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'The Millionaire Next Door' review: How the wealthiest people think

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Updated: August 01, 2023

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The Millionaire Next Door

Quick Facts

The Millionaire Next Door is an excellent read for anyone who wants to get inside the minds of America's wealthiest citizens.

The Millionaire Next Door was originally published in 1996. It was updated and republished in 2010. It is considered by many individual investors and entrepreneurs a classic must-read personal finance book.

It isn’t a “how to become a millionaire” book, but rather a compilation of observations about how the thoughts and actions of self-made millionaires differ from those of the typical middle-class worker. The basis of the content comes from a 20-year study of more than 1,000 real-world millionaires. From the study data, the authors drew paradigms and conclusions about the keys to building high net worth.

How do millionaires think?

The deductions drawn from survey responses confront pre-conceived notions of what it means to become wealthy. In particular, most people assume that being a millionaire means having enough money to never worry about how much you spend and that the keys to accumulating wealth are to:

  1. 1.

    Inherit it from successful parents or relatives

  2. 2.

    Earn advanced degrees at the best universities

  3. 3.

    Be smarter or more intelligent than others

In reality, the results of their real-world study showed that most millionaires live below their means and carefully plan their lifestyle expenses. They also showed that the keys to building a high net worth were more likely to be:

  1. 1.

    The application of a solid ongoing work ethic

  2. 2.

    Application of consistent, long-term savings habits

  3. 3.

    The enduring self-discipline to spend less than they earn and invest the balance

The authors go into detail — with examples and logical analysis — about the seven prominent characteristics millionaires have in common:

  1. 1.

    They have conservative lifestyles.

  2. 2.

    They are efficient in allocating resources (time, money, energy).

  3. 3.

    They place a higher priority on financial independence than on social status.

  4. 4.

    They made it on their own efforts without significant help from their parents.

  5. 5.

    They teach their own family members to be economically self-sufficient.

  6. 6.

    They focus on emerging market opportunities.

  7. 7.

    They choose an occupation where they can become self-employed.

What is the wealth index?

Compare your net worth to what the authors call your “Wealth Index”:

Wealth Index = (your age) x (annual pre-tax household income)/10

  • A Successful wealth accumulator has a net worth of twice their Index.
  • An Average wealth accumulator has a net worth of around their Index.
  • An Under-achiever has a net worth of one-half or less their Index.

The authors assert — and their evidence seems to confirm — there is a direct relationship between controlling family expenditures and the accumulation of wealth.

Under-achievers tend to let their household expenditure levels be determined by their annual income. Successful wealth accumulators, by contrast, have pre-determined annual budgets they operate within and carefully limit their expenditure to be less than their annual income.

“Most people have it all wrong. Wealth is not the same as income. If you make a good income and spend it all, you’re not getting wealthier. You are just living high. Wealth is what you accumulate, not what you spend.”

So how do you become wealthy? “Most people get this wrong too. It is seldom luck or inheritance or advanced degrees or even intelligence that enables people to amass fortunes. Wealth is more often the result of a lifestyle of hard work, perseverance, planning and, most of all, self-discipline.”

How do millionaires minimize taxes?

Along the lines of living frugally and carefully monitoring their expenditures, the study found that the rich are experts at legally minimizing their taxes. Most millionaires structure their financial affairs so as to minimize their annual realized income and maximize their annual unrealized income.

Our progressive tax code is designed to tax higher income earners. The millionaires tend to make most of their income from passive investments that are taxed at a lower rate. They also spend more time on financial planning than the average person and are more inclined to make use of trusts for effective tax reduction. While the average high-income, high-consumption household realizes about 90% of its net worth each year in taxable income, millionaires as a whole realize only about 7% of their net worth in income each year — which means only 7% of their net worth is subject to income tax.

What is generational wealth?

The study showed that around 66% of America’s millionaires received no economic subsidies from their parents other than college educations. Some of the self-made millionaires tried to seed the economic well being of their children by providing them with capital to start their own businesses. Yet despite this, the study data actually showed there was a negative correlation between receiving funds and accumulating wealth — the more adult children received from their parents, the less they accumulated by their own efforts.

Some reasons proposed by the authors are insightful and interesting:

  1. 1.

    Giving money to adult children sends a subliminal message the parent doesn’t think they will be able to make it on their own.

  2. 2.

    The adult children generally fail to distinguish between wealth they have generated and wealth provided by the parents as a gift. Subsequently the adult children perceive themselves as more productive than they actually are, which can lead to negative household consumption habits.

In essence, giving money to adult children seems to encourage lifestyle consumption rather than saving or investing.


The Millionaire Next Door isn’t meant to be a “how-to” on becoming a millionaire. It is, however, an excellent book to get an inside look at the mind of a millionaire, based on a statistical study of 1,000 actual millionaires over a 20-year period.

The findings clearly indicate it’s actually easier in the United States to achieve a high income than it is to accumulate wealth. Most people focus on generating high incomes. Real-world millionaires do that as well, but they then leverage the value of their income stream by moderating their lifestyle expenditure and investing the balance. They become wealth-oriented rather than consumption-oriented.

The overall message is counter-cultural, yet not fundamentally shocking: The underlying keys to building wealth are fiscal discipline, sacrifice and solid work.

About our author

Ruth Lyons
Ruth Lyons, Freelance Contributor

Trading three decades of financial publishing experience in the corporate world for a life of personal and financial freedom as a freelancer in 2012, Ruth is passionate about helping others take control of their personal finances and to become aware and educated on their options as self-reliant individuals. Disenfranchised with the high cost and lackluster performance of her IRA, college savings and other retirement accounts handled by a full-service broker, Ruth moved her retirement money to a self-directed IRA in 2015. Ruth holds an MS in Finance from Johns Hopkins Carey School of Business (1991) and a Business Management degree from University of Maryland (1984).


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