the millionaire next door book summary pdf

The Millionaire Next Door by Thomas Stanley [BOOK SUMMARY & PDF]

The Millionaire Next Door is a fascinating examination of the common characteristics of the millionaires living among us. Authors Thomas Stanley and William Danko debunk the myths and will give you a detailed view of what real millionaires look like.




Who is this summary for?

Let’s be honest, we are all interested in the rich, how did they get rich, what’s their secret and what do they do with their money? We all want to know how we can achieve even just a portion of their wealth. In The Millionaire Next Door authors Thomas Stanley & William D. Danko examine the common characteristics of millionaires. They debunk the myths and provide a detailed perspective of what a real millionaire looks like.

About the authors

Written in 1996, The Millionaire Next Door is a compilation from Thomas J. Stanley and William D. Danko. Stanley was a six-time award-winning author, his focus was the wealthy, particularly in America. His interest in the wealthy began in 1973 and continued throughout his career. Both authors undertook a large amount of research into the ‘wealthy’ in the process of writing this book. William D. Danko credits this book for making him a millionaire. Stanley was a Marketing professor and Danko was his student, Stanley quickly took on the role of a mentor for Danko and eventually the two of them embarked on the journey of writing this book together.

In this summary

Firstly, this summary will explain what Stanley & Danko consider to make a millionaire, just how much money do they really have? Then we’ll move on to examine just how frugal millionaires have to be, how they plan their time and how to spend their money. Next, we’ll take a look at the vehicles a millionaire drives, is the stereotype of owning a flash sports car accurate? The second part of this summary will assess family life, whats gifting like for the wealthy, and how to wealthy parents raise their children? Finally, this summary will examine the working world, what careers bring in the most money and the difference between someone who earns their wealth and someone who was born with it.



“These people cannot be millionaires! They don’t look like millionaires, they don’t dress like millionaires, they don’t eat like millionaires, they don’t act like millionaires—they don’t even have millionaire names. Where are the millionaires who look like millionaires?”

Stanley and Danko do not consider material possessions when they are considering the rich. They recognise that wealthy people do not necessarily only place importance on the possessions that they own, someone can be extremely rich and from the outside, you wouldn’t know. You may not be able to tell from the car they drive, the clothes that they wear or the watch they have on their wrist.

”Those people whom we define as being wealthy get much more pleasure from owning substantial amounts of appreciable assets than from displaying a high-consumption lifestyle.”

For the purpose of this book, Stanley and Danko consider the ‘wealthy’ to be anyone who has a net worth of one-million (US) dollars or more. A couple of facts to not when considering this figure is that only 3.5% of American households can be considered wealthy by these standards. And of that 3.5% 95% of them will have a net worth anywhere between one-million and ten-million.

You might be wondering why Stanley and Danko have used this definition, and are focusing on this small segment of the population. They explain that the reason they have chosen this particular segment of wealth is because it’s entirely attainable, its reachable by many Americans and can be done in only one generation. It’s not going to take time to build up to this level of wealth. They are the millionaires who live among us.

Are millionaires frugal?

Stanley and Danko pose the question, why is only such a small percentage of the population considered wealthy. They know that many households will earn a six-figure salary, but they still don’t reach the threshold. And this is because so many Americans live their life spending tomorrows money. Stanley and Danko emphasise just how many households in America are entirely debt-dependant. Living pay-check to pay-check, digging into savings and over-drafts.

“They are debt-prone and are on earn-and-consume treadmills.”

These are the people, that spend their money on possessions that they believe will give them the wealthy image, possessions to essentially lift their ‘success.’ When in fact, the reality is that it’s purchasing these very possessions, which is detrimental to their wealth.


Millionaires, those who can be considered wealthy, always budget. Stanley and Danko explain that:

“They became millionaires by budgeting and controlling expenses, and they maintain their affluent status the same way.”

When surveying the wealthy, Stanley and Danko uncovered the fact that most ‘millionaires’ had less that 7% of their total wealth as total annual realised income. The incredible result of this is that whatever the figure is under 7%, that’s all that they have subject to income tax.

To build wealth, minimize your realized (taxable) income and maximize your unrealized income (wealth/capital appreciation without a cash flow).

