The Millionaire Next Door is a wealth book based on research conducted for eight years. During this time, the authors Thomas Stanley and his protege William Danko interviewed more than 1,000 millionaires across America about their attitudes towards money and success.

Most people believe that rich people strongly desire material possessions such as luxury cars, mansions, and designer clothes. But actually, it’s surprisingly different from what we know.

Stanley and Danko uncovered the secrets of American millionaires. They present how millionaires differ from the popular belief of what a millionaire looks like. 

It’s interesting, isn’t it? 

The Millionaire Next Door is a book written to help you understand the common denominator among millionaires, how to make more money and even become wealthy. 

Here are the seven lessons you can learn from this book and apply to your finances to fatten your bank accounts.  

Lesson 1: Millionaires live below their means

Real millionaires don’t fall victim to lifestyle creep. Wealthy people often earn significantly more than the average American household, yet they are not extravagant in their lifestyles and do not seek a high social status. 

An average person would believe that wealthy Americans live lavish lifestyles with expensive hobbies, but the truth is that most of them are relatively frugal. Yes, they are thrifty. The authors found that America’s millionaires abstain from high social status symbols like a big house or expensive gadgets and cars in favor of financial security.

They are not afraid to spend money when it comes to spending on things that matter to them, like education, travel, and medical cost. They enjoy the finer things in life. However, they are not materialistic. 

Most affluent people don’t live in grand houses and drive luxury cars like Rolls Royce. They don’t usually spend unnecessary cash on high-end clothes or luxury goods like private jets and antique furniture.

Rich people have enough money but don’t have to keep buying new expensive items every season. They have hobbies that cost little or nothing, like fishing, cycling, and gardening, and don’t need to spend a lot of money on fancy outdoor activities where they can enjoy family fun at home.

Lesson 2: Millionaires are frugal, not cheap

You might think that millionaires are cheap, but that’s not the case. The authors give a detailed description of what it means to be frugal vs. being cheap.

Frugal people spend money wisely and ensure they get the best value possible for the things they buy. They don’t mind spending a little extra on something if it’s worth it over time, but they still want to get the best deal possible in every purchase they make.

On the other hand, cheap people haggle over every penny when buying something new or used. That can lead them into trouble because they buy low-quality products instead of investing in better ones with warranties. They think saving money is more important than getting good quality items at reasonable prices.

Lesson 3: Millionaires are first-generation rich

America’s millionaires are predominantly self-made. They are not born with a silver spoon in their mouth or raised by affluent parents who made tons of great wealth. Many families might have lost everything during the Great Depression or other economic downturns. 

So what have these millionaires done? Those who inherit wealth from their wealthy parents could leverage the money into more incredible wealth. But only a few are children of millionaires in the total population of high net worth individuals. 

Those who came from less money worked hard, earned their wealth from humble beginnings, and had to work for years to get where they are today. These adult children are self-sufficient. 

So, if you want to be rich, you need to put in the hard work and forego the idea of getting rich quickly. It takes patience, dedication, and persistence to achieve prosperity and financial freedom.

Recommended Video:  Don’t Get Stuck: Foster a Persevering Mindset and Reinvent Your Life 

Lesson 4: Millionaires share a passion for their work

The author’s research indicates that American millionaires are passionate about what they do for a living. They enjoy talking about their work and sharing their knowledge with others. What drives them to keep going is the chance to be creative or innovative. 

If you want to earn a million dollars, choosing a career where you hate hearing your voice is not a good idea. 

If you don’t enjoy your work, you won’t be successful. Millions of dollars will remain out of reach. If your job is tedious, no one will want to follow it. 

So, you must find your passion, make it your work, and chase those millions.

Lesson 5: Millionaires make their luck by working smart and hard

Rather than being persons who inherit wealth, these high-income people built their fortunes by working as professionals or business owners, carefully managing what they earned, and working hard and smartly.

They didn’t get the way through inheritance, luck, or even an overnight success and most of them didn’t receive economic outpatient care from their parents.

Wealthy people are hard workers who have made wise investments and followed the correct financial principles. Although their parents’ financial habits didn’t boost the family’s annual income, self-made millionaires know how to leverage assets to become more prosperous, making them an accumulator of wealth.

It’s not a secret that being wealthy is no walk in the park. You can get there and stay there with proper financial planning, seeking financial advice from experts, and some savvy investment strategies. 

There is no simple formula to becoming part of the high-income bracket. You have to put in a lot of effort and make smart investments to create the life of your dreams.

