The Millionaire Next Door

The Low Profile Millionaire Next Door

A producer from ABC’s 20/20 news magazine television show once asked if I could identify neighborhoods where the millionaire next door types live. After checking my database, I pinpointed several neighborhoods where these people resided. The resulting televised program certainly raised eyebrows. Most of the homes depicted were in the $200,000 to under $400,000 price range. All of the millionaire next door types who lived in these neighborhoods had an investment portfolio of at least $1 million. Yet the median price they typically pay for a bottle of wine is just over $10.00 – certainly not the acting rich crowd.

Then I did a statistical analysis of my database and ultimately a profile of millionaires who live in homes currently valued at between $125,000 and $395,000, the low profile millionaires next door. A more detailed examination of the data brought to mind another television episode. It took place while I was promoting The Millionaire Next Door on the Oprah Winfrey Show. A rather well-dressed woman from the audience asked me the same question I had heard a thousand times before: “What good does it do to have all this money if you don’t spend it?” The woman was agitated, even indignant, that I was touting frugality. She further indicated that “these people couldn’t possibly be happy.” She, like most people who are not wealthy, believed that the more one spends, the more satisfying life is. Thus, more money translates into more spending and therefore more happiness.

But she does not completely understand the benefits of being wealthy. It has much more to do with being financially independent and secure than owning prestige brands. High self-esteem is related to achieving financial independence. Both the sense of achievement that comes from success and financial independence lead to happiness and life satisfaction, not meaningless badges.

So, what percent of the millionaires who live in homes valued at under $400,000 are happy? More than 9 in 10 (91 percent) indicate that they are extremely satisfied with life. Yet only one in twenty has a wine collection. Happy people tend to live well below their means. I have found this to be the case in all of the studies I have conducted.

Most of the people who make up this low profile millionaire segment never earned very high incomes. In fact, their median household annual realized income (from all sources) of this group was $113,334 at the time they first reached millionaire status.

In regards to millionaires who live in homes valued under $400,000, ninety-two percent are married. In 90 percent of the cases, the male head of the household is the major breadwinner. Fully 62 percent of those who are married have never been divorced. The median value of their home is $293,214. Their median realized household income from all sources in 2006 was $152,193 or more than one-half of the current value of their home.

Not all regions of the country are equal in producing these low profile millionaires. As a proportion of their respective populations, the Midwest had a higher concentration of these high net worth people, 1.65 times greater than the expectation given the size of its overall population. The South is also above the norm with a multiple of 1.2 while California and especially the Northeast areas of the United States have less than half the expected number. These concentrations are inversely related to the respective proportions of wine zealots found in each region. The traditional values of thrift and modesty in spending are still alive in many parts of the Midwest, where acting rich is typically not in vogue. If I were to open an exclusive wine bar or luxury car dealership, the last place I would consider would be to place it in the Midwest.

29 thoughts on “The Low Profile Millionaire Next Door”

  1. This article is stupid. It doesnt take much to be a millionaire these days. My wife and I are, but not what I thought was a millionaire when I was young. We’re around 50 and have 401k’s, savings and real estate equity of about a million or so. our annual income is ~160k and yes virginia, we buy sub $10 wine. We turn off lights when we leave a room, keep the thermostat at 68 in the winter and 78 in the summer and we clip coupons. We have nice cars, she has an 03 lexus es300 and I have an acura wagon. we have an old 95 picup her father gave us.

    being a millionaire isnt anything. Come on, who plays the lottery if it’s less than 100 million?

  2. “being a millionaire isn’t anything.”

    Really? Try telling that to folks who don’t do the things you mention.

    Point of this is…you have to behave frugally – that’s the only reason you have $1 mil.

    Most people don’t act that way – so it is still a big deal to most.

  3. of course this article is important. only a millionaire can say that being a millionaire is not important. you are speaking from a position of achievement and strength. will you say the same from a different position! I doubt it.

  4. Phil: Your attitude is the reason why many people despise wealthy people. Quit patting yourself on the back and try being a better teacher….yes its relatively simple mathmatically to do…Its the discpline that people have a hard time with….Come on!

  5. This article is far from stupid. The majority of people think if they have alot of money, they can buy anything they want. The reason alot of people are millionaires, and are debt free, is because they don’t spend money like those who don’t have it, but have alot of stuff that isn’t worth what they payed, plus the debt to go along with it. There are alot of people walking around that you would never know had money. And that’s the reason they have it!

  6. Michelle,

    It has been proven that those who have earned their welath and not inherited could and would do it again if they were to lose it.

    They have gained the knowledge of how to get there. They have a proven road map for it.

    Living below your means is not the normal thing in this “I want it and I want it now because I deserve it” childish society.

    Try looking up and learn how to live.

  7. I think Phil said what he said because in this society, being a millionare looks like huge houses, numerous fancy cars, big spender, high roller image. That’s Hollywood, not reality and I would bet that most of that junk is on credit anyway. Being rich is a mentality, not a number.

