Thomas Stanley Ph.D. wrote the book The Millionaire Next Door in 1996. This book highlighted how millionaires accumulated their wealth; they classified millionaires by people who have net worths over one million dollars. A follow-up to the millionaire next door is The Millionaire Mind. Which was published in February of 2000.
Below are my highlights of the book the Millionaire Mind by Thomas Stanley Ph.D.
- 4.9% of the households in America have a net worth of a millionaires.
- Income statement millionaires. Have a high income and high debt.
- Balance sheet affluent are of the millionaire mind. They usually don’t have any credit balances.
To create the research group to identify the millionaires in America. Dr. Stanley worked with a highly specialized demographer. They identified 226,399 areas/neighborhoods in America that would most likely have a high concentration of millionaires. They paired that group down to 2,397 homes and sent them surveys to complete. Of the 2,397 homes that received the survey, 1,001 responded to survey and of that number 733 of the respondents were actually millionaires.
Some of the statistics on these 733 homes that responded.
- Most of the respondents were in homes that were built-in the 1950’s and even the 1940’s in well established neighborhoods and cities.
- 1 out of 4 millionaires were married and had been with their spouse on average of 28 years.
- On average these millionaires had three children
- 92% of the millionaires were married
- 95% of the millionaires have children
- Only 3% widowed
- Only 2% had never been married
- 9.2 million average net worth; With the median being around 4.3 million net worth
- 749,000 income; median 436,000
- On average they never spent more than $41,000 on a car
- Did not spend more than $4,500 on engagement ring.
- Never spent more than $38 dollars for a haircut.
- Never spent more than $340,000 on a home
- Only 2% of them inherited their homes.
- 61% never received an inheritance or gifts from others to accumulate their wealth.
- Only 1 in 4 paid more than a million dollars for a home.
- 1 out of 3 are business owners.
- 1/5 are Senior Executives within a company
- 1/10 are attorneys
- 1/10 Are doctors
- 1/3 are middle managers, sales professionals, engineers, and professors
- Business owners are the richest.
- 50% of the wives don’t work outside the home
- 90% are college graduates
- 50% have advanced degrees
- Average age is 54
This book goes onto highlight eight key areas that were vital in these millionaires to become millionaires and ultimately have what the author calls “The Millionaire Mind”.
1. Success factors
These 733 millionaires were asked to rate 30 success factors. The 30 they were asked to rank came from a list of 100 success factors that were created by the author through interviews and other research the author conducted with groups of millionaires.
Of the 30 success factors the three that ranked the highest are Honesty, Discipline and Social skills. I doubt there is anything here that should surprise any of us.
Here are what some of the millionaires said about these three success factors:
- Integrity is not a pass fail course.
- Millionaires don’t wait for people to tell them what to do at work, in their personal life, or anything else. They set their own agenda, they create their own goals.
- I am a finisher in a society of starters.
- Leasing a Mercedes doesn’t make you rich.
- Finding a source of discipline when you find your self lacking in discipline. I really liked how one of them said this. We all lack discipline at times, but the difference is that people of the millionaire mind realize the lack and seek out a way to find the discipline needed.
- 94% of millionaires ranked getting along with people as one of the most important factors of getting rich.
The author tells a great story of being in a meeting with several former players of the legendary coach Bear Bryant, who were all now successful business owners and senior executives in companies. The author asked questions of the former players. Instead of asking the typical questions you would ask, the author asked a simple very focused question. What is the first thing you learned from coach Bryant. All of the former players tell this story:
On the first day of practice he asked one question. Have you called your parents to thank them? He then says. None of you got here on your own. It required your parents to sacrifice many days taking you to little league practices, school, and feeding you and ensuring that you could play football and ultimately be on this team. None of us got here on our own and we will not win on our own.
The message from coach Bryant was clear. You must have an attitude of gratitude and realize they we all need each other to get where we want to go.
The millionaires in the study agreed with coach Bryant’s assertion.
To be a leader and to get a long in the work place you must have social skills and the ability to get a long with others. This is not only important if you want to grow in your company and be promoted, but it is also necessary to be able to get things done, which will then allow you to accomplish things, get you noticed and get you promoted. If you are a business owner social skills are a must to grow your business.
Lastly, discipline to do the things you don’t want to do, when you know they must be done. This is the mindset the people with the millionaire mind have.
A majority of the millionaires surveyed did not attribute good grades or the school they attended as playing a role in their ability to accumulate wealth.
- Questioning the status quo and the norms are all skills that allow people to accumulate wealth.
- 2% of millionaires surveyed graduated in the top of their college class.
- 3 out of 10 said that they made more A’s than B’s, C’s, and D’s.
- 90% graduated from college with an average GPA of 2.9.
Schooling is important but it is not necessary. Although 90% of the millionaires surveyed had a four-year degree, they all said that it isn’t the only thing that contributed to their wealth. They ranked it very low on the list of success factors.
3. Relationship between courage and wealth
All of the millionaires surveyed said it requires courage to accumulate wealth. To accumulate wealth you must be willing to take financial risk as well as risk that goes along with challenging the status quo.
- One of the respondents said it like this: Working for others puts you at greater risk than working for yourself. Having one source of income is a bigger risk than taking a risk on doing something on your own. I had never looked at it quite like this before, but how true it is.
- Becoming wealthy is a mind game. You must overcome your fear and worry. Overcoming fear is one step in the process of accumulating wealth.
