The Millionaire Next Door by Thomas J. Stanley and William D. Danko is an analysis of millionaires in America. The study detailed the inner workings of their lives and consumption habits and compared them against other millionaires. The book entails how anyone of almost any income can amass considerable wealth if they spend and save correctly. 

The American lie has remained prevalent for centuries: you’re wealthy if you spend large amounts on a lavish lifestyle, drive foreign cars, and eat at the best restaurants. The American Government loves this lie as it generates millions in tax dollars annually. The book emphasises the importance of investing your dollars instead of spending them – “seeds are like dollars, you can eat the seeds or sow them. But when you see what the seeds grew into… ten-foot-high corn… you don’t want to waste them.” Sadly, many societies are consumption-oriented, which is to the government’s benefit as they receive high levels of taxation. Consumption-oriented societies make it far easier to earn a lot than it is to accumulate wealth. 

The authors further emphasise frugality and state that “your high domestic overhead requires full commitment of all your income. You will never become financially independent without purchasing investments that appreciate without income realisation”. Purchasing non-realised assets, such as stocks or bonds, is presented as a favourable purchase for millionaires (by wealth) and reveals that fewer than 7% of millionaires are active monthly investors. Millionaires want their wealth to accumulate, and most don’t trade monthly to avoid realising their income and getting taxed on it. In fact, 32% of millionaires hold their investments for more than six years. 

The consumption habits of millionaires are also explored greatly; millionaires tend to buy used cars, not lease them. Being frugal gives them a dollar base to invest, further increasing their wealth. Most millionaires (by wealth) focus their money on investments and choose to be frugal with their consumption, for example, most millionaires (by wealth) don’t pay large amounts for watches, suits, cars, and shoes – they keep spending on conspicuous consumption to a low.  Those millionaires who aren’t frugal tend to have inherited their wealth or are descended from parents who lived high-consumption lifestyles at a high social level. Under accumulators of wealth often live lives more fearfully than those who accumulate more wealth. For example, taxes are of greater concern to an under-accumulator of wealth as they need to maximise their realised income to maintain their hyper-consumption habits – this leaves them more concerned with increases in government spending. This is because the fiscal deficit would need to be resolved through higher taxes, which would drastically impact their spending that they have become accustomed to. Moreover, higher inflation rates attack under-accumulators of wealth as it reduces their purchasing power. 

On the other hand, prodigious accumulators of wealth benefit from inflation as the value of their investment portfolio increases and rewards them with greater wealth. Under-accumulators of wealth are often dissatisfied with their work; they feel forced to work to support their conspicuous consumption habits, whereas prodigious wealth accumulators are more secure with their spending. Prodigious wealth accumulators allocate disproportionately more time to investment planning than under-accumulators of wealth. The amount of time spent on investment planning positively correlates to the amount of wealth accumulated by an individual; hence, prodigious accumulators spend more time planning their investments. 

Financial handouts, presents, and support from wealthy parents often don’t translate into wealthy, financially independent offspring. Many children become dependent on these gifts as they allocate them as part of their annual spending. These handouts deter the children’s long-term financial success, as many feel the need to try to reach and maintain the same standard of living that they had growing up, despite it being out of their reach and requiring various loans and debt to try to get there. 80% of the millionaires surveyed were first-generation millionaires, and they didn’t feel disadvantaged by not receiving large amounts of wealth. Prodigious accumulators of wealth focus on budgeting and planning for their financial future, many of whom will be able to tell you the exact amount that their household spent last year and how much they are projected to spend in the future. 

To conclude, living below your means, earning a decent salary, and investing in non-realised assets can increase anyone’s wealth significantly and increase their financial independence massively. It can also reduce financial fear about ever retiring and help them support their families too.