5 Millionaire Secrets You Need to Know
(Summary of “The Millionaire Next Door”)
This was such a lovely read for me, If you're someone who enjoys data-driven insights and deep dives into financial habits, you'd probably love this read too. But if you prefer more straightforward personal finance books, this one might not be an easy read for you. Which is why you have me 💃
1. Another Definition of Wealth
A lot of times, we define wealth by how much money someone makes or the material things they own. But I’ve always thought wealth is subjective—what it means to me might be different for you. This book touches on that idea. Just because someone has a lot doesn’t mean they’re actually wealthy. In fact, their net worth could be negative.
Maybe wealth should be defined by expected net worth and financial freedom based on spending habits.
Think about this:
A 26-year-old basketball player making $1M a year with a $1.5M net worth.
A 26-year-old banker making $150K with a $750K net worth.
Who’s wealthier? The basketball player earns more, but if both stopped working today, who could sustain their lifestyle longer? That’s the real measure of wealth—not just income, but financial stability and freedom.
2. Avoid Lifestyle Inflation
Most millionaires actually live modestly—they drive used cars, live in average neighborhoods, and focus on building wealth over showing off. Meanwhile, many high-income earners struggle financially because their expensive lifestyles keep them from saving and investing.
One thing I’ve learned is that chasing social status isn’t worth it—most people don’t care about you having the thing; they just notice the thing itself. I really understood this after reading The Psychology of Money and testing it out. I love cars, but when I see one I like, I realize I’m admiring the car, not the owner. That changed my perspective—I will now choose a Car for its purpose, not for what others will think.
Key Takeaway: A high income doesn’t equal wealth. Avoid lifestyle inflation.
3. The Importance of Frugality
One of the biggest takeaways from this book is that self-made millionaires practice frugality. If you remember nothing else, remember this—frugality isn’t a bad thing; it simply means living below your means.
Research shows that what sets high-income earners who become millionaires apart is their ability to play both offence (earning a high income) and defence (frugality, budgeting, and planning). They avoid extravagant spending, stick to a budget, and prioritize saving and investing. If they have a partner, they ensure they’re on the same page financially—because wealth-building is a team effort.
Key Takeaway: Wealth requires both offence and defense. You can’t win without both.
4. Prioritize Planning for your Financial Future
Something interesting from the research was that the wealthy (those with multiple millions in net worth) have a household budget and can tell you exactly how much they spend on shopping in a year. The research actually shows a strong positive correlation between investment planning and wealth accumulation.
A common myth is that you stop budgeting once you reach a high income, but that’s far from the truth. It’s like the saying: whatever you invest your time in is where you see the most benefits. If you prioritize tracking your finances, learning about investing, and making intentional money decisions, you set yourself up for long-term wealth.
Key Takeaway: Budgeting isn’t bad. Spend more time understanding your finances and building knowledge to grow your wealth. My easy-to-use budget tracker can help you get started!
5. Teaching Financial Discipline to Children
Millionaires often raise their kids with strong financial values, discouraging entitlement and emphasizing work ethic. The book warns that excessive financial support for adult children can actually hurt them, making it harder for them to become financially independent.
Instead of luxury and dependence, millionaire parents prioritize education, hard work, and self-sufficiency. They make sure their kids learn the same values that helped them build wealth—frugality, financial literacy, and discipline.
Key Takeaway: Raising financially independent kids means teaching them the right money habits, not just giving them money.
6. Investing Wisely
Nearly all the millionaires in this research own stocks—what does that tell you about investing? Most of them are passive, long-term investors, buying and holding for years. They focus on appreciating assets like stocks, real estate, and businesses, steering clear of risky speculation and prioritizing long-term growth.
If you want to start investing, check out my detailed post on Investing 101!
Key Takeaway: Invest, invest, and invest wisely.
