Tamara Wilhite is a technical writer, industrial engineer, mother of two, and published sci-fi and horror author.
“Everyday Millionaires” by Chris Hogan was advertised as an updated and expanded study of millionaires, building on the lessons learned from “The Millionaire Next Door” by Danko and Stanley. It is reasonable to compare these two books, though Chris Hogan’s book explicitly avoided comparisons to the prior best-seller “The Millionaire Next Door”. What is different about this follow-up study of millionaires? What changes have thirty years brought to the millionaire population? And what truths remain the same?
The Differences Between “The Millionaire Next Door” and “Everyday Millionaires”
The biggest differences between the books “The Millionaire Next Door” and “Everyday Millionaires” (aside from time frame) is the emphasis in the former on data and the latter on technique. “The Millionaire Next Door” goes into incredible detail on the demographics of millionaires down to spending habits in many categories, financial gifts (or not) to children, ethnic breakdowns and industries they work in. “Everyday Millionaires” by Chris Hogan sprinkles a few stats in like incomes of millionaires, how many went to college, and where their wealth is. However, there is relatively little data on the ten thousand millionaires he surveyed. Yet his book does present enough data to see what has remained the same and what has changed about America’s millionaires.
Chris Hogan's organization eventually released a white paper presenting the deeper data that was lacking in his book, but you have to pay for that.
The Demographic Trends That Remain the Same
“The Millionaire Next Door” reports that 80% to 90% of millionaires were first generation. This rate is similar to the rate of self-made millionaires seen in the early 1900s. But what about the 2000s? Less than a sixth received even $100,000, and only 3% received an inheritance big enough to make them millionaires. We can say the 80-90% of millionaires are self-made statistic remains true. Note that millionaires are no more likely to receive an inheritance than their neighbors, so it isn’t true that many much less most of the rich inherited it. They didn’t, and we have two data sets to prove it.
Millionaires still take decades to get to millionaire status. In Chris Hogan’s study, the average millionaire hit that point at 49. For those in the earlier “Millionaire Next Door” studies, it was in their fifties.
Most millionaires graduated from college. Only one in five in “The Millionaire Next Door” study didn’t attend college at all. In Chris Hogan’s study, that percentage fell to 10%, though two thirds of those attended public state schools. The same was true in “The Millionaire Next Door”. Nor were millionaires always the smartest person in the room; half or more had a B average.
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The Demographic Changes Among Millionaires According to Chris Hogan
The biggest change over the thirty or so years in the millionaire population is what got them there. In “The Millionaire Next Door”, around two thirds of millionaires were self-employed business owners who became millionaires. Many of them were blue collar tradespeople who grew their business into a large enterprise, running multiple stores or employing hundreds in HVAC repair or equipment repair.
The Chris Hogan study found that this population was now a minority of millionaires, with roughly a fifth being self-employed. Instead, the most common professions among millionaires were teaching, engineering and accounting.
The average millionaire in Chris Hogan’s study was someone who saved 15% or more every year for years in tax advantaged retirement accounts. He calls them 401K millionaires, though they are millionaires none the less. His book “Everyday Millionaires” shows how well these tax advantaged retirement accounts work at building real wealth that people can use to support themselves in retirement.
Nor did someone have to have a huge income to become a millionaire. The book “The Millionaire Next Door” found that many wealthy did so by living well below their means. Dave Ramsey calls this acting your wage. Chris Hogan’s study found that almost two thirds of millionaires had a household income of less than $100,000 a year. That’s less than the roughly $130,000 annual income of millionaires in “The Millionaire Next Door” that, with inflation, becomes much larger in today’s money. This means that saving and investing, especially without paying taxes on the money or growth, truly lets it compound until you’re a millionaire. However, if you don’t have debt payments because you’re frugal and make wise choices, you have much more money to save and invest than peers who are leveraged to the hilt.
The Evolving Advice on How to Become a Millionaire
Chris Hogan’s book can be seen as an answer to the question, “Why should I follow Dave Ramsey’s advice?” According to Chris Hogan’s research, nearly three quarters of millionaires never had credit card debt. Nor did they go into debt to invest in the stock market or leverage real estate. Given that Chris Hogan works with Dave Ramsey, his advice to follow Dave’s advice (and program) to get out of debt is understandable. But once you’ve eliminated your car payment and credit card payment, how do you become a millionaire?
Discipline, sacrifice and self-control is what led people to become millionaires. Almost no one in either “The Millionaire Next Door” or “Everyday Millionaires” made risky investments, getting rich via that unicorn IPO. Instead, they saved 15-20% of their income every pay check and invested in stocks, bonds, and mutual funds. Some invested in real estate or their own companies. In every case, they either intentionally saved a large share of their income every month over years.
The book “The Millionaire Next Door” found that a number of millionaires got there on cruise control, not intentionally budgeting but simply shunting a 20% or so to investments and then living off the rest. But when you’re automating your savings and won’t go into debt, you by definition live on less than you make. That system is also prone to automatically saving bonuses and raises. It was in this vein that “The Millionaire Next Door” laid out rules for not buying a house or car that is too expensive, since the carrying costs prevent you from building wealth.
My only disappointment with Chris Hogan's book in this regard was that they didn't verify the financial recommendations from "The Millionaire Next Door" or even cite them, though Dave Ramsey uses similar recommendations like not buying a car that costs more than half your annual income.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
© 2019 Tamara Wilhite