The Millionaire Next Door

Stanley and Danko surveyed and interviewed American households with net worth above one million dollars and report what they found, which contradicts the popular picture of wealth. Their central finding is that most millionaires accumulated wealth through consistent saving and modest consumption over decades rather than through high income, inheritance or investment skill.

The specific findings include that most live in modest houses in ordinary neighbourhoods rather than in affluent ones; that they buy used cars and hold them for years; that a substantial majority are self-employed or own small businesses, frequently in unglamorous industries; that they spend far less than their incomes permit and track their spending in detail; and that the households with high incomes and high consumption, which they call under accumulators of wealth, have low net worth despite appearances.

Their expected net worth formula, age multiplied by pre-tax income divided by ten, provides a benchmark for whether a household is accumulating at an appropriate rate. They also cover what they call economic outpatient care, meaning financial support given to adult children, which they report reduces those children's own accumulation and productivity, and the differences in how sons and daughters were treated.

The research is survey-based with self-selected respondents and the sample is skewed toward first-generation wealth. The million dollar threshold was worth substantially more when the book was published in 1996. The findings describe accumulation among business owners of a particular generation and transfer imperfectly to salaried professionals now facing different housing and education costs. The core observation, that consumption rather than income determines accumulation, holds.