At or near the top of my list of financial books I recommend is “The Millionaire Next Door” by Thomas J. Stanley, Ph.D. and William D. Danko Ph.D. There are a a lot of financial books out there. Many of them are just fluff or not great advice. This is not one of those. This is a classic. Why is it a classic? Because it gives you the secret to becoming wealthy. It is not their opinion, it is results of many people they followed. In order to become a millionaire, you can’t just make a lot of money. You have to have a certain mindset, a certain way you deal with money. In order to find out all of their findings you need to read this book. However in this review of the Millionaire next door, I hope to help you understand a little about what the book teaches us, and get you itching to read it. If you have already read it, read it again. It is that important.

Review: The Millionaire Next Door

I think quoting the first paragraph of the Introduction verbatim will be a good introduction to my review. It will help you know what the book is about and definitely pique your interest.

“Twenty 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 upscaled neighborhoods…

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 become wealthy…

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.”

This is so true. When I first read it my mind was kind of blown. But it makes sense. Just because you are a dentist or a doctor doesn’t mean you will become wealthy. Far too many of us believe a mansion, luxury car, or a boat means we are wealthy. It doesn’t. It means we spend a lot of money. We do have an advantage over most in the fact that we earn more than the average person. But if we don’t save a lot of it, and invest it wisely, we will have no more, or even less wealth than those who make less money than we do. So how do we make sure we become wealthy? Continue reading this review and then read this book.


In the introduction they give us the seven factors about those that become wealthy. These 7 factors alone are worth the price of the book.

  • The wealthy live will 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 displaying high social status
  • Their parents did not provide economic outpatient care (I will explain more later)
  • Their adult children are economically self-sufficient
  • They are proficient in targeting market opportunities
  • They chose the right occupation

I feel like many of us know these. It’s not our fault if our parents didn’t implement or do these things with us. But do we implement them with our children? I’m not so sure. Giving our kids too many things isn’t doing them any favors.

PAWs versus UAWs

Throughout the book the authors compare how PAWs and UAWs differ with their outlook on money, as well as the way they handle their money. The goal is to be a PAW.

PAW stands for “Prodigious accumulator of wealth”, and UAW stands for “Under accumulator of wealth”. To be an average accumulator of wealth, or to have the amount of wealth you should at your age with your income, the authors tell us to multiply our age by our realized pretax annual household income and dived by 10. This is what your wealth should be (You cannot include inheritances in this). If you are in the bottom quartile then you are a UAW, and if you are in the top quartile, you are a PAW. To be a PAW you really should have a net worth twice that of your expected net worth according to the above calculation.

If you are not naturally a PAW, it may be hard to become one. But it’s possible. Starting by reading this book will help.

Frugal Frugal Frugal

One of the main things they found is that those who build wealth and become millionaires are frugal. I have heard of way too many athletes and celebrities that have earned millions but are now bankrupt. They never learned the 7 factors as described above and never learned how to be frugal. Income never was, and never will be wealth.

Their studies showed that most millionaires, even those with over a $10 million net worth are frugal. They eat at normal restaurants, and shop at places like TJ Maxx or maybe Dillards. They drink beer or maybe scotch instead of expensive wines. It is uncomfortable for them to be in fancy hotels or any type of posh place. They buy suits off the rack as opposed to custom made. PAWs tend to buy a Ford, Chevy, Honda, or Toyota to drive. This is not what the TV tells us. But it is true.

UAWs don’t equate being wealthy as actually accumulating wealth. They view it as accumulating nice things or luxury items. They budget for their expensive car payment before they do for their 401k. Being wealthy in their mind means a nice house in an upscale neighborhood. They have a mindset of “One earns to spend. When you need to spend more, you need to earn more.”

Typical millionaires have an income less than 7% of their accumulated wealth. Think about that. You have to save a lot of money to truly become wealthy. Those who are wealthy are those who save a lot of money, not those who spend a lot of money. They interviewed high income workers who didn’t even participate in their companies pension plan or 401k match. These individuals said they would get to it one day when they can afford it. They couldn’t afford it then because of their payments for cars, mortgage, country club etc.

Dr. North versus Dr. South

The authors go through a case study of two different doctors they call Dr. North and Dr. South. Doctors are an interesting group to study because they are typically high income earners, and also UAWs. I am not sure why that is. Doctors tend to be lousy at saving, managing, and investing money. I know of far too many dentists that are still working past age 65 not by choice.

