The millionaire next door

I read lots of business books. Some are an interesting read at the time, some are instantly forgettable but one or two stick with me and help shape how I do things.


One book that made an impression on me is, 'The millionaire next door' by Thomas Stanley and William Danko. Both authors are PhDs and the book is an empirical study of millionaires in the US. It sounds very dull and dry but is a surprisingly good read.

I loaned this book out a couple of years ago. I can't remember who I loaned it to now and I don't think it is coming back so I have just bought a new copy to browse again.

One thing that sticks in my head is that many American millionaires are ordinary people with fairly ordinary jobs. Hence the title. There are a few things that make them different, however and these mainly come down to decision making and lifestyle rather than income.

These are some of the attributes of the millionaires:

1) They don't try and keep up with the Joneses

Many live in ordinary suburbs in nice but not extravagant houses. They drive mid range cars and have regular holidays but perhaps not the most exotic in the brochure. They may have less income than the young upwardly mobile couple next door but they don't spend it all every month

2) They make regular savings into an investment they understand

Others have advocated this, including 'Rich dad, poor dad' author Robert Kiyosaki. Broadly, rather than putting their spare cash into a low interest bank account they take time to learn about a specific area of investment. They become expert in this and invest for the long term. It could be buy to let, shares, antiques, their own business etc but they try and reduce the risk by learning how to do it really well

3) They help their children to be financially independent

With high house prices, increasing student debt and low wage growth, the cost of providing for children, even beyond school and university years, is increasing. The 'boomerang generation' is a real issue and the costs to parents when their best earning years are behind them can be significant. The millionaires in the survey managed to make their children financially independent. You could call it 'tough love' if you like but their kids knew that 'bank of mom and pop' was not available and they found another way.

4) They earn a living doing something they are good at

Sounds blindingly obvious but not everyone manages to do this. Many people drift into something and then find it hard to find a way out. Doing something you enjoy and are good at has been a recipe for success with the millionaires in the survey.

There are more attributes than I have listed, but these are the ones I remember and struck a chord.

OK, so being a millionaire is not the be all and end all. In itself it is a fairly shallow goal. Lack of financial security however, can create a good deal of stress and unhappiness. Perhaps copying some of the things these self made millionaires have done can help us to have wealthier and ultimately happier lives?