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The Millionaire next door

This is the type of books I really love as they separate the noise (public opinions) from the actual facts.

It’s based on the results from a study of the wealthy in America at the end of the 20th century. Not surprisingly, the study was ordered by professionals in wealth management (to know their potential clients better).

The findings are really interesting as they go against the vision most people have of the wealthy people.

So, it not only re-frames minds around who millionaires really are (simple people and many first-generation immigrants btw), but also gives you to think around personal finances in light of rampant consumerism in developed countries and that’s definitely a good thing.

It’s also a great reminder at times where people feel threatened by immigrants/foreigners. It reminds us that those are actually the ones from which value is created while others don’t want to do the dirty jobs or are too busy consuming things (classic).

In case you managed to become a millionaire, the study also goes on with how millionaires distribute their money with offsprings (and how most got it wrong!). By 3rd generation, most of the fortune has disappeared.

It goes like this:

– 1st generation creates the fortune (business owners) with (mostly) dull businesses. They spend very sparingly and want a better education for their kid (pushing them to have a liberal profession: such as doctor/lawyer…).
– 2nd generation becomes doctor/lawyer… and pushed their kid to work at high paying jobs in big corporates.
– 3rd generation is fully integrated (hello consumerism).

An important concept to grasp is that getting an expensive object (a nice car / a better house in a better neighborhood / …) usually comes with more expenses (need to go to private school, update interior design, expensive clothes…).

People in flashy cars are not as rich as their lifestyle requires a lot of spending too.

Rich people actually live well below their means. It’s maths 101 really.

They came up with a formula to determine what the net worth of someone should be (Target Net Worth = Age X Annual Pre-Tax Income / 10). If you are under, that means you are under-accumulating, if you are above, that means you are accumulating well.
E.g. a 50-year-old doctor earning $250,000 should have about $1.25 million in net worth (50*250,000*10%).
I let you do the maths for yourself 

Earning a lot of money is having a great attack.
Spending little is having a great defense.

You need both to become rich.

Also, a funny fact is that if you have a spouse, you both need to be good at defense or the odds of becoming wealthy are significantly reduced.

Overall a great book, yet, it was written pre-internet boom (and only focusing on America). These days, becoming a millionaire is much easier (inflation and internet scale / flat world) that it used to.

So an updated version will be warmly welcomed.


Reviewed by Jeremy Chatelaine, founder of

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