Book Review: The Millionaire Next Door: The Surprising Secrets of America’s Wealthy

Last Updated on

I have heard many great things about this book so I was very excited to receive this book when I won a giveaway on another fellow blogger's site (LIFE HACK alert: If you usually  never ever win anything, try entering giveaways from bloggers! I never win anything and I have won about four books in the past one and a half years).

This book is an easy read (finished it in about 5 hours) and is a real page turner (perhaps more so than that psychological thriller book on your nightstand). The authors have studied the spending habits, background, and savings and investments of America's wealthy for two decades, and what they found out is more surprising than you would think. America's millionaires do not drive expensive luxury cars, nor do they were expensive Rolex watches (more like Timex!). They do not shop at Saks 5th Avenue, they shop at Sears and JC Penney. They are not the lawyers, doctors, or other prestigious professions, they are the small business owners. They do not hold 30% of their portfolio in stocks, they only hold about 20%.

In this book, they start off by giving the reader a baseline of wealthiness- are you a UAW (under accumulator of wealth) or a PAW (prodigious accumulator of wealth)?

Here's how to tell if you are wealthy:

“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”.

(I calculated- and I am not wealthy for my age- I am about $50,000 away from being wealthy.)

They then go on to talk about the differences between UAW's and PAW's. Those with prestigious job titles, the doctors, lawyers, and those who live in fancy neighbourhoods, tend to feel the need to keep up with the Jones' and spend money to keep up this lifestyle accordingly. They are often UAW's and not as wealthy as you might think.

The authors detailed seven factors that more likely lead to wealth accumulation:

  • The wealthy live below their means
  • They allocate their time, energy, and money efficiently, in ways conducive to building wealth
  • They believe that financial independence is more important that showing off high social status
  • Their parents did not dole out money to them aka “economic outpatient care”
  • Their adult children are economically self-sufficient
  • They are proficient in targeting market opportunities
  • They choose the right occupation

One of the messages that really “hit home” for me was the idea of economic outpatient care. The affluent parents giving out money to their children, making sure they lead a good life, go to a good school, and not have to worry about money. Yet these actions are actual counter-beneficial. Those that are not economically self-sufficient come to depend upon their affluent parents because they are accustomed to their current living standards. The say that the gift receivers (adult children expecting handouts from their parents) do not distinguish between the wealth of their affluent parents and their own personal wealth, they establish a “what's yours is mine” mentality when it comes to their parents wealth. Unfortunately, this can also lead to bitter battles of inheritance between siblings. This is probably one of the main reasons why Warren Buffett has declared that he will not give his children any of his 62 billion dollar estate– and his children are fine with that, and wholeheartedly agree that Warren Buffett is making a good decision to not distribute his wealth to his children.

The authors go on to share a story of a father with two daughters- one who left home and refused to comply to her father's vision of both daughters marrying “good husbands” and just bearing children and not working for themselves. One daughter went off to start her own business and became very successful and the other daughter stayed close to her father and continued to receive monetary assistance from him (in a sort of co-dependent sort of way) until his death. I think this idea of economic outpatient care is very prevalent in the generation Y. Take for example, my sheltered sisters. My parents didn't want them to stray from studying well at school, so they did not encourage them to get jobs while in high school. I on the other hand, started working a few months before it was even legal to work in Canada. I am much more advanced in terms of investing my money and saving my money, whereas my sisters are unfortunately not. They are starting to learn though through baby steps- I got one of them a high interest savings account with ING.

In conclusion, I would definitely recommend this book.  It's not “preachy” at all (doesn't tell you to go do this or that, or save 40% of your pretax income or anything like that), but it offers an objective glimpse into the lives of America's wealthy and you can choose to emulate them or not.

Readers: Have any of you read The Millionaire Next Door? What did you think of it? Do you agree that children of affluent parents should not expect a hand-out from the ‘rents? Do you think Generation Y is dependent upon economic outpatient care?

youngandthrifty Book Giveaway!

Since I haven't run a giveaway in a while, I would like to take this opportunity to give away the copy of the book I just read.  It's only been used for 5 hours and there are a few dog eared pages (just loved some excerpts in the book!).  It's worth USD $16.95 and shipping (on my expense lol) so might as well enter to win a copy!

There are two ways to enter:

  1. Subscribe by RSS for one entry and comment below
  2. Subscribe by Email for two entries and comment below
  3. If you already subscribe, thanks for reading!  Just say so below and I'll give you one entry.

