14 Wealth Lessons from 'The Millionaire Next Door'

The book "The Millionaire Next Door," shows the reality of the average millionaire. Here are 14 lessons from this book to undercover the quiet millionaire.


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Chapters

00:00 Start Here
00:55 High Income ≠ High Wealth
01:45 Wealth Is What You Accumulate, Not What You Spend
02:26 Great Offense + Poor Defense = Under Accumulation of Wealth
03:15 A Good Defense
04:14 Being Frugal
05:13 Building Wealth Starts With Saving
06:17 Millionaires Marry Like Minded People
07:02 The Reality of Millionaires is Too Boring to Televise
07:58 Temporary Millionaires
09:15 Looking The Part
09:54 They Drive Used Cars
10:37 Realized Income and Unrealized Income
11:45 The Biggest Risk Is Having A Single Source of Income
12:33 Predetermined to Not Become Millionaires

The middle class millionaire is the quiet millionaire, the millionaire that is not portrayed by the media. In the book, "The Millionaire Next Door," by Thomas J. Stanley & William D. Danko, they uncover who this person is.

1. High Income ≠ High Wealth

In the beginning of the book, the authors want to study millionaires, so they go to upscale neighborhoods; however, upon interviewing people, they discovered that these people who lived in high income neighborhoods did not have high wealth. Income and wealth are not always correlated.

2. Wealth Is What You Accumulate, Not What You Spend

The reason that income and wealth are not correlated is because wealth has to do with what you accumulate, not what you spend. And if you spend all your money one stuff, you have no money left over to put towards wealth building.

3. Great Offense + Poor Defense = Under Accumulation of Wealth

Despite high income earners not always having wealth, a high income does not harm you in your wealth building. It's poor defense, and choosing to live above your means that makes you under accumulate wealth.

4. The Foundation of Wealth Accumulation Is A Good Defense

High income is not always necessary in order to build wealth, but it is a strong defense of living below your means that allows you to build wealth.

5. Being Frugal Is The Cornerstone of Building Wealth

When the authors began to talk to actual millionaires, they discovered one trait in common with millionaires and it was, "Frugality." They discovered that millionaires were very cautious with how they spend their money and did not waste anything.

6. Building Wealth Starts With Saving

According to a study by Ramsey Solutions, 79% of millionaires are self made. In the beginning of most millionaire's wealth building journey, they focus on saving because you cannot invest without something.

7. Millionaires Marry Like Minded People

The traits of being frugal, living below their means, and being cautious with spending are also traits shared by millionaire's partners. Choosing the right partner with the same goals and beliefs is vital to building wealth.

8. The Reality of Millionaires is Too Boring to Televise

Given what I have said, you might wonder why the media does not show this image of millionaires. The reason is because the reality is too boring to televise and it won't sell. This is why the media portrays millionaires are people who live large.

9. Temporary Millionaires

Although most millionaires a frugal, some millionaires do live large and spend a lot of money. For example, athletes often make high salaries; however, eventually this lifestyle catches up with them and they lose it all. They're temporary millionaires.

10. Looking The Part

Millionaires choose not to live in upscale neighborhoods not just because of high mortgage, but also to avoid spending a bunch of money in order to look the part and keep up with those around them.

11. They Drive Used Cars

The number one car millionaires drive are used Toyotas. They believe in buying used, reliable cars to avoid the high costs of a new car.

12. They Minimize Their Realized Income and Maximize Their Unrealized Income

There are two types of income: realized income and unrealized income. These two incomes are taxed very differently. The millionaire's wealth lies in unrealized income to avoid high taxes.

13. The Biggest Risk Is Having A Single Source of Income

Most millionaires are self employed and although it might be a risk, they believe a bigger risk is having a single source of income.

14. Predetermined to Not Become Millionaires

If you believe that millionaires only come from wealthy families, you are predetermined to not be a millionaire as it prevents you from taking action.

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