The Millionaire Next Door Book Summary in English
The Millionaire Next Door by Thomas Stanley and William Danko.
Introduction
The Millionaire Next Door: The Surprising Secrets of America's Wealthy
Hello friends. Today we will talk about a book, "The Millionaire Next Door", written by Thomas Stanley and William Danko. This book was written in 1996. Stanley has won awards 6 times as an author. His focus was always on rich people. His interest in rich people started in 1973, and lasted for his entire career. William credits this book for becoming a millionaire. Stanley was a marketing professor and Danko was his student. Stanley quickly took the role of Danko's mentor, and then both started the journey of writing this book. To write this book, both authors did a lot of research on rich people. We must accept that we all are very much interested in rich people. How did they get rich? What are their secrets? and what do they do with their money? We all want to know how we can get a small part of their wealth. This book is about explaining the habits of millionaires living among us. It explains the characteristics of rich people.
This book is divided into 3 parts. First of all this summary will tell you that in order to become a millionaire, what things Stanley and Danko kept in mind. Then we will understand the characteristics of millionaires, how they plan their time, and how they spend money. Then we will look at the cars of rich people. Do they all buy the same type of fast sports car? In second part, we will understand their family life. What gifts do they give? and how rich parents raise their kids? At the end, this summary will explain the working world, which career has the most money? and what is the difference between people earning wealth and people born with wealth. So let's begin
Millionaire next door key points
Part 1 What makes a millionaire?
The Millionaire Next Door summary by chapter
How can they become millionaire? They don't look like a millionaire, they don't dress like a millionaire, neither eat like them nor behave like them. Their names are also not like millionaires. Where are the millionaires who look like millionaires? When Stanley and Danko were thinking about rich people, they didn't consider just the money related things. They realized that rich people focus not only on what they have. Someone might be very rich and you may not even realize it. May be the car that they drive, the way they dress, or from their wristwatch, you may not be able to tell. Those we consider rich, like to keep good assets than showing off a high lifestyle. For this book ,the author has considered those as rich, whose net worth is more than $1 Million or more, means around 7 to 8 crore rupees. According to this standard, only 35% households can be considered as rich. And among those 3.5%, the net worth of 95% can be anywhere between 1 to 10 million dollars. You might be thinking why author used this definition, and why focused on a small part of the population?
The reason is that this wealth is completely achievable.
Anyone can achieve it, and it can be achieved in just one generation. They those millionaires that live among us. Now there is a question: why such a low percent of population is considered as rich? Many people will earn 6 figure salary, but still they can't reach to this point. That is because most people are living their life by spending the money that will come tomorrow. Many households are completely dependent on credit. They are living pay cheque to pay cheque and spending the savings. These are the people who spend their money on such things that they think will show them as rich. But the fact is that these things actually reduce their wealth. Millionaires who can be considered as rich always make a budget. They become rich by budgeting and controlling the expenses, and they maintain their status the same way. By surveying the riches, it is found that most millionaires as an annual income, keep less than 7% of their entire wealth. The amazing result of this is that whatever figure comes within this 7%, they have to pay income tax on that. To create the wealth, reduce your taxable income, and increase your tax-free income. A household, despite its high income, is considered asset-poor.
The main reason is that they live a high consumption life, and for this, they need to increase their realized, i.e., taxable income. Such people should ask themselves a simple question: can I live on 7% of my wealth? One thing is common in all riches, which is being efficient and their ability to plan. To become rich, people will have to learn that how to rightly use their time, power, and money. Those who understand how to plan their wealth, they have ability to keep money on side for investing. The best goal is to keep at least 15% of your income for investing. This will help you increase your wealth. You should know how much your household spends in a year, and do you know how much is spent on your groceries, petrol, and bills? Unless you understand where and how much you spend, it's almost impossible to control your money, and you will never be able to gather the wealth.
For a better understanding, you should note your expenses. You can create a budget with the help of an account. Remember, knowledge is power. If your goal is to be financially secured, then you will achieve it. But if your goal is to earn money to spend on a better life, then you will never achieve it. Author found in his research that, 25% people out of those surveyed, purchased no car in 4 years. And only 25% purchased a brand new car. Rest of the people bought a second hand car or leased it. This uncovered the lie that rich only buy the shining cars. You can buy a standard second hand car even if you are rich.
2 part Family life.
Author has used a term, Economic Outpatient Care, means EOC, to explain those economic gifts, that the kids receive from their rich parents or grand parents. Kids of rich people become high volume consumers, not rich. Kids spend to enhance their status. They buy costly cars, good houses at good places, and send their kids to costly private schools. They are the living proof of simple rule of EOC. It's easier to spend others' money than earning yourself. This is common for those who receive EOC from their rich parents, and they become under achiever. They earn less by themselves because they don't feel the need of this. They spend more than their income. Separating their income from their parent's wealth, seems difficult to them, and they invest less than those who don't receive EOC. Whatever is your income, always spend less than your means. It's clear that giving money to your kids happily can often harm more than benefit.
Here comes a question, what should you give them so that they become a more financially stable and responsible adults? Things that you can give them are, excellent education, environment that fosters independence, responsibility, and leadership, and that rewards and acknowledges personal achievement. Many parents dont see any harm in EOC. They believe that it can be beneficial. And it's true in certain circumstances. Although kids should have discipline and ability to earn, without seeking any support and help. This becomes a trouble when EOC receivers are undisciplined, irresponsible, and don't have any means of earning their own money.
There are 10 such rules that rich parents should use to make their kids productive, and responsible with money. Don't let your kids know how much wealth you have. Always focus on teaching discipline with money. Until kids are matured, disciplined, and in their profession, don't let them realize your wealth. Don't discuss your inheritance with your kids. Don't use cash for negotiation, especially with your adult kids. Keep your kids away from your family matters. Don't take your kids as a competition. Remind yourself that your kids are an individual and an independent person. Always recognize your kids' achievements. Make them feel good for that. Don't acknowledge small success. You should teach your kids that there more to this life is than money, and show them that some things are more valuable than money.
Part 3 The workforce.
This book was written in 1996, and it was believed that in the next decade, people will see so much wealth that they would have never seen before. This was true also. Wealth increased, but it's distribution was constantly uneven. It was believed that riches will need more services than ever. To solve the problems and to manage their money and life, they will need people. There are some professions where there has been huge growth in past 20 years, medical and dental care specialists. asset liquidators, facilitators, and appraisers. educational institutes, professional services specialists, housing specialists, fund-raising counselors, travel agents, bureaus, and travel consultants. It's clear that, to accumulate wealth, there is no magical formula. Being self-employed can be a good step. But still most of the business owners won't be able to convert their money into wealth. Being a business owner, you will know about the success, you will realize the competition, and also know the trend. For this reason, 1 out of 5 business owners who can be considered rich will leave their business for their kids.
To become a business owner, you should have a real motivation. You should have desire to be self-employed. A successful business owner should love what he does, and he should have proud for doing this alone. If you handover a business in a silver plate, then you won't have that desire, and business won't be successful as before. So friends, to become a millionaire, your worth should be more than $1 million. Millionaires may not look rich from outside. You won't be able to tell from their possessions.
Millionaires learn to be efficient and responsible with money.
You need to plan how you should spend your money. It's important to understand where and how you spend your money. Rich parents should spend time on thinking that how to raise their kids. You have to encourage them to be responsible with money. Think that when you give money, you actually are benefiting your kids. There will always be a difference between people who earn their own wealth and those born with it. Thank you friends. I hope you liked the video, I hope today you could understand many secrets of rich people. So try to implement these things in your life.
Thank you so much.
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