in your 40’s or even sooner.

    Reply

    • Hélène Massicotte December 2nd, 2016 at 11:28 am

      Thanks for the comment Arrgo. So true that it’s when we waste money on “wants” we get ourselves into trouble. Unfortunately though, what we define as a “need” keeps creeping forward every year in Western society. Sounds like you’re managing to resist that trend!

      Reply

  3. Jim @ Route To Retire December 2nd, 2016 at 12:02 pm

    I really enjoyed this book – it was quite different in how the statistics drove most of the writing but without making it an overly-complicated read.

    On of the big points I got out of it was that a lot of people in your typical suburban neighborhood tend to “look” like they have a lot of money, but most of these families are really not in good shape financially. The rich tend to not waste their money on stupid things and, a lot of times, drive the used cars and live in the smaller, older houses… you would never even think they have money.

    Great review, Hélène!

    — Jim

    Reply

    • Hélène Massicotte December 2nd, 2016 at 12:08 pm

      Thanks Jim! Your comment makes me think of the expression “big hat, no cattle”. The millionaires don’t seem to care what others think and I agree. I’d rather have cattle :).

      Reply

      • Patty July 28th, 2017 at 7:59 pm

        I agree with JIm. Most with the new house in new neighborhood are living paycheck to paycheck with no savings. I have a great savings and 410K plus IRA, etc. and very comfortable. Own my house, zero debt. But i live in a middle of the road home and no one would think I have the money I do. What I DO HAVE is peace of mind and no stress. Sometimes I get caught all up in the BIGGER BETTER NEWER house craze and go looking around. But then I realize my house is probably better built than the fast ones they put up nowadays and they are all 6 inches apart from each other. Ok well you know what I mean. So do I want dump my money into that? No. Not now anyway. Maybe if there is another crash or “Correction” but I have the luxury of waiting for the right time. I don’t have let my “wanting” drive my decisions. And as was said, the best things in life are not things.

        Reply

        • J. Money July 31st, 2017 at 6:33 am

          Hell yeah!!! Way to use “own your own home” correctly too :) Too many people like to say that when in fact the bank owns it, haha…

          Reply

  4. Ten Factorial Rocks December 3rd, 2016 at 12:39 am

    Good review. TMND was an influential book for me that gave me the insight that I too, since I was following much of the same principles, will become a millionaire one day.

    Reply

    • Hélène Massicotte December 3rd, 2016 at 8:40 am

      What a great way to summarize the book’s purpose for so many of us. It did the same for me: confirmed what I thought but hadn’t yet internalized. Powerful and succinct. Thanks for the comment TFR!

      Reply

  5. Full Time Finance December 3rd, 2016 at 2:26 pm

    I didn’t actually read this one until very recently, I picked up a copy at a charity use book sale last year out of curiousity. I can see where it would heavily change people who follow the mainstream Finance/life culture. The core tenets are all good. Live within your means…. a powerful message sadly largely outside the mainstream. Great review.

    Reply

    • Hélène Massicotte December 3rd, 2016 at 5:37 pm

      Glad to hear you liked the book FTF & thank you for the kind words. I agree that the core tenets are good and would suggest that it goes beyond the concept of merely “living within our means”. The millionaires focus on value and intentional spending & investing, a powerful approach toward money management that goes beyond the typical budgeting discussion. They can often afford more but, like Warren Buffett, don’t see the value in it.

      Reply

  6. Loren Carlson December 4th, 2016 at 1:37 pm

    $100000 income at 65 equates to net worth of $650000. That net worth would provide an income of $26000 a year. What am I doing wrong?

    Reply

    • Hélène Massicotte December 5th, 2016 at 9:42 am

      Hi Loren. I understand where you’re getting $26K per year (rule of 4% safe withdrawal rate) but I don’t know what you mean by $100K of income at 65. Can you clarify?

      Reply

  7. Go Finance Yourself! December 12th, 2016 at 9:32 pm

    This is one of my favorite personal finance books. You’ve just inspired me to go back and read it again! I love how practical the book is. We grow up believing that millionaires live in huge houses on top of hill, fly in private jets, drive expensive cars, etc., etc. In fact, most of them are driving Camry’s and living in modest houses wearing modest clothes.

    Reply

    • Hélène Massicotte December 13th, 2016 at 7:53 am

      It’s definitely worth a second read. I feel I have a deeper understanding of the book the second time around, but that could be because I just hit the sections I most wanted a refresh on. So true how it dispels common-held beliefs about what we believe (or believed) about the wealthy.

      Reply

  8. Mr. Stop Ironing (Shirts) December 9th, 2017 at 1:11 pm

    This is my favorite personal finance blog. It has a slight trend towards Southeastern Entrepreneur.

    I regret not meeting Dr. Stanley in person before his passing.

    Reply

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