Ryan Shaw FIN- 1050

THE MILLIONAIR NEXT DOOR BOOK REPORT

Americans most wealthy, living a life of glamour? Not according to Thomas J. Stanley,
PhD and William D. Danko, PhD; coauthors of The Millionaire Next Door: The Surprising
Secrets of Americans Wealthy. A simple book constructed from years of research and study.
What is real wealth? Who are the millionaires next door? And how did they become
millionaires? What do they know that I dont? And where did they come from? Questions
similar to these are typical of many Americans wanting to become wealthy and financially
independent. This book is a very informative resource on how to become wealthy and
financially independent!
Like many others I believed that Americas most wealthy were in the high income, high
spending category. I never imagined they could live right next door. Or even look just like
anyone else in my neighborhood. This knowledge is very inspiring to me. I have always had the
desire to know more about how I could become financially independent, and wealthy. But like
many others I lack the know-how.
In this book I found many of the ways in which the millionaire next door became as
wealthy as he/she is. There are many facts, statistics, and different points that are covered in
wealth accumulation. While wealth is defined by most people as an accumulation and
abundance of material items, or in other words a flashy lifestyle, in The Millionaire Next Door
it is defined as substantial amounts of appreciable assets. Investing in stocks, bonds and trust
are some of these appreciable assets, and are significant ways to accumulate wealth. While
vaguely covered; stocks, bonds, and trusts seem to be some of the best ways in which these
people plan for their future retirement, and their childrens and grandchildrens futures and
education. Investing as it seems is one of the best ways to minimize ones realized income and

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increase unrealized income also. Realized income is taxed, while unrealized is not. Thus,
unrealized income leads to a greater accumulation of wealth. These facts are very fascinating,
and educational. I believe that they should have discussed investing in greater detail in this
book, but they do give you the key information on investing and different ways to get started.
Stocks, bonds, and trusts are not the only form of appreciable assets however. Other
major investments that may appreciate over time include homes and other properties. The
typical millionaire next door is not found in an upscale neighborhood; instead you will find
him/her in a home that is averagely valued at $320,000. They do not usually live in an upscale
neighborhood, since this would not be conducive in accumulating wealth, and would put too
much pressure on them to keep up with those around them. Upscale neighborhoods demand a
high consumption lifestyle to fit in.
As opposed to appreciable assets there are assets that depreciate also. This includes
furniture, and vehicles. While furniture will depreciate quickly, if well taken care of can last a
long time and provide a substantial amount of use. On the other hand vehicles depreciate in
value rapidly, such as the moment they are driven off the lot they have already lost a lot of value.
Vehicles seem to be a hot topic in this book, and are discussed frequently and in great detail.
Though, it is nice to hear the top choices of vehicles, and the reasoning behind those choices.
Budgeting and financial planning are key concepts in wealth accumulation. The typical
millionaire allocates more time budgeting and planning then the average American. They live
well below their means, and save around 15% of their income monthly. It is in fact one of the
first amounts taken from their income as a priority. Saving is important to the wealthy, and is a
major reason why they have become wealthy. Budgeting and planning are important roles when
it comes to saving. They go hand in hand.

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Most of the wealthy do not receive an inheritance, and do not plan to. They are first
generation rich, and became this way through hard work and sacrifice. They also do not need to
rely on an inheritance or outpatient care from their parents. They are financially independent and
can support themselves without aide for many years as opposed to most Americans. Most
Americans could not support themselves for even a year in most cases, they are financially
dependent.
The wealthy determine themselves as such by net worth. Ones net worth is determined
by a simple formula in this book. Multiply your age times your realized pretax annual household
income from all sources except inheritances. Divide by ten. This, less any inherited wealth, is
what your net worth should be. For example, Mr. Anthony O. Duncan is forty-one years old,
makes $143,000 a year, and has investments that return another $12,000, he would multiply
$155,000 by forty-one. That equals $6,355,500. Dividing by ten, his net worth should be
$635,500. This was both interesting and helpful in finding my net worth. It will be an easy
determinant as to progress in wealth accumulation.
While the education of their offspring seems to be a priority for most of the millionaires;
they themselves typically did not go to private schools, or colleges, some were even high school
drop outs. Instead most of them entered the working world earlier than their high income peers.
Many started their own businesses. 50% of the millionaires own their own business, according
to Thomas J. Stanley, and William D. Danko. While most businesses will fail within the first
year, owning a business is the best way to accumulate wealth for most millionaires. 80% of the
first generation rich millionaires own their own business. The other remaining 20% are retired.
Most of their children will be independent and economically self-sufficient. They were
raised this way. They have learned responsibility and living below their means through example

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by their parents. They will also receive more education then their parents, because their parents
will want them to be better off. Usually meaning they will want them to become doctors and
lawyers or high income earners. But in this they will be discouraged from entering the job
market and accumulating their wealth the way their parents did. This will also put pressure on
the children to live above their means.
Ancestry and background is discussed very well in this book in my opinion. It
was to the point. Giving statistics and charts on what ancestry most millionaires share, and
giving a percentage based on ethnicity and wealth. Some ethnic groups though small have a
higher percentage for being millionaires, and some that are large have a smaller percentage. I
found this quite interesting. I had not really given much thought to who the wealthy are or where
they came from. I guess, like most, I just figured it was those who had came from an ancestry
group that had helped to found America.
This book is a wonderful resource, and extremely educational. While I found this book to
be helpful and enlightening I did have a hard time reading it especially the sections on vehicles.
The amount of discussion done on cars in my opinion was overdone. There was too much
emphasis on vehicles that could have been simplified, and still held the effect of vehicle choices.
Some other issues I had with the book were that while the book talked of how frugal and thrifty
the wealthy are, it did not in fact organize the process very well. I would have liked to have seen
a picture of a typical spending plan with the wealthy. This would have increased the
understanding, and impact of the frugal. Also the sections on the children of the wealthy left me
wondering. There seem to be two different views on how the children of the wealthy live. The
information given on the children of the frugal seems to be inconsistent and contradictory. It left
me a little confused as to if the children are better off or not. In all if the contradictions were

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explained a little better and consistently I would have been less confused. All in all the book was
wonderful, it just would have been easier to read if it had been organized better, and had
explained contradictions more thoroughly.