The Millionaire Next Door – Thomas J. Stanley and William D. Danko

Market Meditations | February 4, 2021

The cryptocurrency market has created serious wealth for many people. 

Particularly now that we are seeing an increase in the power of individual traders and investors (post-GameStop). What’s more, the reddit community, in a group named ? SatoshiStreetBets has turned its attention to crypto.

In the age of the internet, the crypto millionaire almost seems to live next door. Afterall, we see their Twitter posts nonstop. Sometimes even in the form of cartoons…

So how can you become the next crypto millionaire? Let’s find out today by summarising Thomas J. Stanley and William D. Danko’s book ? The Millionaire Next Door.

Instead of teaching how to become wealthy, the book profiles several people who have already become millionaires.

? Whilst the book was originally published in 1996, a lot of the themes it identifies are timeless and still relevant today. As we saw when we summarised the ? key takeaways from Jesse Livermore.

The 8 Characteristics Of A Millionaire 

Contrary to popular belief, millionaires are not typically created through luck or inherited wealth (the so-called ‘silver spoon’).

It is more a result of hard work, planning, deliberate lifestyle choices and self discipline. 

If we could interview the millionaire population, this is probably what they would reveal to us:

1️⃣ Living below your financial means ?

If you are picturing Jordan Belfort in Wolf of Wall Street throwing lobsters out of a yacht, think again. Most millionaires live below their means. About 50% have lived in the same house for more than 20 years. As we discover in the next sections, they consider the opportunity cost of expensive purchases in assets that depreciate in value.

2️⃣ More time spent on financial planning and investing ⏰

Compared to the average person, they spend twice the amount of time on financial planning and investing. We explored a similar theme in our ? 10x article.

3️⃣ Financial freedom is more important than displaying high social status ?

Millionaires are usually driven by trying to be the best in a certain field and to obtain financial freedom from this. They are less often driven by ‘clout’ and attempting to flex their social status.

4️⃣ Never receive cash gifts from parents ?

Large financial aid from parents typically does not work to the advantage of the person receiving it. It distracts from them learning to obtain their own financial freedom and creates a false notion that it is easy to obtain wealth. People who sit around waiting for the next financial injection from their parents are far less productive. Gift receivers have in 80% of instances a lower net worth than their peers. The single most common gift that millionaires receive from their parents is tuition. As well as an environment where independent thinking is rewarded.

5️⃣ Self employed ?

About ⅔ are their own bosses and 75% consider themselves entrepreneurs.

6️⃣ Keeping a substantial piggy bank ?

They keep a fund that allows them to keep their lifestyle for 10 or more years, without bringing in additional income.

7️⃣ Investors ?

Millionaires invest a lot. The popular concept of letting your money work as hard as you do (by earning interest or capital through investments). On average, about 20% of their realised income per year is invested and they make their own investment decisions.

8️⃣ Investing in the long run ?

Over 90% hold their investment for more than a year with a longer term view.

You might wonder why a millionaire would need a budget. 

The answer is, they maintain the same behaviours that got them to being a millionaire in the first place.

✅ They spend less money on consumables and possessions that will depreciate in value. They consider the true cost of consumption in all they do ?.

The True Cost of Consumption 

To build on the above section, millionaires may consider cost in a slightly different way to the average person. 

? They consider the opportunity cost of a purchase. A popular concept in traditional economics.

Opportunity cost can be defined as the loss of potential gain from other alternatives when one particular alternative is chosen over the others. Easier in an example.

Opportunity cost (Financial)

The new iphone pro 12 looks pretty cool ? Other than the fact that it sits at a staggering $999…

When you take the decision to buy this fancy new piece of kit, you are simultaneously forfeiting the decision to invest that money in, say, a crypto fund. 

For the purpose of this example, let’s imagine the fund returns 10% a year. So if instead of buying that phone you put £999 in a crypto fund, your returns would look like this ?

After 10 years: $999 x 1.1^10 = $2,591

After 15 years: $999 x 1.1^15 = $4,173

You get the point. The opportunity cost of the iphone is a significant accumulation of wealth from the crypto fund should that money have been invested there instead. 

This is how millionaires see it and when you start to look at it this way too, it’s easier to understand why they are so keen on investing.

? The question “is it worth it?” suddenly has a lot more considerations.

Opportunity cost (Time)

Opportunity cost is not just monetary. We would all like to think our time is worth something. Provided we don’t spend it all watching the latest Netflix original.

To maintain particular purchases such as a mansion or luxury car is time consuming.

This is time that you could alternatively spend on improving your start up, studying the Market Meditations resources or setting up a proper budget (look back at the millionaire checklist ☝️).

⏰ Whilst it might not seem like it, particularly during a dull lockdown, time and indeed energy are finite resources. Best you choose how to spend them wisely.

Millionaire Checklist 

Hopefully when you read the above section, you considered whether you too follow each of the 8 characteristics. Here is another quiz:

Do you know your annual budget? 

Do you know you know how much you spend each year? 

Do you have a clearly defined set of short, medium and long term goals? 

Do you plan for your financial future? 

If you answered yes to all the above, you have something in come with the majority of millionaires.


Becoming a millionaire is a consequence of hard work, lifestyle decisions, planning and self discipline. Reading through the key characteristics and the checklist will give you a sense of where you sit on this spectrum. A consideration of the monetary and time opportunity cost of decisions will reaffirm the characteristics of millionaires. The purpose of this article was to assist you in view wealth accumulation in a different and more deliberate way.

Start to think like a millionaire if that’s where you are trying to get to in the not so distant future.