Hello,Please see the attached file and answer the(What 1 fact about true millionaires surprised you the most?)For this assignment I would like you to skim through the Introduction and Chapter 1 of the book and then answer the following question.Thnaks,
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J . M”t;EL~~Y, P h . D
~tlI.:i.~III. D. D~II.k. ., P h . D .
LONGSTREET PRESS, INC.
A subsidiary of Cox Newspapers,
A subsidiary of Cox Enterprises, Inc.
2140 Newmarket Parkway
Marietta, GA 30067
Copyright © 1996 by Thomas J. Stanley and William D. Danko
All rights reserved. No part of this book may be reproduced in any form or by any means,
electronic or mechanical, including photocopying, recording or by any information storage
and retrieval system, without the prior written permission of the Publisher.
Printed in the United States of America
4th printing, 1997
Library of Congress Catalog Card Number: 96-76497
Electronic Film output and separation by Overflow Graphics Inc., Forest Park, GA
Book design by Jill Dible
For Janet, Sarah, and Brad-a million Christmases,
a trillion Fourth ofJulys
– T. J. Stanley
For my loving wife, Connie, and my dear children,
Christy, Todd, and David
-we D. Danko
1: Meet the Millionaire Next Door
2: Frugal Frugal Frugal
3: Time, Energy, and Money
4: You Aren’t What You Drive
5: Economic Outpatient Care
6: Affirmative Action, Family Style
7: Find Your Niche
8: Jobs: Millionaires versus Heirs
1-1: The Top Ten Ancestry Groups of American Millionaires, p. 17
1-2: The Top Fifteen Economically Productive Small Population Ancestry Groups, p. 22
2-1: Prices Paid by Millionaires for Clothing and Accessories, p. 32
2-2: Credit Cards of Millionaire Household Members, p. 44
2-3: Contrasts among American Taxpayers, p. 57
3-1: Concerns, Fears, and Worries: Dr. North vs. Dr. South, p. 73
3-2: Consumption Habits: The Norths vs. the Souths, p. 79
3-3: Income and Wealth Contrasts: The Norths vs. the Souths, p. 92
3-4: Concerns, Fears, and Worries: PAWs vs. UAWs, p. 95
3-5: Investment Planning and Demographic Contrasts: Middle-Income PAWs vs. UAWs, p. 97
3-6: Hours Allocated: Dr. North vs. Dr. South, p. 102
4-1: Motor Vehicles of Millionaires: Model-Year, p. 113
4-2: Motor Vehicles of Millionaires: Purchase Price, p. 114
4-3: Motor Vehicle Acquisition Orientations of Millionaires, p. 119
4-4: Economic Lifestyles of Motor Vehicle Acquisition Types, p. 128
5-1: Economic Outpatient Care Given by Affluent Parents, p. 145
5-2: Receivers vs. Nonreceivers of Cash Gifts, p. 151
6-1: The Likelihood of Receiving a Substantial Inheritance: Occupational Contrasts, p. 177
6-2: The Likelihood of Receiving Substantial Financial Gifts: Occupational Contrasts, p. 177
6-3: Mean Annual Earnings: Men vs. Women, p. 181
6-4: Corporate Executive-Gifts and Inheritance, p. 188
6-5: Entrepreneur-Gifts and Inheritance, p. 197
6-6: Physicians-Gifts and Inheritance, p. 198
7-1: Estimated Allocations of Estates Valued at $1 Million or More, p. 213
7-2: Estimated Fees for Estate Services, p. 213
7-3: Predicted Number and Value of Estates of $1 Million or More, p. 217
7-4: Predicted Number of Estates Valued at $1 Million or More Rank Ordered by
Number of Estates by State for the Year 2000, p. 218
7-5: Estimated Number of Millionaire Households in the Year 2005, p. 225
8-1: Rankings of Selected Categories of Sole Proprietorships, p. 231
8-2: The Top Ten Most Profitable Sole-Proprietorship Businesses, p. 236
8-3: Selected Businesses/Occupations of Self-Employed Millionaires, p. 239
This publication is designed to provide accurate and authoritative
information in regard to the subject matter covered. It is sold with the
understanding that neither the author nor the publisher is engaged in
rendering legal, investment, accounting, or other professional services.