The winner will be selected by random.org from my excel sheet.  You have until Wednesday May 11, 2011 midnight PST to enter.  Good luck!

The following two tabs change content below.
Young is a writer and former owner of Young and Thrifty and the main "twitter' behind Young and Thrifty's twitter account. She lives in Vancouver, BC and enjoys long walks on the beach, spending time with her anxious dog, and finding good deals. If you like what you read, consider signing up for email updates.

74 Comments

  1. Steve Zussino on April 25, 2011 at 8:09 am

    Don’t worry I am not wealthy either!

    Entry 1: Rss feed subscriber



  2. Michael Stoicescu on April 25, 2011 at 8:24 am

    I would love a chance to peek at the pages you have dog-eared 🙂

    Already subscribed via RSS feed.



  3. Sandy @ yesiamcheap on April 25, 2011 at 8:56 am

    I haven’t read the book, but the basic tenets, as you describe them, sound reasonable to me. I just need to find the right small business to start and then I can begin banking my millions!



  4. retirebyforty on April 25, 2011 at 11:09 am

    I love the MND. It’s an essential book to wake you up from the day to day grind/spending. I think it’s THE book to start you off on your personal finance journey and wished I read it when I was in my early 20s. 🙂



  5. SavingMentor on April 25, 2011 at 9:45 am

    You make it sound like winning blog contests is SO easy, but I’ve yet to win any and I’ve participated in several.

    You know I subscribe by everything so make sure to throw my name in the hat! If I win, I’ll expect the book to be autographed by you! Getting actual author signatures is so pass



  6. Alex C on April 25, 2011 at 10:01 am

    Throw my name in the draw please (RSS)!



  7. MoneyCone on April 25, 2011 at 10:01 am

    Excellent review Young! I like how you summed up the most important points of the book. Haven’t read this book yet, will be adding it to my reading list.



  8. ifat1st on April 25, 2011 at 10:03 am

    A dedicate RSS feed-reader … please enter me in the book giveaway.



  9. Kevin on April 25, 2011 at 10:35 am

    Keep up the book reviews, always looking for more good reads.
    Already on the RSS bandwagon!



  10. jpshilton on April 25, 2011 at 10:37 am

    Subscribed by RSS and email.
    Enter me please



  11. Allison on April 25, 2011 at 11:23 am

    I already subscribe. Thanks!



  12. Echo on April 25, 2011 at 11:27 am

    Good review Y&T! Don’t be too concerned with the PAW vs. UAW, as this metric is very skewed against anyone younger than 40 since we just haven’t had the time to grow our net worth compared to our income yet.

    I already own the book, so just throwing in my two cents 😉



  13. Steve on April 25, 2011 at 12:36 pm

    Count me in. I’ve read the book previously but would love to add it to my PF bookshelf . . . .



  14. Stefanie on April 25, 2011 at 12:47 pm

    This sounds like a great book! I’m already subscribed to the emails.



  15. Joel on April 25, 2011 at 1:23 pm

    I subscribe to your RSS – and would love the book



  16. Joel on April 25, 2011 at 1:24 pm

    I am also a subscriber by email 🙂



  17. Ginger on April 25, 2011 at 2:49 pm

    Well I am $50,000 short too! I do not think this calculation works if your parents did not help you with school and you ended up with student loans. Even if a person is very frugal and saves a large portion of income, that person would be worse off than someone who saves less and has no student loans, according to the formula. However, in real life the person who is saving more and knows how to be frugal will end up with a higher net worth (if he or she keeps it up). I think parents should help pay for college, if they can, especially if not helping will penalize the young adult (the school expects the parent to help). But after that, except for maybe some money for a down payment or wedding I would say “Don’t help”.



  18. CF on April 25, 2011 at 3:09 pm

    That’s actually very similar to my younger sister – she is 18 and has never worked, doesn’t know how to manage her money or boil an egg. Clearly, first-borns are better! Hehe

    I’ve certainly made my own mistakes but I was independent. I don’t see the same independence or desire for independence from her (yet?)



  19. Vonnie on April 25, 2011 at 6:11 pm

    Already a subscriber~! Please count me in too!