Stanley and Danko explain that often, a household may be considered asset-poor, regardless of their high income. The key reason that this happens, is that they lead a high-consumption life, and in order to do this, they are required to maximise their realised income.

”Such people might wish to ask themselves a simple question: Could I live on the equivalent of 6.7 percent of my wealth? It takes much discipline to become affluent.”

Stanley and Danko explain, that in their research they have come across people and households who total realised income is under $80,000, yet they are world $2-$3 Million.

How do millionaires plan?

Among their research, Danko and Stanley discovered that one of the most common traits among the wealthy was efficiency, and almost more commonly, the ability to plan well. In order to become wealthy. people had to learn how to use their time energy and money in the most efficient ways. Without efficiency, it would be a lot harder to accumulate any wealth. People who understood how to plan their wealth had the ability to set aside money for investments etc.

A great goal to have is to have a minimum of 15% of your income available for investments. This is going to help set you up for more wealth.

Stanley and Danko encourage you to ask yourself, how much your household spends in a year, and do you know what portion of that spending comes out of different categories such as groceries, petrol, bills, mortgage etc. Unless you understand exactly how and where your spending, its almost impossible to truly control your money, and you’re not likely to ever accumulate a lot of wealth. Stanley and Danko suggest that you begin to record your expenditure and gain a better understanding. You can consider working with an accountant and come up with an achievable budget. Remember that knowledge is power.

Do you have to drive a flash car?

“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 gonna make it.”

In their research, Stanley and Danko uncovered some interesting information about motor vehicle ownership among the wealthy. Firstly, they found that just over 1/4 of those surveyed had not purchased a car in over 4 years. And just under 1/4 actually, own brand new cars. The remaining purchase second-hand or the lease. This debunks the myth of the wealthy only owning brand new, flash, top of the range cars. You can still be wealthy and own a standard second-hand car.

”Being frugal is a major reason members of the used vehicle-prone group are wealthy. Being frugal provides them with a dollar base to invest.”


Stanley and Danko use the term economic outpatient care (EOC) to define the economic presents that children receive from their wealthy parents (or even grandparents.)

Stanley and Danko discovered that it is the children of the wealthy that become “high-volume consumers,” not the wealthy themselves. The children spend to increase their status, they purchase luxury cars, buy flash homes in nice areas, and send their children to expensive private schools.

”They are living proof of one simple rule regarding EOC: It is much easier to spend other people’s money than dollars that are self-generated.”

It’s common for those that receive EOC from their wealthy parents to become an ‘under-achiever.’ They’ll earn less of their now money because they don’t feel that they need to. It’s common for those who have received EOC to spend more than they earn. They find it harder to separate their earnings from the wealth of their parents, who perhaps gift them too much. They have a tendency to rely on credit and debt. And one of the most common traits that Stanley and Danko found was that they always invested less than those that didn’t receive any EOC.

Don’t spend more than you earn.

“Whatever your income, always live below your means.”Click To Tweet

So it’s been made pretty clear that gifting your children money, while feeling like a nice and generous gesture, can often do them more harm than good. So that poses the question, what can you provide them will to ensure that they will become financially stable and responsible adults. A few of the things that Stanley and Danko recommend are; providing an excellent education, providing an environment that encourages independence, responsibility and leadership, and one that rewards and acknowledges personal achievements.

Raising children in wealth

Stanley and Danko have found that many wealthy parents see no harm in EOC. They believe that it can be beneficial. And in some circumstances, Stanley and Danko acknowledge that this is correct. However, the children need to already be discipline and have the ability to earn a living and provide for themselves without relying on hand-outs. This becomes a problem when those receiving the EOC are undisciplined, irresponsible and have no means of earning their own money.

”Unemployment during the early stages of adulthood is related to unemployment at later stages in life. Many unemployed middle-aged sons and daughters receive direct cash subsidies, often annually. Further, the incidence of unemployment is associated with larger and more frequent gifts. “

Rules for affluent parents raising productive children

Stanley and Danko have come with 10 rules to encourage wealthy parents to raise productive children who are responsible with money.