Some of their findings were that Dr. North has a well thought out and adhered to annual budget where as Dr. South doesn’t. In fact the authors found that “PAWs allocate nearly twice the number of hours per month to planning their financial investments as UAW’s do”. And also that “There is an inverse relationship between the time spent purchasing luxury items such as cars and clothes and the time spent planning one’s financial future”. For example, Dr. South spends much more time shopping for his newest car than Dr. North does. Dr. South thinks he is doing this to save money. But to find a “deal” for $80,000 on an $85,000 car is not really saving money. Especially when you can by a good car for $20,000 or even less.

A PAW like doctor North believes that “…Financial independence is more important that displaying high social status.”

Economic Outpatient Care

In the beginning I outlined the 7 factors the authors found about those who accumulate wealth. One of them was that the parents of those who became millionaires didn’t provide economic outpatient care. Now it is too late for us to change our childhoods. But perhaps it isn’t too late for what we teach our kids about money. Providing economic outpatient care for our kids will not help them in the long run. It just won’t.

Economic outpatient care is different than just spoiling your children. Spoiling children is also not a good thing for them, but providing for your dependent kids is also a must. However, Economic Outpatient Care (EOC) is more than that. It is providing for adult children. The authors outline how rampant EOC is in America, and how these adult children usually never learn to earn and accumulate wealth on their own. Sometimes parents think they are just helping their child get a good start in adulthood, when it is really hindering them.

Money that is received by adult children as gifts is more likely to be spent on consumption items than be saved or used to help them create ways to make their own money. In fact, those adult children who recieve EOC feel that their parent’s wealth is also theirs.

The authors found that most of the millionaires they interviewed were not provided with economic outpatient care. They were self driven to succeed and become wealthy on their own. However some of them want to provide more than what they were given by their parents. The problem is, that is exactly the reason they were successful. The authors found in their research that “In general, the more dollars adult children receive, the fewer they accumulate, while those who are given fewer dollars accumulate more.” The proof is in the pudding. Helping your adult children too much financially hinders rather than helps them.

More parenting tips

I don’t believe the authors are trying to tell us how to raise our children. But they are presenting information that shows us how we can help our children stand on their own two feet financially. I learned a lot from this book about how to raise my children, at least as far as money goes. When I started reading this book I had no idea I would learn things about raising my kids. But I did. And there are great things. Below are some rules that affluent parents did to raise productive children:

  • Never tell children that their parents are wealthy
  • No matter how wealthy you are, teach your children discipline and frugality
  • Assure that your children won’t realize you’re affluent until after they have established mature, disciplined, and adult lifestyle and profession
  • Minimize discussions of the items that each child and grandchild will inherit or receive as gifts
  • Never give cash or other significant gifts to your adult children as part of a negotiation strategy
  • Stay out of your adult children’s family matters
  • Don’t try to compete with your children
  • Always remember that your children are individuals
  • Emphasize your children’s achievements, no matter how small, not their or your symbols of success
  • Tell your children that there are a lot of things more valuable than money


I honestly don’t have many. This book really isn’t about their opinions anyway. It’s pretty hard to criticize results they found from people they followed. However there is one message I don’t necessarily agree with. They said they hadn’t met a single millionaire who had more than 20% of their wealth in the stock market. I feel like this gives off the vibe that investing in the stock market is not smart. I disagree with that. There are many people who get wealthy with real estate and other business ventures for sure. But working hard at your high income job and saving a huge chunk of it in low cost index funds is a great way to become a millionaire and wealthy. Many of the people who have inspired me along my financial journey are multi-millionaires with 60-80% of their wealth in low cost, stock and bond index mutual funds.

However, this book is worth being at or near the top of your list to read. This is one I would keep in your library and pick it up every year to remind yourself the way to truly build wealth.


There is so much more great information in this book than I could ever summarize here. I already feel like the review is going a little long. But there is so much great information that I wanted to discuss. In summary, this book isn’t a book of someone’s opinion on how to become wealthy. It is the result of years and years of research on real people who have become wealthy, and those that have earned a lot but haven’t accumulated wealth.

As dentists and doctors, we will earn enough money to accumulate wealth, but that doesn’t mean we will. I encourage you to read this book, and if you already have, read it again. If you do read it, and learn from those PAWs in this book, you too will accumulate the wealth you desire and be able to become financially independent and live your life on your terms.

Buy “The Millionaire Next Door” today!

-Debt Free DDS

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