  20. Kanwal Sarai - Simply Investing on April 25, 2011 at 6:34 pm

    I’ve read The Millionaire Next Door, and I think it is a fantastic book! I agree that children of affluent parents should not expect a hand-out from the parents. However I do think Generation Y is dependent upon economic outpatient care, only because I see it again and again. Outpatient care is so easy, why save and invest when your parents take care of your financial needs? This is actually a disservice to Generation Y.



  21. Karl on April 25, 2011 at 7:09 pm

    RSS subscriber. Have this book on my to-read list so would be great, thanks!



  22. Sunny on April 25, 2011 at 8:22 pm

    Interesting. I read somewhere that Buffet actually had gave money to his children and grandchildren. Buffet son received something like a million dollar bucks. But once Warren Buffet will die, no one will get any money, that’s correct. But money had been giving away in the past years. For his grandchildren, Buffet paid off tuition for university. One of his grandchildren is a female artist painter.

    So no need to be a lawyer or a doctor to become financially healthy? That’s good news! :0)



  23. Debt Free Divas on April 25, 2011 at 8:25 pm

    Good point about free books from blogger giveaways. You should try Millionaire Women Next Door. I just finished that one, and found it even better than the original. Good stuff!



  24. young on April 25, 2011 at 8:51 pm

    @Debt Free Divas- Cool! I have never even heard of that one. Sounds like a good book, with good role modeling for young women like me.



  25. young on April 25, 2011 at 8:54 pm

    @Sunny- Yup! I think you’re doing just fine yourself!! 🙂 It’s all about investing and being smart with your money. In the book, he said doctors and lawyers spent like 30 minutes a year or something terrible like that on choosing investments, but America’s millionaires regularly put time out of their day to research good investments… could be that doctors and lawyers are already so busy at their main jobs??

    Oh I didn’t know that, I guess it makes sense.. it would be pretty difficult for a billionaire father to tell his children/grandchildren not to go to university… I would not have the heart to do that! (But perhaps I would end up being an enabler of economic outpatient care?!)



  26. young on April 25, 2011 at 8:55 pm

    @Kanwal Sarai- Yeah, I see it again and again too… I’m not sure if it’s because the economy is so expensive now (e.g. new grads not getting jobs, or housing and shelter being so expensive…). Even back then, it was easy to live as a one income household, but these days, it’s difficult. I guess it’s multifactorial.



  27. young on April 25, 2011 at 8:57 pm

    @CF- Ah ha! I must agree because I am a first-born (first born daughter anyway). I have been trying to instill independence to them with little luck. Baby steps, I suppose 🙂 Have you tried teaching her how to boil an egg? 😉



  28. young on April 25, 2011 at 8:59 pm

    @Ginger- You make a good point… I think graduating with debt would be very hard… I know a few people in their late thirties with $50,000 still in student loan debt still. I agree, tuition for college would be good (though reasonable education and not something that would cost $100,000 a year, you know what I mean?).



  29. young on April 25, 2011 at 9:00 pm

    @Echo- That’s what I was thinking as I was calculating it, because I have only recently begun to make this level of income (in the past few years).. okay I’ll wait until I am 40 and calculate it again 😉



  30. young on April 25, 2011 at 9:01 pm

    @retirebyforty- Definitely… it has inspired me to get down to business and do a budget and not rely on my mint.com app! To me, I think the book to start the PF journey is the Wealth Barber, but this one is definitely really good. The Intelligent Investor is good too, but that one was not as easy of a read as this book.



  31. young on April 25, 2011 at 9:02 pm

    @Kevin- Thanks! I love doing book reviews! I think next on my list is Cash Flow Quadrant by Robert K. I bought a year ago from Amazon.



  32. young on April 25, 2011 at 9:02 pm

    @ifat1st- of course I’ll enter you. Thanks for reading 🙂



  33. young on April 25, 2011 at 9:03 pm

    @MoneyCone- Its really good, and I’m pretty good at deciphering between crap blah blah jargon PF books and the real thing by now 😉



  34. young on April 25, 2011 at 9:04 pm

    @SavingMentor- LOL Okay if you win I will autograph it and draw an apple in the book… and colour the apple green. Though i think it would be difficult to sell it easily on Amazon afterwards!! 😉



  35. young on April 25, 2011 at 9:05 pm

    @Sandy- Girl, I think you’re on your way! You’ve already opened up a few small businesses, so you definitely have the experience to know what works and what doesn’t. One day, I’ll read about you and say “hey, I remember her!” in the Forbes list, I know it!