  1. Don’t let your children know how wealthy you are.
  2. Always focus on teaching discipline with money and the art of being frugal.
  3. Do your best to ensure your children don’t have a complete understanding of your wealth until they are mature, disciplined and in a working profession, providing for themselves.
  4. Don’t discuss inheritance with your children.
  5. Don’t use cash as part of a negotiation, especially with your adult children.
  6. Remain removed from your child’s family matters.
  7. Never see your children as competition.
  8. Remind yourself that each of your children are their own individual, independent person.
  9. Always acknowledge your children achievements, make them feel good about what they can achieve. Don’t acknowledge or celebrate simple symbols of success.
  10. Ensure that your children understand that there is more to life than money. And show them that many things hold more value than money itself.


This book was written in 1996 and Stanley and Danko predicted that the following decade would see more wealth in America than ever before. They were certainly right, as the wealth grows, but this distribution continues to be radically uneven. They predicted that the wealthy would require more services than ever, people to solve their problems, manage their money and manage their lives. These are a few of the professions Stanley and Danko predicted would see a radical increase in work volume for the wealthy over the following twenty years:

  • Attorneys who specialize
  • Medical and dental care specialists
  • Asset liquidators, facilitators, and appraisers
  • Educational institutions and professionals
  • Professional services specialists
  • Housing specialists/dwelling products/services
  • Fund-raising counselors
  • Travel agents and bureaus and travel consultants

Worked hard for it vs. was born with it

Stanley and Danko have made it pretty clear that there is no magic formula to accumulating wealth. They acknowledge that being self-employed can be a good first step, but the majority of business owners will still never see their money accumulate into true wealth.

Stanley and Danko recognise that as a business owner, you will be aware of the success odds, you’ll be aware of the competition, the vulnerability of trends and the unknown. And for this reason, less than one in five business owners, who can be considered wealthy, will leave their business to their own children on run and own.

They explain that in order to be a business owner, you have to have a real motivation a drive, you need to want to be self-employed. A successful business owner needs to love what they do and take pride in ‘going at it alone.’ If you’re simply handed a business on a silver platter, you are unlikely to have the same drive and desire. It’s likely the business will not continue to succeed in the same way.


Key Takeaways

  • To be considered a Millionaire, under Stanley and Danko’s understanding, you must be worth US$1million or more.
  • Millionaires may not seem ‘wealthy’ from the outside, you may not be able to tell simply from their possessions.
  • Frugality is a common characteristic of millionaires.
  • Millionaires learn how to be efficient and responsible with money.
  • You need to understand how to plan the spending of your money in order to accumulate true wealth.
  • It’s important to understand how and where you are spending your money.
  • As a parent who is wealthy, it’s worth taking the time to consider how you raise your children. You want to encourage them to be responsible with money.
  • Consider whether you are truly benefiting your children when you gift them money. And question if it is actually affecting their future capabilities negatively.
  • There’s always going to be a difference between those who worked hard for their wealth, and those that are born with it.

Further Reading

Jen Sincero’s You are a Badass at Making Money is an excellent read for anyone looking for some financial advice and has a decent sense of humour. Jen uses her own economic transformation to teach you what’s truly holding you back from making real money. She will help you stop letting your doubts, fears and excuses get in the way and show you how you too, can be as wealthy as you want to be.

If you’re looking for some more money advice, look no further than Ramit Sethi’s I will Teach you to be Rich – this is an in-depth guide with steps you can take to optimise your bill payments, investments, savings and earnings.

Guidelines is my eBook that summarises the main lessons from 33 of the best-selling self-help books in one place. It is the ultimate book summary; Available as a 80-page ebook and 115-minute audio book. Guidelines lists 31 rules (or guidelines) that you should follow to improve your productivity, become a better leader, do better in business, improve your health, succeed in life and become a happier person.

Action Steps

  • It’s well worth understanding how and where you are spending your money. You can even do this yourself with different apps or websites. Check out my blog post on how I use pocketsmith to control my finances.
  • Plan how to spend your money, consider investments for your future.
  • Consider whether you use possessions to lift your status? Is this entirely necessary or would you be better to be a little more frugal with your spending?
  • Download the complete book on Amazon



This summary is not intended as a replacement for the original book and all quotes are credited to the above mentioned author and publisher.