Weekend Edition Book Review: The Millionaire Next Door

A few years ago, I made my weekly trip into the local library and did a little bit of browsing in the Getting Rich section of the bookshelves (I’m a big fan of the good ol’ 332.024 part of the Dewey Decimal system).

I found an intriguing book called The Millionaire Next Door, The Surprising Secrets of America’s Wealthy, by two Ph.D researchers named Thomas Stanley and William Danko.

Now, regulars on the financial blog circuit will already know all about this book, but for me it was quite a surprise, and it provided a nice mixture of Advanced Mustachian Training as well as affirmation of principles I had suspected were right all along.

Now that a few years have passed and I have become Mr. Money Mustache, I re-read the book to see what benefits I could pass on to you, the readers.

You can soak up the overall message within the first paragraph:
“Twenty years ago we began studying how people became wealthy. Initially, we did it just as you might imagine, by surveying people in so-called upscale neighborhoods across the country. In time, we discovered something odd. Many people who live in expensive homes and drive luxury cars do not actually have much wealth. Then we discovered something even odder: Many people who have a great deal of wealth do not even live in upscale neighborhoods”.

The book goes on through 270 pages of interesting findings by these researchers who actually conducted thousands of surveys of real millionaires around the US. It took them years to do it. The overwhelming results of these surveys show that these people are not Velvet-Bathrobe wearing gentlemen smoking pipes in their West Palm Beach seaside compounds. They are not even Suburban Ultraconsumers with a 4500 square foot McMansion and two Lexus SUVs in the driveway.

95% of the millionaires of this country are, in fact, what you and I would call Senior Mustachians. They all got there by spending way less than they earn, working hard when they had the chance, and looking to all the outside world like they were actually somewhat low-income.

There’s actually one of these guys three doors down from me on my own street. One of those well-trimmed-grey-mustache-and-full-beard types with a bald head, silver glasses, and a big smile. He lives in a much smaller house than me, and we talk over the leaf-raking occasionally. This man does all his own home and car maintenance, and is often happily covered in mud and grease. It was only when we got to talking about the fact that we are both out often in our front yards on weekdays, that he revealed he “mostly lives off of the passive income from his 300-unit apartment building these days”. Mr Money Mustache shut his own mouth at this point, feeling like quite a silly beginner.

There are loads of amusing individual stories in the book, including one about two contrasting Doctor families each making $700k per year. One of them spends $30,000 on clothing alone and is completely broke, the other one merely spends a moderately luxurious amount on everything and is an ultramillionaire. And inspiring stories about firefighters and secretaries who became millionaires while sharing a $50,000 income.

My personal favorite statistic was the one that over 66% of people driving $70,000 luxury cars in this country are actually non-millionaires. Millionaires typically spend $29,000 or less on their cars, representing less than 2% of their net worth. If you’re not a millionaire yet, your spending should be the appropriate ratio lower, probably translating into a $5,000 car or less!

So when I bike down the street on my 3-year-old $299 commuter bike, wearing ripped jeans and a plaid construction shirt, and someone passes me in a brand new BMW 7-series, I actually get to feel pity for that person and their very-likely poor financial situation. That is true joy.

So if you want some backup tracks to go with Mr. Money Mustache’s own rhymes, you might consider checking this book out of the library. The main thing it will do is give you reassurance that I am not actually making this shit up. I’m following a very time-honored formula for making you rich here. The only difference is I’m trying to make things a little more concrete, telling you EXACTLY how you can cut your spending to a level that allows riches, using real numbers instead of sissy guidelines, and weeding out any hidden losses of your precious employees. That way it will happen automatically, and you can increase your odds dramatically above the default 3.5% chance a person has of becoming a millionaire.

Ready to go further next week? OK, see you then.

Welcome New Readers! Take a look around. Feeling Hardcore? Start at the first article and read your way through using the links at the bottom of each article. Casual Sampler? Browse the complete list of all posts since the beginning of time. Hope to see you around here more often. ~ Love, Mr. Money Mustache

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19 Responses to “Weekend Edition Book Review: The Millionaire Next Door”

  1. Mr. Frugal Toque May 15, 2011 at 7:17 pm #

    I tried growing a mustache once … well, actually, I just shaved the rest of my face to see how I’d look. I looked like a police officer from Northern Ontario, possibly the kind who rides a horse.

    And yet, while I’m not quite worth a mil, all of my car purchases combined wouldn’t add up to a single $70k luxury vehicle, so I guess I’m on the right track.

