Chronicles Of A Father With Cents

Simple Life. Personal Finance. Family

Book Review: The Millionaire Next Door

It's Leave the Office Early Day.

The Millionaire Next Door by Thomas J Stanley, Ph.D and William D Danko Ph.D

After many suggestions about this book and overwhelming raving reviews on this book I finally got my hands on it and gave it a read.

What is this book about?

I got to admit I didn’t see why a lot of people like the book when I was halfway through.  Yes, it was quite revealing that a lot of high income people do not have a lot in their net worth since they have high consumption and the people with a lot of net worth do not live the lavish lifestyle.  Most live in middle-class neighborhoods and drive sedans and live below their means.  But this was an ongoing theme throughout the first half of the book.  I kept thinking, “Ok, I got it but is there something a bit deeper than this?” Then the second half of the book answered my question by laying out why the people with low net worth that earn high income get to this financial position First was the Economic Outpatient Care where the kids of the UAWs(more on this abbreviation later) really dependent on their parents money to have a good living Second were the specialists who enjoy the affluent since its services that are definitely needed and the affects of millionaires giving their business to their heir.

Important Points that stuck out in the book

Wide differences between PAWs and UAWs

It was mind boggling how some people that earn high income just want to spend and tend not to worry of their net worth. They worry about their status in regards to the car they drive, neighborhood they live in, and the clothes they wearBasically they are more into spending than saving and it’s a prime example of under accumulator of wealth or UAWs.

On the other hand, a good percentage of millionaires are more careful of their spending.  They are more frugal, be smart about how they spend, drive cars that meet their needs, and live in middle class neighborhoods. Their net worth is about as twice as their yearly income.  This group is called the prodigious accumulator of wealth or PAWs.

Throughout the whole book, the authors give many examples of the differences of the two groups.  One case that really resonate for me was the one between two men, Mr. North(a PAW) and Mr. South(a UAW). Both men are very similar in age, income, and family composition. But the way they go about how they view money is very different.

Mr. South is worried of being forced to reduce his high standard of living, concerned that his high income will not be enough to satisfy his family’s spending habits, doesn’t spend a lot of time looking his investments, not keeping track of his family’s spending especially with food and clothes and not planning his financial future.

Mr. North is on the other end of the spectrum where they are not worried of high standard of living, spends a good amount of time looking at his investments and planning his financial future As you can tell, all these factored in why Mr. North has a high net worth and Mr. South does not even though they earn the same amount of income.

Economic Outpatient Care

EOC refers to the economic gifts, most in substantial amounts, parents give their adult children and grandchildren. In the book, they give a few examples of families heavily depending on EOC from their parents.  Instead of being wise with the cash gifts they receive and try to be independent, they are high spenders, perceive themselves as millionaires because they live on upper class neighborhoods and send their kids to private school.  This is most if not all on their parents’ dime.  They basically sit around and wait for the money the parents give them and spend it almost instantly.

The Millionaire Next Door.  Thanks as usual SF Public Library!!

These adults who depend on EOC are mainly underachievers when it comes to their career achievements With the cash gifts they receive, they feel that they have no motivation to advance in their career and feel that it’s a great lifestyle to live on someone else’s money.

The affluent parents have the mindset that the more money they give to their children, they will more likely to be productive adults and go off on their own That is definitely not the case and it turns out to be the reverse and they are stuck on gifting their adult kid’s monetary rewards whenever they need itOn the other hand, affluent parents who provide little to no money to their children are more independent, always look to advance in their career and look after their investments.
This chapter of the book got me to understand why some people who think they are millionaires are not because of their economic dependence from their parents I’m guessing that their parents didn’t provide them ways to take care of their money, didn’t push them to go out and have a career they wanted They kept on giving and giving without any reasoning other than and led them to think they can live off their wealth It also leads to some of these affluent parents not having a high net worth because they are always providing EOC to their kids.

The Character of the Business Owner is More Important in Predicting his Level Of Wealth than the classification of his Business

There are industries that are more profitable than others and thus they realize more income. But does that mean that business owners that make huge profits end up being wealthy? That depends on the business owner.