- How do you overcome fear: Belief in yourself. (Read the Power of Positive Thinking, Norman Vincent Peale) http://www.amazon.com/Power-Positive-Thinking-Norman-Vincent/dp/0743234804/
- Almost all millionaires surveyed say that belief in yourself is the number one way to accumulate wealth. They are not always confident, but they have a way to find confidence even when they are not confident.
- It is hard to be motivated and to motivate others if you don’t believe in yourself.
- Fear and worry are never all the way defeated. Confidence is built through the process.
Choosing a vocation is one of the major reasons for many of these millionaires success. Although many of them agree that a stable upbringing, love from a spouse, and warmth from family is critical in success, being passionate about what you do everyday is a major success factor.
- Business owners is the largest category of millionaires, next to doctors, lawyers, and senior corporate executives.
- All confidence begins at home.
- Only 55% of millionaires say that they chose their career or vocation because they loved it. But over time 80% say that it is because they love their vocation that they accumulated wealth.
- 58% chose their field because it showed the opportunity for wealth accumulation.
- 2 out of 3 millionaires don’t retire even though financially they can, because they love their vocation.
- 81% of people chose their career because it allowed full use of their skills, passion, and abilities.
- Specialization in a certain field is one way to become a millionaire.
- 46% of millionaires say that intuition is what led them down the path of wealth and opportunity.
- There are more than 22,000 different opportunities within the defined business areas.
5. Choice of spouse
What is it about marital status that allows couples to accumulate wealth?
- With dual incomes the ability to take more financial risks are created. Which could lead to successful businesses and larger investments.
- The support a loving spouse can provide when things aren’t going well can get their partner through tough spots.
- The decision-making ability a person with a millionaire mind has in choosing their spouse was well discussed at length in this book.
- Millionaires and people with the millionaire minds have the ability to pick spouses. They have the ability to pick mates that have patience and are caring.
- 96% of both the husband and wife believe that telling the truth is important.
- For every 100 millionaires that say that their spouse wasn’t important in accumulating wealth, there 1,317 that say that their spouse was extremely important.
6. Economically productive Household
All the millionaires surveyed ran very ecumenically productive households that you wouldn’t think you average millionaire would do. Things such as:
- Having furniture refurnished instead of buying new.
- Never buying from a phone solicitation
- Using coupons
- Buying household products in bulk.
- Having shoes resoled instead of buying new.
An interesting statistic with a great example in the book was: An average household spends $10,000 a year on food. Which is $400,000 – $600,000 in a lifetime. By couponing if you are able to cut just 5% of the cost down, that would be roughly $25,000 over a lifetime. If you invest the money saved in a mutual fund. That money could grow to a half million dollars.
- Millionaires are future focused.
- Millionaires don’t spend time on things that they aren’t very good at. For example: Putting in a hot water heater. You are better off hiring and paying someone than doing it yourself. You would think that being frugal that a millionaire would want to save the money and do it themselves. However, millionaires know that there is an opportunity cost associated with doing it themselves. They lose the opportunity to go and accumulate new business or skills that would earn them more money.
- Millionaires are frugal when they need to be. The DIY is not always the cheaper way. You are better off to earn income from your vocation than being a do it yourselfer.
- Ask yourself: is there better use of my time
- 4 out of 10 millionaires have clothing altered versus buying new.
7. How millionaires choose their home
- Average purchase price: $560,000 and hold onto in for it at least 10 + years.
- 53% of have not moved in the past 10 years.
- Balance sheet affluent versus Income statement affluent. I loved how the book really highlighted the differences between the balance sheet affluent and the income statement affluent. There are lots of people who make a lot of money (income statement affluent) but they spend it all. Balance sheet affluent have a high net worth because of assets and other investments.
- High Incomer earners in their 30’s and 40’s have a disproportion amount of the higher value mortgages in the market.
Millionaires use these guidelines to pick homes:
- 1. Be willing to walk away from any deal on any home at any time.
- 2. Don’t pay the initial asking price for any home. If you have ever paid the asking price for any home, most likely you are not a millionaire.
- 3. Never try to buy a home in a short span of time.
- 4. Look for an estate sale, divorce sale, or a foreclosure.
- 5. Only 27% of millionaires ever had a custom-built home. 1 out of 5 millionaires actually ever bought a spec house.
- 6. Always buy homes that you can afford. Appreciation of the home and whether or not you can afford the payments easily.
What is affordable? Assume that your annual income is cut in half a year after you buy a home. Could you still afford it? If not, then it is not affordable for you.
The 733 millionaires were surveyed and asked what activities they were engaged in within the last 30 days.
There were 27 lifestyle activities that these millionaires were engaged in. Here are the top 3.
1. Socializing with children and grandchildren
2. Entertaining close friends.
3. Planning of investments
- Millionaires don’t spend money so they can have fun. They don’t buy boats, they don’t take exciting vacations.
- Most millionaires are not do it yourself types. On average they make $325 an hour. They don’t put shelves up in the house, when they could be doing something else to earn $325 an hour.
- Golf ranks 13th on the list: However, most of the millionaires said that golf was not only a recreational activity, but it was a business activity that was one of the success factors that led them down the path to accumulate wealth.
- Most millionaires in the study on average paid over $300,000 in taxes. 1 out of 5 paid over 1 million dollars in taxes. One of the activities was that they all had met with a tax professional within the last 30 days.
- Don’t borrow money for a new venture. Bootstrap any business ventures.
- Attended religious activities
These are my notes from the Millionaire Mind. I hope you enjoyed the summary and picked up a few nuggets of wisdom along the way. Please share.
To your success and your future.
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