|Complete Book Title||The Next Millionaire Next Door: Enduring Strategies for Building Wealth|
|Author||Thomas J. Stanley Ph.D, Sarah Stanley Fallaw Ph.D|
|My Rating||4.5 out of 5 stars|
“Achieving any major goal – including financial independence – requires disciplined action over time, an awareness of one’s own abilities, and the effective allocation of resources”The Next Millionaire Next Door, Stanley, page 12
It was nearly 25 years ago when The Millionaire Next Door was published and set the world on fire as it revealed “their findings that millionaires are disproportionately clustered in middle-class and blue collar neighborhoods and not in more affluent or white-collar communities” which was a “surprise to the authors who anticipated the contrary” (Wikipedia). That book introduced us to the concept of “Under Accumulator of Wealth” versus the “Prodigious Accumulator of Wealth” and shared with us that most millionaires live a lifestyle of frugality, have a disciplined approach to saving for the long-term, and are walking amongst us and we don’t even know it. The book has sustained longevity with huge fanfare; however, when it was first published and even today, there were critics of the book specifically based on the bull run of the stock market at the time.
Fast forward 20 years later, and Thomas Stanley with his daughter, Sarah Stanley Fallaw Ph.D, set out to review their research with new data to see if the results still held true today. While gathering the research and writing the book, Mr. Stanley was killed by a drunk driver at the age of 71. His daughter carried on the mission to finish the book and it was published in 2019.
The book starts in Chapter 1 with a focus to see if the millionaire next door is alive and well. Did the data hold up over the years? Do the patterns and practices of your every day millionaire still hold true? Not only does the data seem to remain consistent across the decades, it appears to have solidified in its findings. One of the highlights is that your every day millionaire has a respect for money which is a prerequisite for wealth building. You will also need to be a believer that in the United States there is freedom to choose “the life we want to lead and the way we build or maintain wealth” and recognizing that income is NOT wealth.
“Income is what you bring home today. Wealth is what you have tomorrow. And the next day. And the next day.The Next Millionaire Next Door, Stanley, page 24
Here are just some highlights from page 29 on the “portrait of these millionaires”
- “We live off what we’ve made, as more than 86% of us had 0% of our income from trusts and estates… and only 10% received any gifts of cash, securities, properties, or vehicles from relatives”
- “We are frugal and we budget. A full 70% of us know how much we spend on food, clothing, and shelter each year…”
- “We tend to drive Toyotas, Hondas, or Fords that are at least three years old.”
- “We are confident investors”
- “We made mistakes along the way.”
- “The most we’ve ever spent on jeans is $50, on a pair of sunglasses is $150, and on a watch is $300”
- “But, we don’t shop sales in person. Roughly 77% of us haven’t stepped foot inside a store for Black Friday…”
The author also shares a formula that seems to work to determine if you are an under accumlator of wealth (UAWs) or a prodigious accumlator of wealth (PAWs). NET/NET – are you a spender or saver? The author also shares with us that there isn’t an exclusive path to financial independence and that there are opportunities to prosper and various paths to wealth including the path of frugality, high-income producers, small business owners, and moonlighters and gig workers. “Nearly one-third of all working Americans are moonlighters, which means they generate revenue in addition to and outside of their regular full- or part-time employment” (page 40).
“Economic freedom, like the freedom we experience in the United States, has a cost: the discipline and work it takes to get there and then to maintain it. Not everyone is willing to pay this price.”The Next Millionaire Next Door, Stanley, page 35
“To build and maintain wealth over time, it will be necessary for you to approach all financial management – spending, saving, generating revenue, investing – in a different, more disciplined approach than anyone else around you.”The Next Millionaire Next Door, Stanley, page 50
Time and discipline goes to the heart of my long held beliefs and learnings. It also goes directly against what most people will tell you. How many times have you heard your friends or family members say “it takes money to make money?” This is the greatest lie and the greatest myth told. It usually comes from your naysayer friends that just read the headlines like “LeBron James invests $1 million into a no-name pizza place and it is now worth at least $35 million.” Yes, if you have money like LeBron James, it is easy to take big risks with big returns. But, we aren’t LeBron James. We are the average Joe living in an average neighborhood. You don’t need money to make money. You need time (and I’ll now add discipline). Time is your greatest asset.
Chapter 2 and chapter 3 of the book provides several examples of the myths that you will hear along the way; heck, maybe even before you get started. Some of these myths like “I cannot get ahead on my own” may be the myths that you currently subscribe to. The author does a great job in discussing seven myths before detailing for you the various influences on wealth building such as “training for economic success,” “moving past early experiences,” “the experience of hyper-spending” among others.
When we jump to chapter 5, Strengths for Building Wealth, the author goes into great detail about finding or being the Household CFO and does a beautiful job outlining the “critical tasks for household financial management” (page 160). I truly appreciated the author providing a set of categories of wealth-related behavior patterns – confidence, frugality, responsibility, social indifference, focus, and planning. If you are single and are new on the journey and don’t possess these traits, you may want to visit my review of the book, The Automatic Millionaire, to help you put some of these things in motion where you can set it and forget it and try to get your finances on auto-pilot. If you are married and don’t possess these traits but your spouse is gifted in these areas, I would suggest handing the keys to the kingdom to him or her and then schedule either a monthly or quarterly family business meeting to review your month-over-month progress.
Along the way, be prepared for the critics and naysayers and start building the confidence to have a perseverance attitude and disciplined approach about your future. Also remember that there are many millionaires around you and you don’t even know it as they look and act like the average Joe. Building wealth is a slow and steady process. It takes time and anyone can achieve financial independence.
From the research conducted for Stop Acting Rich, we know the typical balance-sheet affluent millionaire had an annual realized median household income of $89,167 when he first became a millionaire. In other words, one-half of the balance-sheet affluent had incomes that were less than this figure. What does this tell us about building wealth and becoming financially secure? For most American’s one’s desire, discipline, and intellect are more important factors in accumulating wealth than earning a high income.The Next Millionaire Next Door, Stanley, page 219-220
Before the conclusion and in Chapter 7, Investing Resources, the author goes into detail on where the money is invested by percentage of assets held by millionaires sharing that “60% of millionaires have 30% or more invested in retirement accounts… nearly 33% of millionaires have some investment in real estate” (page 249). The key takeaway for me in this chapter is acknowledging that if you aren’t putting your dollar to work (investing), it loses some of its purchasing power every year due to inflation.
“Every dollar that you save loses some of its purchasing power every year because of inflation. Prodigious accumulators of wealth understand that money must be productively invested to avoid this loss of purchasing power from inflation and to grow the money to meet future needs and wants”The Next Millionaire Next Door, Stanely, page 261
I give this book a solid 4.5 out of 5 stars. I felt energized in reading it and would recommend it to everyone. Over the course of 25 years since the publication of the first book, The Millionaire Next Door, it is still clear that “high-potential wealth accumulators are largely made, not born” (page 282) and many are our neighbors hiding in plain sight.