Book Review: ‘The Next Millionaire Next Door’
“The Next Millionaire Next Door” is a repeat of the landmark study from the classic book “The Millionaire Next Door”. Written by Thomas J. Stanley and his daughter Dr. Sarah Stanley Fallaw, it provides insight into the original work, addresses criticisms of it and a whole new data set.
Yet the “next” millionaire next door book is not just an analysis of the original. It contains new information, and it builds on related works by others that borrow from the original millionaire next door book.
How Does “The Next Millionaire Next Door” Compare to the Original?
“The Next Millionaire Next Door” asks many of the same questions as the first study of actual millionaires while adding a few new ones. For example, there are updated tables on big ticket spending and more information on how people use their time. The “next” millionaire next door book also analyzes the shift in the millionaire population over the intervening twenty years. What jobs do they hold?
The data in this book is mostly from 2015-2016. That means it is the first “Millionaire Next Door” book to analyze the impact of social media on spending and consumption. Yet it is your home purchase and the community you’re living in that has the biggest impact on spending. While we’re depressed by what we see on social media, we’re still spending to keep up with the Joneses next door.
You learn additional information about the average millionaire next door such as marital status, education levels and their investment strategy. More millionaires are divorced and re-married, but most are married. And you find out that a majority had “supportive” home environments, though this isn’t necessary to become wealthy. The findings here tie in to Rachel Cruze’s book “Smart Money, Smart Kids”. I think “The Next Millionaire Next Door” provides a better action plan and higher level overview of why that’s the right way to teach your kids to save, control spending, plan for the future and invest.
The key ingredients remain living below your means and saving and investing the difference. Fewer millionaires are small business owners, and more are 401K millionaires.
“The Next Millionaire Next Door” addresses a number of myths and confusing contradictions the prior version didn’t. For example, it lists the job titles correlated with high income, though this may not be related to net worth. And it discusses some of the high income jobs that make it almost impossible to build a large net worth.
Interestingly, the book addresses criticisms of the original. The data shows that their findings were not affected by the Dot Com bubble or the real estate bubble, though one updated version of the classic book said to take your home out of your net worth calculation. They validate the original rules of thumb such as how much your net worth should be based on age and income and how much you should spend on your house.
How Does “The Next Millionaire Next Door” Relate to “Everyday Millionaires”?
Chris Hogan’s book “Everyday Millionaires” was advertised as the follow-up to “The Millionaire Next Door”. It became a best seller based on that premise. I own a copy of it, too. Yet I didn’t know that “The Next Millionaire Next Door” had come out, though the original book sits on my bookshelf, too.
Dr. Sarah Stanley Fallaw’s book actually references Dave Ramsey a number of times. In their follow-up study, many of the millionaires cited Dave Ramsey’s plan for getting out of debt and building wealth.
“The Next Millionaire Next Door” does a better job in my opinion in providing the hard data dispelling myths about millionaires such as “they inherited all their money”, “they took crazy risks in the stock market” or “they’re lucky”. Chris Hogan’s book “Everyday Millionaires” is better at spelling out these myths, discussing why we believe them and why they’re incorrect without getting down into the weeds, or in this case, data tables. “The Next Millionaire Next Door” addresses some myths Chris Hogan doesn’t like “the rich don’t pay their fair share” or “the rich exploit others”.
“The Next Millionaire Next Door” is a good follow-up to the original book, “The Millionaire Next Door”. You can learn a lot from it if you read “Everyday Millionaires” or any of Dave Ramsey’s books. If you haven’t read any of those books, “The Next Millionaire Next Door” should be next on your reading list.
© 2020 Tamara Wilhite