    Also, I saved about $45 by buying crackers and cheese in bulk. Did you know you can freeze cheese? Someone told me that. I certainly hope it’s true.

    • MMM May 15, 2011 at 9:35 pm #

      Yes! You have been guided correctly. I have successfully frozen and thawed cheese many times.

      In fact, having a 5-year-old who requires a small pizza baked fresh for him every day, I buy shredded mozzarella in 10 pound bags from Costco and freeze them.. then keep a cache of only 2 pounds or so of it in the fridge for on-the-fly pizzamaking.

  2. Happy clam May 25, 2011 at 8:12 am #

    What do my european eyes read here?
    Dudes, if you freeze cheese it dies. It’s a living thing. Thawed cheese looses it’s taste completely. That is, if it ever had a taste to begin with (not the biggest fan of square-shaped cheddar here)

    • MMM May 25, 2011 at 8:45 pm #

      What you talkin ’bout Sukka? I just ate a delicious pizza made from recently thawed shredded mozzarella today! And last month, I discovered a big brick of Cheddar I had carefully wrapped and frozen before going on a month-long roadtrip in January, and subsequently forgot about. I made wonderful nachos and quesadillas and vegetable/cheese platters with it with no complaints from the eaters.

      Maybe United States freezers work better than European ones? :-)

      Also, does Cheddar cheese taste better when it is in a shape other than a square? If so, tell me which shapes I should create for ultimate deliciousness.

      • Happy clam May 26, 2011 at 8:05 am #

        http://www.thekitchn.com/thekitchn/the-cheesemonger/can-you-should-you-do-you-freeze-cheese-on-freezing-cheese-the-cheesemonger-117893

        Like I thought – the processed squarey cheeses don’t have much taste to loose :). Everything that comes in the shape of a square can probably be frozen, thawed, re-frozen, and buried in the backyard for the time after the 3rd world war.

        Now if it comes in a round shape like these here:

        http://image1.trefle.com/images/gastronomie-vin/full/un-bon-plateau-de-fromage-pour-noa-l.15041691-73806672.jpg

        I can confidently say that it’s not a good idea to freeze that! Even using an American freezer.

        But then, we europeans also don’t use deodorant, so what do I know about aroma…

        • Steve May 26, 2011 at 9:33 am #

          There is a difference between frozen and non-frozen cheese, just like there is a difference between frozen and non-frozen vegetables. I eat frozen vegetables and fresh vegetables. I eat fresh and frozen cheese.

          However, I don’t freeze cheese blocks. I just store them in the fridge as I figure if it has aged 2 years, it can age a few more months in my fridge and be even better.

          I do freeze shredded cheese because it doesn’t last long once opened. I do freeze the fine cheeses you advise against freezing because a recipe that calls for Gorgonzola or Stilton doesn’t call for much, and it doesn’t last long in the fridge before it looks like a blue disgusting furball.

          So, I store it in the freezer. And even though you could probably taste a difference between it and fresh, by the time you add sliced steak, cream, and garlic, I seriously doubt that would still be the case.

          • Laurie March 1, 2013 at 7:14 am #

            You can wax the cheese, and then you don’t have to keep it in the fridge. Bulk wax is inexpensive and you can keep cheese indefinitely in a cool dark spot.

  3. Macs May 26, 2011 at 8:15 am #

    “Maybe United States freezers work better than European ones? :-)”

    Nah, the difference is in Europe we have CHEESE, not ‘processed dairy by-product’.

    “Also, does Cheddar cheese taste better when it is in a shape other than a square? If so, tell me which shapes I should create for ultimate deliciousness.”

    The shape is a by-product of the manufacturing process – square cheese usually made in vast vats from pasteurised, homogenised milk using standardised cultures, pumped full of E-numbers, rapidly matured by artificial means and made by poorly-motivated factory workers with no feel for the art of cheesemaking. Whereas GOOD cheese is hand-crafted in small batches from fresh milk, treated with unique location-specific cultures and lovingly matured in perfect conditions by skilled craftspeople.

    I’m afraid American ‘cheese’ is an international laughing stock ( a bit like English coffe is over there, I guess….). Insensitive, I know, but someone had to tell you guys :-)

    • Happy clam May 26, 2011 at 8:51 am #

      Hahaha, English Coffee :)!!
      But I am perplexed – Mr. Money Mustache claims to be Canadian, and Canadians have wonderful cheeses. In fact, we usually bring back cheese from Montreal (young ones that is, so that they can mature to taste before being consumed some weeks later, without having to freeze them :)). He needs to know the difference..
      And yes, you were more insensitive than I was.