    Phil – you could start back at square one and be right back to where you are in a number of years. A lot of people can’t live on less than they make. Kudos to you!

  8. Having been “converted” to the Dave Ramsey school of thought! (thank God)I have had to really analyze and adjust my attitude and habits about Money. 3 years ago, I was one of the masses living like a millionaire on a middle class income. I had mountains of debt (50K) and nice stuff. Now that I have chosen to change my habits, I have payed off all but 15K and am going to be debr free except the House. We stopped SPENDING needlessly and payed off debt. Our friends think we’re crazy because we don’t vacation like we used to and our cars are at the point where most trade up. They are still in massive debt! I guess my point is that I can see the light at the end of the tunnel and in another year I will be debt free except for my house. When you don’t have DEBT you have MONEY!! Thanks for the wisdom DR!

  9. The point of this article was to show people that the CHOICES they make, will create their end result. Writing about it is not stupid. Phil has had the discipline to make the money he has work from him, and he is now able to enjoy his hard work. All Mr. Stanley is doing is showing those that are not currently where he is how to do the same. It is unfortunate though, that most people (not including Phil, as I do not know him) who are in Phil’s position are not willing to share these same philosophies with those who are not so self-sufficient. I am thankful for these articles, I was a middle class worker, who was laid off, and am now in a low-income bracket. The common sense that Stanley and people like Dave Ramsey provide have prevented me from accepting the situation I am in, and I can be proud to say one day that I will be in Phil’s shoes one day, even if my income never increases. Negativity never solves anything.

  10. This is an interesting article. It is common sense that these people would be millionaires but so many struggling simply look at the “celebrities” and others who are keeping up with the “Joness” and end the end everyone is poor living paycheck to paycheck. Now if the government can figure out how to handle the money we’ll be set.

  11. Phil, you are proving the point of the article. And, yes, a million isn’t what it used to be. Even now people imagine millionaires drive a new fancy car every year, live in a million dollar house, wear designer clothes, etc., but you need to have multi-millions to do that now (without being in debt) and why flaunt it even if you had it? How would you know if people liked you because of your money or because of you? Millionaires are a very small percentage of the population…you’ve obviously made some good choices along the way. If you didn’t have the net worth you have, you wouldn’t be nearly so secure. And THAT is the point of the article…it’s the security, not the flashy possessions.

  12. Really Phil, a lot of people don’t have fathers around, let alone one who would give them a ’95 pickup for free. It’s sad, but true. Articles like this are essential for the rising generation trying to learn what their parents weren’t there to teach them. I’m glad for you that you’re in such a healthy position, but from my life experience this has to be taught to be learned. A lot of us are fortunate that the information is coming to us from somewhere. Sometimes I think stability can have the downside of a lack of compassion or perspective. I’m happy this article was written, I know I will be molding my young family after the tips I read and learned tonight.

  13. Very interesting and true. In this current culture we look at the outside and make a judgment as to wealth and success. The Bible says the Lord looks at the heart and we should too. I also find it interesting that most people achieve “millionaire” status without fanfare or the lottery-just old fashioned hard work, hence the majority being mid-westerners.

  14. I found this particularly interesting: “California and especially the Northeast areas of the United States have less than half the expected number.” Aren’t those also typically areas with the highest tax rates? Hmmm, maybe there’s a correlation between lower taxes and more personal wealth!

  15. The millionaires the Dr. Stanley profiles live by the Dave Ramsey credo: They lived like no one else (i.e. they lived below their means, saved and invested their money wisely), so that now they are able to LIVE LIKE NO ONE ELSE (i.e. live with the peace of mind and sense of accomplishment that, unlike those who simply ACT RICH, they, the true millionaires, are truly rich, successful, and FINANCIALLY FREE! I can’t wait to join their ranks some day.

  16. You can become a millionaire by putting away $600.00 a month from aged 25 to 65. Buying a house 100K cheaper is one of the fastest ways to not spend an extra few hundred a month and not having car payments. $600 a month is not a lot of money, but it takes the mentality to not spend it all.

  17. phil,
    all I can say is that I read Dr. Stanley’s book, ‘Millionaire Next Door’, when it was first published. I also read similar articles which have been published since. the philosophy of living below my means has helped me become a millionaire on an average combined income of $60,000. I am thankful such articles/books were published. many of my colleagues are losing their jobs and they worry about losing their houses, etc. I am glad I am not in their shoes. thank you, Dr. Stanley!

  18. I am a real estate agent in the Midwest and I see these millionaires next door all the time. They are the nicest most respectful people I could ever meet, and I will go out of my way to help them anytime. Not because they are an easy transaction, but because they understand the basic concepts of money, how to do business and they are extremely reasonable and respectful people. They work through the obstacles, they don’t create them.

    I also see way too many of the wanna-be’s; they appear to own a beautiful home, but once you get inside its barely furnished, and unkept. usually its because they are so busy working 7 days a week to impress people that that they don’t even know. Why? I don’t get it.