  36. young on April 25, 2011 at 9:06 pm

    @Michael Stoicescu- lol, I tried to “un-dogear” them… 🙂



  37. The Passive Income Earner on April 25, 2011 at 11:02 pm

    The math to tell if you are wealthy in the example can be very misleading. I don’t think the current salary should be used. It should be at least the 5 year average. Otherwise, any recent salary increase throws off the expected savings.

    It’s a good indicator to see if someone is living on future earnings though since any extra above salary such as bonuses aren’t included. What do most people do with a bonus? Save or spend?



  38. Laura on April 26, 2011 at 3:28 am

    Ooh this book sounds intriguing! If I don’t win it, I’m definitely picking up a copy!

    I read your blog religiously through RSS – 1 entry for me! 🙂



  39. Jen @ SheBloggs on April 26, 2011 at 6:23 am

    I’ve heard so much about this book and would love to read it. I’d love to read it (RSS Subscriber).

    I’m $50,000 off too 🙂



  40. Ad on April 26, 2011 at 5:46 am

    already subscribed



  41. Ravi Gupta on April 26, 2011 at 9:01 am

    I heard about the book and have also heard the same things that you summarized. I think the media has skewed our image of weatlhy or rich is. We think of it as old money, large mansions and fancy cards. Rather it’s moderately sized homes and frugality.

    -Ravi Gupta



  42. The Dividend Ninja on April 26, 2011 at 8:03 am

    Y&T – Add me on, follow and tweet 🙂

    Cheers



  43. Shawna Stoicescu on April 26, 2011 at 8:15 am

    Sounds like an interesting read! My husband would love it!

    I’m already an email subscriber 🙂



  44. krantcents on April 26, 2011 at 11:16 am

    I started reading biographies of successful people at a very young age. I read as many books, magazines and stories on the Internet in order to keep learning how they do it. We should keep learning forever, Books like this provide insight in successful people’s lives so we can develop their habits.



  45. Big E on April 26, 2011 at 11:35 am

    already subscribed. sounds like a worthwhile read.



  46. Nicole on April 26, 2011 at 12:02 pm

    Already subscribed, and i’m always interested in a good finance book! (that’s easy-ish to read 😉 )



  47. SophieW on April 26, 2011 at 1:33 pm

    I borrowed the original book when it first came out and haven’t read it since… It would be awesome to not only read it again, but read the updated version. Pick me! 🙂



  48. SophieW on April 26, 2011 at 1:34 pm

    oh, and have been a subscriber for a while now too 😉



  49. Cassie on April 26, 2011 at 2:32 pm

    I’m already subscribed, but I also already own the book. I’ll take the entry though, because then I can pass on a copy to someone else who would benefit from it 😉



  50. PMarie on April 26, 2011 at 10:17 pm

    Please pick me! Help support a financially illiterate student looking for some guidance 😉

    BTW awesome blog! I just recently subscribed via google reader hopefully that works, I’m new to the blogosphere :s



  51. Little House on April 27, 2011 at 6:59 am

    I loved reading this book last summer. It was also a real eye-opener for me too. I realized I can’t make excuses for not being wealthy, even on a teacher’s salary. I think one of the examples in that book was a teacher who invested their money correctly. 😉 It really brought home the whole “live below your means,” I’m really working on that now.



  52. Canadian_sadie on April 27, 2011 at 9:17 am

    I already subscribe, because I love reading PF from Canada–it’s nice having investing insights and debt reduction strategies that actually pertain to me! 🙂

    Please enter me, I’ve been meaning to get my hands on a copy of this book for quite some time, and this would make it super-easy! 🙂

    Thanks!

    -sadie in Halifax!



  53. Tsunami on April 27, 2011 at 2:31 pm

    By their calculations I am more than wealthy,how come I don’t feel that way.

    I drive a 7 year old car, never been to Europe, China but do spend my winters in Arizona, over 70 been retired for 16 years and making more money today than ever.

    Bought my watch at Walmart, come to think of it the entire wardrobe (if you call jeans and shirt a wardrobe.

    Never went to university, never inherited anything, picked a nice steady job and Wife and followed much like the wealthy barber except I do have a lot more than 20% in the markets and doing more than well.
    Buy only stocks that the world needs (potash, food, ag, oil) yes I said needs, not wants. Don’t have a cell phone, i-pod and all that other stuff and don’t need one. Life is good.