If legal advice or other expert assistance is required, the services of a
competent professional person should be sought.
All the names in the case studies contained in this book are pseudonyms.
.” J – –
wenty years ago we began studying how people become 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.
That small insight changed our lives. It led one of us, Tom Stanley,
out of an academic career, inspired him to write three books on marketing to the affluent in America, and made him an advisor to corporations that provide products and services to the affluent. In addition,
he conducted research about the affluent for seven of the top ten financial service corporations in America. Between us, we have conducted
hundreds of seminars on the topic of targeting the wealthy.
Why are so many people interested in what we have to say? Because
we have discovered who the wealthy really are and who they are not.
And, most important, we have determined how ordinary people can
What is so profound about these discoveries? Just this: Most people
have it all wrong about wealth in America. Wealth is not the same as
income. If you make a good income each year and spend it all, you are
not getting wealthier. You are just living high. Wealth is what you accumulate, not what you spend.
How do you become wealthy? Here, too, most people have it
wrong. 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 come I am not wealthy?
Many people ask this question of themselves all the time. Often they
are hard-working, well-educated, high-income people. Why, then, are
so few affluent?
There has never been more personal wealth in America than there is
today (over $22 trillion in 1996). Yet most Americans are not wealthy.
Nearly one-half of our wealth is owned by 3.5 percent of our households. Most of the other households don’t even come close. By “other
households,” we are not referring to economic dropouts. Most of these
millions of households are composed of people who earn moderate,
even high, incomes. More than twenty-five million households in the
United States have annual incomes in excess of $50,000; more than
seven million have annual incomes over $100,000. But in spite of being
“good income” earners, too many of these people have small levels of
accumulated wealth. Many live from paycheck to paycheck. These are
the people who will benefit most from this book.
The median (typical) household in America has a net worth of less
than $15,000, excluding home equity. Factor out equity in motor vehicles, furniture, and such, and guess what? More often than not the
household has zero financial assets, such as stocks and bonds. How
long could the average American household survive economically without a monthly check from an employer? Perhaps a month or two in
most cases. Even those in the top quintile are not really wealthy. Their
median household net worth is less than $150,000. Excluding home
equity, the median net worth for this group falls to less than $60,000.
And what about our senior citizens? Without Social Security benefits,
almost one-half of Americans over sixty-five would live in poverty.
Only a minority of Americans have even the most conventional
types of financial assets. Only about 15 percent of American households have a money market deposit account; 22 percent, a certificate
of deposit; 4.2 percent, a money market fund; 3.4 percent, corporate
or municipal bonds; fewer than 25 percent, stocks and mutual funds;
8.4 percent, rental property; 18.1 percent, U.S. Savings Bonds; and 23
percent, IRA or KEOGH accounts.
But 65 percent of the households have equity in their own home,
and more than 85 percent own one or more motor vehicles. Cars tend
to depreciate rapidly. Financial assets tend to appreciate.
The millionaires we discuss in this book are financially independent.
They could maintain their current lifestyle for years and years without
earning even one month’s pay. The large majority of these millionaires
are not the descendants of the Rockefellers or Vanderbilts. More than
80 percent are ordinary people who have accumulated their wealth in
one generation. They did it slowly, steadily, without signing a multimillion-dollar contract with the Yankees, without winning the lottery, without becoming the next Mick Jagger. Windfalls make great headlines, but
such occurrences are rare. In the course of an adult’s lifetime, the probability of becoming wealthy via such paths is lower than one in four thousand. Contrast these odds with the proportion of American households
(3.5 per one hundred) in the $1 million and over net worth category.
THE SEVEN FACTORS
Who becomes wealthy? Usually the wealthy individual is a businessman who has lived in the same town for all of his adult life. This person owns a small factory, a chain of stores, or a service company. He
has married once and remains married. He lives next door to people
with a fraction of his wealth. He is a compulsive saver and investor.
And he has made his money on his own. Eighty percent of America’s
millionaires are first-generation rich.
Affluent people typically follow a lifestyle conducive to accumulating money. In the course of our investigations, we discovered seven
common denominators among those who successfully build wealth.
