After reading hundreds of books about wealth, this book to me is second only to "The Richest Man in Babylon". In The Millionaire Next Door, Thomas Stanley has created a classic. He actually took the time to go out and study real millionaires and ask them questions about how they became wealthy. I read the book again recently, and I swear it gets better every time.
Stanley found that wealth is the result of a lifestyle of hard work, perseverance, planning, and most of all, self-discipline. He says that many millionaires do not look wealthy, and because they do not purchase high cost, high status artifacts, or live in expensive homes, they could be your next door neighbor. Stanley identifies Prodigious Accumulators of Wealth (PAWs): high earners who save and invest their money, and Under Accumulators of Wealth (UAWs) who have high incomes but do not save and instead waste money on high status goods.
Most millionaires are frugal, and not wasteful, or "hyper-consumers" as Stanley calls non-frugal people. Stanley says millionaires became so by budgeting and controlling their expenses, and they maintain their affluent status the same way. High earners who live in luxury have little money left over after funding their high-consumption lifestyles. Frugality is the way to wealth. Who would have thought that people who wear cheap clothes, live in modest houses, and have a cost conscious attitude are the ones who have a great chance of becoming rich?
Stanley gives many examples of millionaires who buy their suits at discount stores, only buy secondhand models of cars they like, and use coupons when they go shopping. It does not mean they are mean and penny pinching it just shows that they are practicing good financial habits which keep them financially affluent.
Stanley talks of financial defense, which is saving money, and financial offense, which is high earning. He says defense is more important as one can become well-off on a moderate salary, whereas somebody who makes a lot of money but wastes it all, usually ends up poor.
Critics say the book is too stats heavy in places, and can be too statistically biased.
Before reading this book, I assumed millionaires lived lavishly and spent money opulently like the rap stars and sports stars we see on TV, or like JR Ewing from Dallas, flaunting their big money at every opportunity. Now I know that it is usually the "poor" people who buy these expensive goods, and that is why they are "poor". This book illuminated the shocking truth that the people you think are rich, flashing their money and expensive cars, usually are not rich, but are in fact deep in debt because that lifestyle costs money. There are lots of millionaires who live next door to ordinary people with a fraction of their wealth, and due to their frugal habits these millionaires are able to create and maintain real wealth.
Moneyseeker3000 rating: 5 stars out of 5.
I went looking for millionaire mentors, and I found Mr Piper, who is the model of the people described in Stanley's book. He looks nothing like the media stereotyped millionaire, and sometimes when I look at him in his casual clothes, I think this guy can't be a millionaire, yet he has a property empire worth £4m and earns in excess of £120k annually. He is very frugal and cost conscious, and scrutinizes every purchase, always looking for bargains. He has no education, yet created his wealth from his habits, the very same habits I see in Stanley's book.
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