Millionaires know that a person who works hard  and smart is more likely to get ahead than someone who just works hard.

According to Stanley, “Millionaires are not lazy. They do not inherit wealth. They do not win the lottery. They do not get rich quick.”

People with average income would likely work with the average working hours. However, Stanley’s research shows that some millionaires work even longer hours. 

People who earn a million dollars a year or more are willing to work hard, and most of these people work at least 50 hours a week for more than 20 years.

If you are willing to put in long hours on the job, you too can get rich by working productively and patiently saving and invest your money until retirement age comes, and then spending wisely once there.

Being a millionaire isn’t easy, but it is possible. From now on, we should think and act as millionaires do. We must remind ourselves of this simple rule: A lifetime of hard work and sacrifice pays off in the end.

Recommended Video: The Power Woman that Builds a $600 Million Real Estate Empire      

Lesson 6: Millionaires save diligently

Don’t be fooled into thinking that only glamorous people become millionaires. Millionaires don’t have to live lavishly or a high life. Many live in modest homes or apartments. Their secret is that they save money and invest wisely. They put savings into investments that will yield higher returns over time. 

When deciding how much to save and invest, consider what you’ll need for retirement or your child’s college education, and then save aggressively so that you’re well-positioned to meet your goals when the time comes.

Related:  What are Smart Financial Goals? Here is a List of Great Examples

Lesson 7: Millionaires strive for Financial Independence

The Millionaire Next Door suggests that financial independence is not achieved by earning a certain amount of income or reaching some particular monetary goal but by making sound financial decisions daily. 

It means spending less than you earn, setting aside savings regularly, paying debt responsibly, investing wisely, and avoiding frivolous purchases such as new watches or pieces of jewelry.

Related:  Financial Independence: What is the Valuable First Step?

Financial Advice for Becoming a Millionaire 

1. Save, save and save some more. Whether you’re saving for retirement, emergency fund, education fund, or setting aside money for a significant purchase, the key is to start saving early and consistently. 

2. Live within your means. The vast majority of millionaires who live within their means and invest what they can afford to spare into long-term investments such as real estate purchases. Like them, you have to limit your expenses for unnecessary items and use your money instead for investments and make it grow exponentially.

3. Invest wisely as appropriate for your financial situation. Investing is one of the most important things that you can do to prepare for financial future. But you have to make sure that your investments are well-researched. Investing could be intimidating and confusing, but it doesn’t have to be.

You may find an investment advisor. Your advisor can help you determine your financial goals, including what percentage of your portfolio should be invested in the stock market, bonds, or even real estate, the most popular type of investment among high income.

Recommended Video: How to Get Into Multifamily: Tips for New Investors 

4. Don’t buy more houses than you need. Too many people spend more on housing than they can afford. It can lead to more expenses, such as a larger mortgage payment and maintenance costs. And depending on how much money you make, it may not even be worth it. 

The Millionaire Next Door recommends keeping housing costs at 10% or less of gross income. So, if rent/mortgage plus utility amounts exceed 10%, consider downsizing before saving towards other goals like retirement or college tuition. This figure includes taxes, too, so keep that in mind when calculating what goes into monthly payments. 

When buying real estate properties, you may seek tax advice from tax experts.  

5. Don’t be afraid to take risks. Not all millionaires made money by being cautious. Some took substantial chances that paid off handsomely for them. However, many of them were indeed able to succeed because they calculated risks carefully before making any investment decision.

6. Set goals. To get somewhere in life, you must set goals for yourself and work toward them. Your goals must be specific, and achievable.

Conclusion

The Millionaire Next Door dispels the myth that most millionaires are high-earners with no financial sense. It shows how most of them came from modest backgrounds and attained status through hard work, frugality, and wise investments. 

Their success was not an accident and didn’t happen overnight. It combines avoiding lifestyle inflation and being strict with how they spend their money.
So, if they can make it, yes, you can make it too.  

This book will show you how many millionaires live parallel lives to yours but just choose to spend less than they earn. 

So if you’re looking for advice on becoming an intelligent millionaire without inheriting it or being born into it but through good financial practices, read this book, learn economic principles and be financially literate, grow your income and save more, and seek investment opportunities. 

Related: The Power of Now: A Financial Freedom Guide 

Learn more about how you can improve financial circumstances by visiting our website www.wellthycapital.com. 

If you want to hear from our podcast guests who are passive investors in real estate, tune in to our podcast episodes with our notable resource speakers on Apple, Stitcher, and Spotify. Every episode is packed with success stories, advice, and expertise instrumental to achieving financial success.