1. They live well below their means.
2. They allocate their time, energy, and money efficiently, in
ways conducive to building wealth.
3. They believe that financial independence is more important
than displaying high social status.
4. Their parents did not provide economic outpatient care.
5. Their adult children are economically self-sufficient.
6. They are proficient in targeting market opportunities.
7. They chose the right occupation.
In The Millionaire Next Door, you will study these seven characteristics of the wealthy. We hope you will learn how to develop them in
The research for The Millionaire Next Door is the most comprehensive
ever conducted on who the wealthy are in America-and how they got
that way. Much of this research was developed from the most recent
survey we conducted that, in turn, was developed from studies we had
conducted over the previous twenty years. These studies included personal and focus group interviews with more than five hundred millionaires and surveys of more than eleven thousand high-net worth
and/or high-income respondents.
More than one thousand people responded to our latest survey,)1which was conducted from May 1995 through January 1996. It asked
each respondent about his or her attitudes and behaviors regarding a
wide variety of wealth-related issues. Each participant in our study
answered 249 questions. These questions addressed topics ranging
from household budget planning or lack of it to financial fears and
worries, and from methods of bargaining when purchasing automobiles to the categories of financial gifts, or “acts of kindness,” wealthy
people give to their adult children. Several sections of the questionnaire
asked respondents to indicate the most they ever spent for motor vehi*For details on how we targeted respondents for our survey, see Appendix 1.
cles, wristwatches, suits, shoes, vacations, and the like. This study was
the most ambitious and thorough we have ever undertaken. No other
study has focused on the key factors that explain how people become
wealthy in one generation. Nor has a study revealed why many people,
even most of those with high incomes, never accumulate even a modest amount of wealth.
In addition to our survey, we gained considerable insight into the
millionaire next door from other research. We spent hundreds of hours
conducting and analyzing in-depth interviews with self-made millionaires. We also interviewed many of their advisors, such as CPAs and
other professional experts. These experts were very helpful in our
exploration of the issues underlying the accumulation of wealth.
What have we discovered in all of our research? Mainly, that building wealth takes discipline, sacrifice, and hard work. Do you really
want to become financially independent? Are you and your family willing to reorient your lifestyle to achieve this goal? Many will likely conclude they are not. If you are willing to make the necessary trade-offs
of your time, energy, and consumption habits, however, you can begin
building wealth and achieving financial independence. The Millionaire
Next Door will start you on this journey.
MEET THE MILLIONAIRE NEXT DOOR
These people cannot be millionaires! They don’t look like
millionaires, they don’t dress like millionaires, they don’t eat
like millionaires, they don’t act like millionaires-they don’t
even have millionaire names. Where are the millionaires who
look like millionaires?
he person who said this was a vice president of a trust department.
He made these comments following a focus group interview and
dinner that we hosted for ten first-generation millionaires. His view
of millionaires is shared by most people who are not wealthy. They
think millionaires own expensive clothes, watches, and other status
artifacts. We have found this is not the case.
As a matter of fact, our trust officer friend spends significantly more
for his suits than the typical American millionaire. He also wears a
$5,000 watch. We know from our surveys that the majority of millionaires never spent even one-tenth of $5,000 for a watch. Our friend also
drives a current-model imported luxury car. Most millionaires are not
driving this year’s model. Only a minority drive a foreign motor vehicle.
An even smaller minority drive foreign luxury cars. Our trust officer leases,
while only a minority of millionaires ever lease their motor vehicles.
But ask the typical American adult this question: Who looks more
like a millionaire? Would it be our friend, the trust officer, or one of
the people who participated in our interview? We would wager that
most people by a wide margin would pick the trust officer. But looks
can be deceiving.
THE MILLIONAIRE NEXT DOOR
This concept is perhaps best expressed by those wise and wealthy
Texans who refer to our trust officer’s type as
Big Hat No Cattle
We first heard this expression from a thirty-five-year-old Texan. He
owned a very successful business that rebuilt large diesel engines. But
he drove a ten-year-old car and wore jeans and a buckskin shirt. He
lived in a modest house in a lower-middle-class area. His neighbors
were postal clerks, firemen, and mechanics.