    • Mr. Meager Mustache March 3, 2013 at 7:45 am #

      I never realized just how big the difference in taste is until a few weeks ago. My wife and I seek out different types of raw milk (non pasteurized) cheese to keep around the house for breakfasts, snacks, etc. When I was walking around Costco the other day around the frozen/fridge stuff, there was a 2lb brick of Colby Jack for 5 bucks. I bought it thinking we might be able to cut our cheese bill if this stuff was any good. It literally was like eating a mixture of plastic and rubber. We ended up giving the rest to my wife’s parents. We’re currently enjoying a nice 5 year aged gouda instead.

      As for shredded cheese, that stuff literally has wood pulp in it!

  4. Spork October 12, 2011 at 3:07 pm #

    Forget the cheesy replies and return back to topic. That book changed my life. I don’t remember when I read it… probably 10 years or so ago. It opened my eyes. I started seeing how the wife and I were really making a pretty insane amount of money… and spending 85% or more. We thought we were saving.

    It about that same time that we had a 40% cut in pay (wifey quit her job). That 40% pay cut was the biggest raise I ever had.

  5. BC February 13, 2012 at 5:30 pm #

    These arguments about freezing cheese remind me of ancient Chinese saying:

    “Person who says it cannot be done must not interrupt person already doing it.”

  6. hands2work September 4, 2012 at 11:28 am #

    Hi Mr. Moustache, I read that book years ago and was flabbergasted. I love that feeling of watching ridiculous SUV’s and luxury cars pass me in traffic and knowing that my car has been paid off for years and costs me little more than gas and oil.

    I just found you a week or so ago and am enjoying your blog from page one…yes I’m hardcore! I have to say that my favorite metaphor is when you refer to dollars as our employees…I really needed that.

    I have always been frugal, but now I’m in overdrive. I drive a ’96 Mazda Protege that I bought new in ’96 and which now has 211k miles. My previous car was an ’88 Mazda 323 that lasted 12 years and 237k miles without ever needing to replace ANYTHING but the oil and the tires and the brakes!! When it died, it really died! I buy almost all my clothes at thrift stores, but I work in a very professional office and my wardrobe is beautiful. No one would believe that I pay $3 for skirts and sweaters! I currently have a leather purse that I get compliments on all the time that I paid $7. I don’t wear make-up, I don’t drink coffee, I don’t get my nails done and the mall just holds no interest for me whatsoever. I did pre-paid college tuition for my son, who just started his freshman year at VCU. His entire 4 years only cost me $15k.

    I own a 1986 RV which I paid less for than some people pay for one vacation. In 7 years when my boyfriend’s youngest child graduates from high school we intend to hit the road for full time travel. We can’t wait.

    Thanks for this blog. You are inspiring me to work even harder at amassing more employees!

  7. PFgal December 27, 2012 at 3:03 pm #

    If you like this book, try reading The Automatic Millionaire by David Bach. The first example is perfect proof that this way of living really does work. I think that people try to overcomplicate saving, and these books are great reminders of how simple it can really be.

  8. Rob aka Captain and Mrs Slow March 29, 2013 at 2:51 pm #

    Another great book is Millionaire Teacher by Andrew Hallman (will probably have to buy it unlikely to be at your local library) he opens up with a great story about an executive’s wife who,could barely afford to pay to tutor her son inspite of making over half a mill a year.

    Second part is how,he buys cars, found a way to trade up to a “new” car every two years with out having to pay for it.

    I’ll give you a hint of how he does it, it has to do with depreciation.

    • Mr. Money Mustache March 29, 2013 at 10:19 pm #

      Yeah, I got the chance to exchange some emails with that guy earlier this year. Sounds like a good fellow.

      But changing cars every two years? What would be the benefit? I could see every 10 or 20 years perhaps, just for variety’s sake.. but two years.. man, that’s about how often I need to change the oil (every 7500 on my maintenance schedule).

  9. That Guy April 13, 2013 at 12:02 am #

    Two years later and I am the first to say this?

    (I’m a big fan of the good ol’ 332.024 part of the Dewey Decimal system)

    NERD!!!!!

    :)

  10. Carrie September 23, 2013 at 9:46 pm #

    The wealthy barber is another good book similar to the millionaire next door. I believe it was written by a Canadian.

  11. L'Ingenieure October 24, 2013 at 9:29 am #

    There is now a book called “Millionaire Women Next Door”. Is it worth the read? I’d be interested to read Mr. and Mrs. MM’s opinions on the book.

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