Money Plato

When you picture a millionaire, what comes to mind? Shiny sport cars, luxury watches, a house with swimming pool and a yacht parked in the nearby harbor? According to The Millionaire Next Door, you’re probably wrong. This classic book – first published in 1996 and still widely quoted today – flips our assumptions about wealth. Authors Thomas J. Stanley and William D. Danko did the math, and they found that most real millionaires live next door and don’t behave in a very flashy way. Also, a formula suggested in the book lets you calculate where you stand regarding the accumulation of wealth.

1. Prodigious accumulators of wealth
2. The Millionaire Formula: calculate if you are UAW or PAW
3. A lesson still valid today
4. …but is there a missing piece of the puzzle?
5. Consider buying me a coffee without buying me a coffee
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Prodigious accumulators of wealth

Stanley and Danko introduce two key terms: Under Accumulators of Wealth (UAWs) and Prodigious Accumulators of Wealth (PAWs). UAWs may earn a lot but save little. They buy the latest car, dine out often, and wear their paycheck on their sleeve.

PAWs, on the other hand, are masters of stealth wealth. They live modestly, often in middle-class neighborhoods, and prioritize saving and investing over status. It turns out that many doctors, lawyers, and executives — despite high incomes — fail to build significant wealth because they spend too much trying to “look rich.”

So here’s the simple but often overlooked principle for growing wealth, that is emphasized throughout the book and enforced by examples from the real world: in order to grow a wealth of at least a million, saving and modesty of lifestyle are the way to go.

The Millionaire Formula: calculate if you are UAW or PAW

The book outlines a simple (but powerful) formula to gauge your expected net worth:

“Multiply your age times your realized pre-tax annual household income from all sources except inheritances. Divide by ten. This, less any inherited wealth is what your net worth should be.” 

If your net worth is lower than that number, you’re probably a UAW. PAWs consistently beat this benchmark — not because they earn more, but because they live below their means and put their money to work.

They buy used cars, skip luxury brands, and avoid “economic outpatient care” (a.k.a. constant financial help from parents). Instead, they build habits that compound over decades: consistent saving, smart investing, and resisting lifestyle creep.

A lesson still valid today

Nearly 30 years later, the lessons from The Millionaire Next Door are more relevant than ever. In a world driven by social media flexing and consumer debt, the book reminds us that wealth is what you don’t see: savings accounts, retirement plans, and paid-off homes.

Becoming a millionaire is less about earning more and more about spending less. The formula is simple — discipline, patience, and a long-term mindset. If you want to get rich, forget the Lamborghini (at least at the start of your wealth-accumulation journey!) and start thinking like the millionaire next door.

…but is there a missing piece of the puzzle?

While The Millionaire Next Door is undoubtedly an eye-opening and valuable guide to understanding how real wealth is built and maintained, I believe it has one small shortcoming: it leans heavily on the virtues of frugality and disciplined saving, perhaps at the expense of another key ingredient, which is entrepreneurship.

The book powerfully debunks the myth that high income equals wealth and makes a strong case for living below one’s means. However, it tends to underemphasize the potential of starting and growing a business as a wealth-building engine.

Many successful millionaires — especially today and often as the first in their families to do so — have created value through businesses, side hustles, or entrepreneurial ventures. It’s worth remembering that even today, around 80% of millionaires did not inherit their wealth but built it themselves. Building a company, even a small one, not only accelerates wealth creation but also offers greater control over one’s financial destiny.

Saving and investing remain crucial, but I’d argue that creativity, calculated risk-taking, and ownership should also be part of the conversation about financial freedom.

I highly recommend picking up The Millionaire Next Door if you still haven’t read it!

On the other hand, if you already knew that book, what are your thoughts about it? Let me know in the comments!

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