  54. CreditDonkey on April 28, 2011 at 5:36 am

    This is interesting. Warren Buffett is not giving anything to his children? No wonder he’s the richest man in the world! I agree that generation Y has a longer right of passage into adulthood. Many still live with their parents up even at 20 years and above. Though there is more openness and curiousity in this generation, we should bring back the independence and work ethic of generation x.



  55. Adil Palsetia on April 28, 2011 at 8:30 am

    Hi Y&T! I already subscribe. Def enjoy the blog! Give me a free book!!! 😉



  56. kaslogal on April 28, 2011 at 8:21 am

    This sounds like a great read. I really enjoyed reading everyone’s comments. I have a 10 year goal for retirement and I think this read would assist in greatly in that quest.



  57. TS on April 28, 2011 at 8:26 pm

    Hi YT,

    Can you recommend a good book or website for retirement planning as far as establishing goals?

    Thanks.

    TS



  58. Andre on April 29, 2011 at 10:45 am

    I’ve been wanting to read this for awhile as well. If I win I’ll have no excuse.

    Thanks.



  59. young on April 30, 2011 at 9:48 am

    @Ravi Gupta- I think it’s not only media, I think it’s our society in general 🙂 But how do people display wealth if they don’t have fancy cars, large mansions, I suppose? We can’t see their bank statements. Then again, people shouldn’t have to feel the necessity to display their wealth, right?



  60. young on April 30, 2011 at 9:49 am

    @krantcents- Books are such a great ‘lifelong learning’ tool. I really should read more often 😉



  61. young on April 30, 2011 at 10:00 am

    @Canadian_sadie- Thank you! You subscribe to RSS right? Good luck!



  62. young on April 30, 2011 at 10:02 am

    @Little House- Yeah, I felt that way after I read the book too- no excuses (well, one excuse could be that we’re taxed to the nines because we’re not small business owners 😉 ).



  63. young on April 30, 2011 at 10:03 am

    @PMarie- Thanks! Once you get started reading PF blogs, you’re gonna get hooked 😉 Hopefully Random.org will be kind to you. I wish I could pick you but it’s random!



  64. young on April 30, 2011 at 10:03 am

    @Cassie- Very benevolent of you, Cassie! 🙂 Okay, good luck!



  65. young on April 30, 2011 at 10:04 am

    @SophieW- Thanks for reading! Good luck!



  66. young on April 30, 2011 at 10:04 am

    @Nicole- definitely easy to read, many “a-ha” moments for sure. Good luck!



  67. young on April 30, 2011 at 10:05 am

    @Andre- Are you an RSS subscriber? 🙂



  68. young on April 30, 2011 at 10:06 am

    @TS- Hmm Retire Happy Blog (Jim Yih) is good for retirement planning and establishing goals!



  69. young on April 30, 2011 at 10:07 am

    @Adil Palsetia- Thanks! Glad to hear you enjoy the blog. Good luck!



  70. Etienne on May 3, 2011 at 4:30 pm

    I’m in (subscribed)!
    I have read a ton of books on finances, and some (many) are very disappointing… my last total disappointment was “Cash in a Flash” adn my next book to read is “Wealthbuilding” from a Canadian author.
    The best book I have read to date are Garth Turner’s Money Road, the 4-hour workweek (as well as Dave Ramsey’s audioseminar and Suze Orman’s Rich & Fabulous)



  71. NChoedon on May 3, 2011 at 4:37 pm

    It sounds like a very good book and I will definitely check it out. Thank you.



  72. young on May 5, 2011 at 11:20 pm

    @Etienne- I don’t know if I’m a big fan of Garth Turner.. if it’s anything like his blog! (Seems very biased and condescending). I haven’t read 4 hour work week, but I have heard very good things about it.



  73. Colleen on May 8, 2011 at 4:08 am

    As an avid reader with a passionate interest in the very topic of the book up for grabs, I’d certainly love to add it to my growing collection. I also think it’d be a great idea to pass it on to one of my own readers such as you have here, we could be starting a new trend… “pass it on books” 🙂



  74. young on May 9, 2011 at 8:22 pm

    @Colleen- Thanks Colleen! Yeah, I like that idea too! As long as they don’t become toooo dog earred 😉



Leave a Comment





> >