The Millionaire Next Door

By Thomas Stanley and William Danko
The millionaires we discuss are financially independent. They could maintain their current lifestyle for years and years without earning one months pay.

Who becomes wealthy? Usually a businessman who has lived in the same town for all his adult life. He owns a small factory, service company, or chain of stores. He married once and remains married. He lives next door to people with a fraction of his wealth. He's a compulsive saver and investor. And he made his money on his own. 80% of the wealthy are first generation rich. Seven characteristics of the wealthy:

  1. They live well below their means;
  2. they allocate their time, energy, and money efficiently in ways conducive to building wealth;
  3. They believe that financial independence is more important than displaying high social status;
  4. Their parents did not provide economic outpatient care;
  5. Their adult children are economically self-sufficient;
  6. They are proficient in targeting market opportunities; and
  7. They chose the right occupation.
They are not descendants of the Rockefellers or Vanderbuilts. They did it in one generation -- slowly, steadily, without signing a multi-year contract with the Yankees, without winning the lottery, without becoming the next Mick Jagger.

Windfalls make headlines, but such occurrences are rare. During a lifetime the probability of becoming rich via such paths is lower than 1 in 4000. Contrast these odds with the proportion of American households in the $1 million and over net worth category: 3.5 per 100.

Another characteristic is that their spouses are even more frugal than they are.

[In 2000] the median household [had] a net worth of $15,000 excluding home equity. Without a check from an employer, the typical household could survive only a month or two.

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