How to be Like the Millionaire Next Door

How do you become like the Millionaire Next Door?

The lavish lifestyle sells. We confuse social media influencers with millionaires, and while the pop up entrepreneurs of the world stand in front of their Lambos we are left asking… how does someone really become like the millionaire next door?

What does the millionaire next door even look like?

What would it take to be like the millionaire next door?

If you are a money nerd like myself, you probably have thought about being a millionaire. You are also probably equally as confused (as I am) as to what it takes to be a millionaire.

I always thought that in order to be like the millionaire next door I had to:

  1. Be lucky
  2. Be really talented
  3. Inherit it
  4. Invent something

However, I was excited to find out that to be a millionaire – this isn’t the case… it is the opposite.

The Millionaire Next Door

how to be like the millionaire next door

Sure, there are millionaires who inherited some money or those who are super talented. But for every spectacular athlete or star singer, there are tons of normal people like you and me who are millionaires… and you would never know it.  

Written by Dr. Thomas Stanley and Dr. WIlliam Danko, The Millionaire Next Door, used a longitudinal case study to chart out the common characteristics of American millionaires.

While the book is great – it is lengthy and full of spreadsheets (AKA it can be dry at times). So here is my 5-minute review of the 251-page book – giving you the key points you need to truly understand while detailing where happiness and wealth is ACTUALLY achieved.

Related: 9 Tips to Help You Think Like Rich People

A typical millionaire is not what you think.

Everywhere we turn consumerism hits us in the face and portrays a life of spending to be happy.

But do you ever wonder what characteristics make up the American millionaire? Is it cars, jewelry, and status?

Believe it or not, you might know someone who is a millionaire. No, not the person driving the leased luxury automobile, or even the person with the country club membership.

Often times, you may not even know it, but the everyday average joe next to you at the grocery store might be a millionaire.

Rich people stay rich living like they are broke; Broke people stay broke living like their rich.”

Characteristics of a Typical Millionaire.

average millionaire next door

Traditional family values, such as hard work, discipline, sacrifice and thrift separate millionaires from their counterparts. However, just because you work hard and you are disciplined doesn’t mean you will end up being a millionaire.

After completing the study, the authors of Millionaire Next door came up with this list that highlights the seven characteristics that make up a typical millionaire:

  1. They live well below their means
  2. They allocate time, energy, and money efficiently in order to build wealth
  3. They have budgets.
  4. They believe financial independence is more important than high social status
  5. Their parents did not provide economic support as adults
  6. Their adult children are economically self-sufficient
  7. They are proficient in targeting market opportunities
  8. They chose the right occupation

While the list speaks for itself, I think it is worth emphasizing a few of the above traits that most millionaires possess. And since I like to personally play the odds that are in my favor, I would recommend highly considering each of the following from Dr. Stanley and Dr. Danko.

1. Millionaires are Frugal Frugal Frugal!

Millionaires are frugal. Period, dot.

They don’t blow money on things and they assess needs and wants differently than most people. Is the new sectional at Costco a need or a want? A millionaire would say it is a want, therefore they wouldn’t buy it.

Get in the habit of delaying gratification and being frugal in order to be able to make money start to work for you as most millionaires do.

When spending money –

Always assess in future value, not in present value. For example, a $30,000 car won’t be worth $30,000 in 5 years. Focus on living well below your means.

2. How do Millionaires Spend Their Time, Energy, and Money?

How do you spend your time, energy and money?

Are you focused on earning or spending? Most millionaires focus on earning. In Entrepreneur's 9 Everyday Habits of the Average Millionaire article, the average millionaire focuses on multiple streams of income.

It makes sense – if you want to fill up a pool (bank account) would you rather have one hose (1 stream of income) or many hoses?

Millionaires typically don’t waste time or energy on things that won’t have a positive long term impact. Focusing on the daily news to be informed is great, but chances are it won’t make you rich.

Instead focus on earning (On a side note, you won't get rich filling out surveys, but you can make money while you're bored).

3. The Millionaire Next Door Drives a Normal Car!

millionaires drive cars they can afford

What are you whipping around in?

Chances are you might have a nicer car than the average millionaire next door.

The common perception of “rich” people would tell you they drive fancy luxury automobiles. However, this is far from the truth. In fact, 8 in 10 millionaires by used and their favorite payment method is cash.  

New vehicles depreciate at a rate of 20% per year on average. A brand new car at $40,000 will be worth $32,000 within 12 months! Simply put, most millionaires look long term and don’t think about short term thrills like new automobiles.

Imagine your $200,000 house being worth $180,00 a day later and only $160,000 a year later!

Remember, the millionaire next door focuses on financial independence, not high social status.

Related: Read what this millionaire had to say about cars.

4. Millionaires Don’t Provide Economic Outpatient Care

Ok.. what the heck does that even mean?

I found this interesting just because so many millennials are still living off their parents. In fact, 1 in 4 millennials with full-time jobs has mom and dad pay for a bill.

Economic Outpatient Care – refers to the substantial economic gifts and acts of kindness some parents give to their adult children.

“The more dollars an adult child receives, the fewer they accumulate.”

Don’t weaken the weak. Now I am not referring to the survival of the fittest, but millennials who still have a bill or two covered by mom and dad… you are not on the up and up to become a millionaire.

If mom and dad still support your lifestyle ultimately you are enabled. Chances are you are less inclined to take full ownership of your finances because you have a mental fall back.  

5. Millionaires Are Aware of Social Media Filters

This is a bonus section that I personally added.

The wisdom from Millionaire Next Door still holds true, however, there is one caveat – social media.

Social media lets us filter our lives, exposing what we want others to see and hiding what we don’t (We all have that one Facebook friend that puts everything online).

Whether showing off new vehicles, trips around the country, or even those creative wedding proposals, social media is a life filter.

The glamorous life portrayed on the internet and television is anything but accurate when it comes to true wealth. Social media challenges our ability to stay steady when trying to delay gratification and stop keeping up with the Joneses.

If you are constantly comparing yourself you will have more of a challenge moving forward financially.

Millionaires think logically.

Here is my personal take away from reading Millionaire Next Door:

Millionaires just keep it simple and think logically.

We live in a world where common sense is not so common anymore. As humans, we are exceptionally good at tricking ourselves into thinking our way of thinking IS THE RIGHT WAY.

One would naturally think, if you knew it all, you would have it all. But being a millionaire isn’t really complicated. In fact, you should be pumped that the game plan to millionaire status is simple.

But it takes work.

~Josh

Q: What “Millionaire Next Door” habit would you add? Comment below.