After he substantiated his financial success with actual numbers, this
Texan told us:
[My] business does not look pretty. I don~t play the part . ..
don~t act it. … When my British partners first met me, they
thought I was one of our truck drivers. … They looked all
over my office, looked at everyone but me. Then the senior
guy of the group said, “Dh, we forgot we were in Texas!” I
don’t own big hats, but I have a lot of cattle.
PORTRAIT OF A MILLIONAIRE
Who is the prototypical American millionaire? What would he tell you
about himself?)l? I am a fifty-seven-year-old male, married with three children. About
70 percent of us earn 80 percent or more of our household’s income.
? About one in five of us is retired. About two-thirds of us who are
working are self-employed. Interestingly, self-employed people make
up less than 20 percent of the workers in America but account for twothirds of the millionaires. Also, three out of four of us who are selfemployed consider ourselves to be entrepreneurs. Most of the others
* Our profile of the typical millionaire is based on studies of millionaire households, not individuals. It is, therefore, impossible in most cases to
say with certainty whether our typical millionaire is ahe or ashe. Nevertheless, because 95 percent of millionaire households are composed of
married couples, and because in 70 percent of these cases the male head of the household contributes at least 80 percent of the income, we
will usually refer to the typical American millionaire as “he” in this book.
MEET THE MILLIONAIRE NEXT DOOR
are self-employed professionals, such as doctors and accountants.
? Many of the types of businesses we are in could be classified as dullnormal. We are welding contractors, auctioneers, rice farmers, owners
of mobile-home parks, pest controllers, coin and stamp dealers, and
? About half of our wives do not work outside the home. The numberone occupation for those wives who do work is teacher.
? Our household’s total annual realized (taxable) income is $131,000
(median, or 50th percentile), while our average income is $247,000.
Note that those of us who have incomes in the $500,000 to $999,999
category (8 percent) and the $1 million or more category (5 percent)
skew the average upward.
? We have an average household net worth of $3.7 million. Of course,
some of our cohorts have accumulated much more. Nearly 6 percent
have a net worth of over $10 million. Again, these people skew our
average upward. The typical (median, or 50th percentile) millionaire
household has a net worth of $1.6 million.
? On average, our total annual realized income is less than 7 percent
of our wealth. In other words, we live on less than 7 percent of our
? Most of us (97 percent) are homeowners. We live in homes currently
valued at an average of $320,000. About half of us have occupied the
same home for more than twenty years. Thus, we have enjoyed significant increases in the value of our homes.
? Most of us have never felt at a disadvantage because we did not
receive any inheritance. About 80 percent of us are first-generation
? We live well below our means. We wear inexpensive suits and drive
American-made cars. Only a minority of us drive the current-modelyear automobile. Only a minority ever lease our motor vehicles.
THE MILLIONAIRE NEXT DOOR
? Most of our wives are planners and meticulous budgeters. In fact,
only 18 percent of us disagreed with the statement “Charity begins at
home.” Most of us will tell you that our wives are a lot more conservative with money than we are.
? We have a “go-to-hell fund.” In other words, we have accumulated
enough wealth to live without working for ten or more years. Thus,
those of us with a net worth of $1.6 million could live comfortably for
more than twelve years. Actually, we could live longer than that, since
we save at least 15 percent of our earned income.
? We have more than six and one-half times the level of wealth of
our nonmillionaire neighbors, but, in our neighborhood, these nonmillionaires outnumber us better than three to one. Could it be that
they have chosen to trade wealth for acquiring high-status material
? Asa group, we are fairly well educated. Only about one in five are
not college graduates. Many of us hold advanced degrees. Eighteen
percent have master’s degrees, 8 percent law degrees, 6 percent medical degrees, and 6 percent Ph.D.s.
? Only 17 percent of us or our spouses ever attended a private elementary or private high school. But 55 percent of our children are currently attending or have attended private schools.
? As a group, we believe that education is extremely important for ourselves, our children, and our grandchildren. We spend heavily for the
educations of our offspring.
? About two-thirds of us work between forty-five and fifty-five hours
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