Insights from The Millionaire Next Door by Thomas Stanley & William Danko 

Thomas Stanley and William Danko conducted the most comprehensive study ever on wealthy Americans and discovered that the
prevailing assumptions about millionaires are just plain wrong.

 For starters, most Americans with over $1 million in net worth rarely purchase fancy cars or homes. The typical millionaire lives in
a neighborhood where they are outnumbered by non‐millionaires three‐to‐one and half of millionaires live in the same house for
at least 20 years.
 Most Americans with over $1 million in net worth live way below their means. The median (50th percentile) net worth of a
millionaire is $3.1 million with an annual household income of $250,000, but they spend like someone who makes only $85,000 a
year (numbers are inflation‐adjusted for 2023).
 And lastly, most Americans with over a million dollars in net worth are not privileged people who inherited money. 50% of
millionaires didn't inherit a cent from their parents. They were self‐made and self‐employed.

Here is a closer look at these three surprising findings and specific steps you can take to become an unassuming millionaire:

Most millionaires don't care about looking rich

More than one‐third of millionaires buy used vehicles, and more than half drive a vehicle that is more than two
years old. The average price they pay for a vehicle is just $4,000 more than the average American spends. When
you see a luxury car or SUV on the road, it's probably not driven by a millionaire. Stanley and Danko found that
“many people who live in expensive homes and drive luxury cars do not actually have much wealth.” Just as
people act confident when they're insecure, many people look rich when they have little in the bank or invested
in appreciating assets. The truly wealthy know that the thrill of buying a luxury car, a suit, a watch, or any other
high‐status artifact lasts about a month, but the pride of buying assets and increasing financial independence lasts a lifetime.

Whenever you're tempted to buy nice things to keep up with your friends and neighbors, recall the words of one millionaire doctor in the
book, “I'm not impressed with what you own. I'm impressed with what you achieve.” Forget accumulating nice things and focus on your
craft.

Most millionaires live well below their means

“Millionaires play both quality offense and quality defense. And quite often their great defense helps them
outscore/outaccumulate those who outearn/have superior offenses. The foundation stone of wealth
accumulation is defense, and this defense should be anchored by budgeting and planning.”

Nearly every millionaire in Stanley and Danko’s study saved a minimum of 15% of their annual income. If 15% seems
impossible, upload your credit and debit card spending into a budgeting app that breaks out your discretionary
spending, and you'll quickly see opportunities to spend less while maintaining your quality of life. Whatever area
of discretional spending you see as an opportunity for saving money (eating out, entertainment, travel, hobbies, gadgets, home decor, and
anything else beyond your basic needs), make a budget for it and stick to it.

One significant difference between the wealthy and non‐wealthy is that wealthy families spend twice as much time analyzing and planning
their spending than non‐wealthy families do. Review your spending at least one hour each month to continually find ways to save at least
15% of your annual income. Then, as you earn more, keep your spending the same to gradually increase your savings rate from 15% to 20% ‐
which is the average savings rate of millionaires in the wealth study.

Most millionaires are self‐made and self‐employed

“Self‐employed people make up less than 20 percent of the workers in America but account for two‐thirds of
the millionaires… Three out of four self‐employed millionaires consider themselves to be entrepreneurs, and
most others are self‐employed professionals, such as doctors and accountants.”

Being self‐employed requires hard work, persistence, diligent planning, and incredible self‐discipline, all of which
are traits of most self‐made millionaires. “Much of a (self‐employed millionaire’s) success depends on living a
frugal existence while building their business,” which becomes a lifelong way of thinking.

When the authors looked at the types of businesses self‐employed millionaires start, they found most could be classified as “dull”
businesses that few people at a cocktail party would be interested discussing. Having a “dull” business (like a paving contracting service or
a pest controller service) is great because it doesn’t attract much competition, and the demand for their offering stays elevated during
downturns and recessions.

One other common characteristic of self‐employed millionaires is that they find opportunities to serve other wealthy people in one of
three ways: create service companies for expensive products, create professional practices that help people manage their wealth, and
simplify and sell products that wealthy people will pay a premium for.

“Allocating time and money in the pursuit of looking superior often has a predictable outcome: inferior
economic achievement. What are three words that profile the affluent? FRUGAL FRUGAL FRUGAL” ‐ Thomas
Stanley & William Danko

www.ProductivityGame.com