Most of them are big spenders and they end up buying non-business related consumer goods and services.  They may also go through a tough time in their personal life. They end up going through a divorce or two and gamble a lot of their money at the casino.  They also don’t plan their investments like not building up their retirement plans or own a good amount of shares in successful companies.  They keep on spending even though they see a lot of money coming.

On the other hand, some owners are aware of the income they earn based on the successful company they are running and make the most out of it.  They can be frugal, end up saving a lot of their income and be a smart investor in the stock market. This results in these business owners becoming millionaires because of their high net worth.

It’s not the successful business they are running, it’s also how they manage their finances that makes them wealthy.  It comes down to saving and spending.  If you save more than you spend, chances are your net worth is in good shape

Concluding Thoughts

I was surprised by that amount of business owners that don’t manage their money.  ‘The Millionaire Next Door’ was a real eye opener for me.  I’d assume most if not all successful business owners would know how to manage their finances by investing, making smart decisions that affect their wealth and have a lot in their net worth I’d also assumed most millionaires are spenders but not to the point where their net worth is lower than expected.  You would think that with a high income they would know how to control it.
Also some of the kids that are depending on their parents wealth can’t break out of this mental state of mind that they spend their money they are providing them and try to cut back on it.
I commend the millionaires or PAWs that are smart with the income they have.  They buy used cars instead of new luxury cars, live in middle income neighborhoods instead of high income, and don’t go on a shopping spree to buy brand name items They also try to raise their kids on be independent, push them to find a career that best suits them and provide with little or no monetary gifts because they want to see them succeed on their own.  This in turn motivates their kids to strive to be the best they can be.
I highly recommend this book for anyone who wants to know the do’s and do not’s of building a good net worth.


  1. This was a good post! I never read the book. I wish I could but I don’t have the time. Maybe I’ll try it as an audiobook. I definitely want to build my net worth, it’s my goal. But it’s hard to accomplish that goal at the moment when I now have to build my savings for preschool tuition. Hopefully, once he starts Kindergarten I can work on it.

    • I high recommend reading this book MF. It will change you view on how you view millionaires. I thought all this time many high income people were smart on how they finance their money. Definitely give it read because the book also describes how millionaires’ kids are affected by their wealth.

  2. Love this book. I know an EOC and although I love her as one of my best friends, it makes me shudder when I think my children might grow up to need the bank of mom and dad. I told hubby we’re hiding any wealth away because I notice the rich kids grow up…to be very unmotivated people.

    • We’re planning to do the same thing with Baby with Cents and if we have a second kid. We don’t want our kids to know about our financial status and want to push them to be the best at whatever they want to do, be independent and build their own wealth. We will give them financial support(529 college fund) along the way but not how EOCs are treated where they are solely dependent on their parents’ financial backing.

  3. I read this book when it first came out and it was a shocking revelation. So many regular people – teachers, plumbers, janitors – had Stealth Wealth!

    I’ve see parents give EOC to their adult child and it’s really, really detrimental. It makes the parents feel good though. Probably the same way they felt when they bought their young child everything he wanted.

    The job of a parent is to prepare his child for being a happy, successful adult in the real world. Anything else is parenting failure.

    • Definitely agree. As a parent to a 18 month old I already feel this obligation to prepare my kid to be as successful as he can be. Getting him ready for school, work, and life in general is something I am looking forward to. Thanks for stopping by Mr. FF!!

  4. I have heard this book mentioned so many times but haven’t gotten around to reading it yet. Sounds like I really need to. I definitely know a few EOC’s and it always amazes me how lazy they are. Thanks for the great review!

  5. This is one of my fave books as well, I remember an excerpt from it, talking about how the millionaire next door to you drives an old Toyota Camry (if I can remember correctly). It definitely opens your eyes to the fact that most millionaires are not flashy and do not drive BMW’s or Mercedes.

    • That was one of biggest revelations that I took out from the book. You don’t need to have luxury cars to make others think you are a millionaire. Be smart with your money by owning a used Camry and living in middle income neighborhoods and your net worth will go a long way.

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