    P.S. I drive a four year old car that is paid for, I will drive it until the wheels fall off; i could care less what someone else thinks. I can spot the wanna be’s right away – they think they are better than everyone else, they are unreasonable, and they always want to know where my Cadillac/Lexus is. 99.9% of the time I get asked where “where is your (blank) car?” and its a dead give-away of how my client will be financially and how they will treat me. The millionaire next door could care less what I drive…and is respectful no matter what.

  19. I was puzzled when I read the Book of Proverbs which said “he who loves wine will not be rich”. I could not imagine what loving wine had to do with wealth.

    Thank you for helping me understand. I enjoy a glass of wine on occasion but am happy with the $10 bottle.

    But now I get it! The true lover of wine is like the lover of expensive material goods of all sorts. They must have the best wine, the best clothes, the best houses and the best cars. Therefore they are spenders not savers and like the proverb says they will not be rich.

    Appreciate the insight.

  20. California and the NE have fewer low profile millionaires because they are the show off, upper class crazed, climb maniac areas, with resulting high taxes and high house prices (the wasington thru boston corridor with their political/finance/university elite, and their Hollywood/fame obssessed brethren in CA.

    I clip coupons, drive a 1994 car, and still have a 32inch CRT TV (until it breaks). that’s why I quit my job last yr and have no worries about finding another job, even if it takes years, while everyone around me seems desperate to find a job, or terrified of losing theirs.

  21. Phil: I doubt you’re a true millionaire. Your home may be overly valued so that on paper you could be a millionaire but I doubt you really earned it.

  22. I totally get the article and the book. I only add that excessive consumerism and peer pressure keeps most poor. Cutting the cable television would be a good start to saving individuals and their families money in more than one way.

  23. My wife and I live beneath our means. We own 6 year old cars, I live close to my work, we clip coupons, we share baby swapping duties with other familes on date nights. We live a healthy lifestyle, we no longer have cable tv, we attend church twice a week(often)and my wife gave up her medical career to be a stay home mom. She makes most of our childrens clothes(even sells a few), we get hand down kids clothes from older cousins, we enjoy free state parks, free community events and often play outdoors. My wife cooks 90% of our meals and we live in a house valued less than 200K (1970s circa). We are able to do this because we had no debts when we got married. We have no school loans, no car payments and a small mortgage. Our peers live in the newest developments, drive newer cars, spend lots of money at SEC games, their children attend private schools and many of these parents medicate themselves to cope with their financial stress.

    1. What does going to church have to do with this? We don’t go to church.

      Why did your wife give up the career instead of you? My husband and I both work.

      When we married thirty-one years ago at 30 and 32, I had two student loans and we had really stupid credit card debt. But we had goals: our future child’s education, pay off the mortgage before we retired, pay off the cc, and our 401Ks would remain untouched as we contributed to it.

      He’s worked for the federal government for 40 years in finance. I have been an industrial chemist for 30 years and my second career is teaching in a two-year technical college. We have one child who went to public school (magnets both) and a flagship state university, who finished her masters in another state and is going to Yale for her doctorate (she didn’t take loans for either). We paid for her undergraduate degree (no loans), paid off our small house (circa 1970s and part of it 1990s) at about the same time, as well as the credit card. My student loans were already gone.

      Whenever we paid off the cars we kept them for about five more years. Currently, we have paid-for 2008 and 1996 Chevy sedans and a 2006 Camry. It helps that we both have 15-minute drives to work!

      We have a home equity loan (to refurbish the house), the balance of which we will pay off when my husband retires, and it will hardly make a dent in our net worth.

      We’ve always cooked a lot at home. We never had more than one car loan – in fact I drove everyone around one year until my car was paid off before we replaced his car. We refinanced the house but kept the same payment to pay it off in 22 years instead of 30. And we had other things through the years: my yearly bonuses, his stock purchases, our raises, the state college scholarship for all high students with a B average (it pays 80% of the tuition). the longest bull run in American history, his great health insurance.

      Even then. we took in and financially supported people who needed help: his best friend, his mother, and his brother. We gave and still give to charity.

      And we still passed the million mark at around 55. At my age of 61, our net worth is a bit over $1.5 million (ah the dropping stock market), and our house is the least of it. Maybe that is not as impressive as some millionaires, and maybe we could have been faster, but here near retirement, we feel pretty relaxed.

      So, it is indeed possible to start late and finish well.

  24. Saving regularly, living beneath your means and fixing on goals have made the difference for us. If you don’t have goals, you dont have a roadmap and you will have no means of acknowledging that success in life comes from a progressive realization of large and even small goals. Have goals that both partners agree on then work towards achieving them together.There will undoubtably be setbacks and detours, but that’s life

  25. Nicholas Yioves

    It doesn’t sound to me like Phil is really a millionaire. At least not as defined in the book. It has to wealth not counting your home. If by “real estate equity” he means rental properties than ok, but I have a suspicion he is just counting his main residence and his 401k plan. And that means you’re not a millionaire. Further, in Stop Acting Rich, Stanley discusses how MNDs do not have any more than 25-30 percent of their wealth is the stock market.

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