Most money books regurgitate the same core concepts over and over and over again.

Therefore, it’s often one of the earliest books on a specific topic that introduces us to the bulk of what we need know. Fortunately for me, one of my earliest reads on building wealth was The Millionaire Next Door by Thomas Stanley and William Danko.

This is my 2017 Book Review of the personal finance classic that changed my life.

As noted in my other book review for 2017, I will be focusing on key takeaways and the actions I took as a result of reading this book. I will NOT be focusing on repeating the content from the book as you can find summaries on the internet.

Before we get into it, I’d recommend checking out the 2010 edition of this book because of the expanded forward. If you already have an older edition, you can read through the new pages on Amazon here.

The expanded edition addresses the common criticism that the books’ authors surveyed hundreds of millionaires who merely lucked out because of the 1990’s equity boom. The new forward, from 2010, identifies how this misconception doesn’t hold up as less than half of holdings were in equities.

If you’re interested in a 5 minute audio version of some of these key takeaways, be sure to listen to this podcast episode of Millennial Money Minutes:

Key Takeaways from the Millionaire Next Door

I’ve read through the book at least half a dozen times. It is great to remind myself of many money fundamentals through re-reading books. Each successive read has led to the discovery a few more golden nuggets that I either didn’t catch, or, more likely, was not in a position to appreciate at the time.

So, let’s get right down to it:

Financial Defense wins Championships

A penny saved is a penny earned, but we often forget about the saved part. We think our paychecks are ours, despite being earmarked for future expenses such as rent, loans, or food.

At least, that’s how I used to view my pay stubs. I often equated earned-income with being rich and wealthy. Eventually I realized that “rich” and “wealthy” are two very different concepts. One means a high level of pay while the other means a high level of assets.

In order to build and grow wealth, we need to have a high portion of our income going towards investments.

We need to have a high investment rate.

Luxuries and fancy stuff can come later in life.

This is tricky because higher income comes hand in hand with higher cost of living and higher tax brackets.

Financial defense means we’re careful to shelter more of our income by utilizing tax advantaged accounts and being overall frugal in our behavior.

This leads us right into ROI and Taxes.

Return on Investment (with Our Time)

A decent portion of the book is devoted to talking about purchasing vehicles. One person in particular spends months haggling and negotiating the price of a high end, foreign imported luxury car.

The ROI on the gentleman’s time was extremely low because he spent an obnoxiously large amount of time negociation down the price of a car he probably should not have purchased in the first place.

In other words, anything not worth doing is worth not doing well.

Our time is a limited resource and sometimes negotiations are a waste of that time.

Don’t get me wrong, there are times when a little negotiation goes a long way. My fiancee and I negotiated a better contract on our current home which saved us $2,400.

Tax Savings

Another example of ROI in my life was learning about taxes from the books. Specifically, learning how to pay my fair share without overpaying.

Millionaire Next Door details the stories of several millionaires paying a much smaller share of their wealth towards taxes in comparison to those who are aspiring to be rich.

The reason is twofold. The wealthy understand the difference between realized and unrealized gains AND the aspiring wealthy typically have higher taxes on their higher income.

In common IRS tax language, earned income is any money we receive within the year. Since this is the IRS, this commonly refers to cash (or cash equivalents) in hand. Promises of big bonus payouts next year are not factored into this year’s tax returns.

To mirror the results of the millionaires highlighted in the book, I’ve now maximized my tax advantaged accounts. Specifically, we’ve maxed out both our IRA’s accounts along with my HSA and 401k.

This one move has reduced my adjustable gross income (AGI), reduced my tax burden, increased my investments, and increased my net worth.

As I mentioned at the top, many of the best personal finance books cover this topic, but this was the first time I truly saw the benefits to tax avoidance strategies. (Not to be confused with tax evasion strategies which are illegal.)

Career Choices are Critical

John D. Rockefeller would never have become a household name if he decided to try and corner the corn market in America. Similarly, our choices in our careers yield much of the weight of our results.

Today’s society represents a myriad of free market mechanisms, societal input, and regulatory control to arrive at far ranging norms of pay across various industries. This pay might be proportionally out of scale with our human values because the market is not a pure reflection of our beliefs.

This is why a teacher of twenty kids is paid 0.001% of what a hedge fund manager makes in a year. No one is going to doubt the critical importance children play in our future, but the market has voted to pay more to the allocators of assets than to the teachers of our future.

We can endlessly debate the merit and value of our current market system, but that’s a topic for another day.

My solution has been to work within the system rather than try to change the system.

The Millionaire Next Door goes on to recommend careers in law, accounting & medicine, however; having read it as sophomore in college, it solidified my desire to become a licensed CPA.


The Millionaire Next Door was an eye opener. It also taught me that effective tax planning is a staple amongst the wealthy and often overlooked  by those who earn a high income.

My ROI on tax planning, negotiations, and other money hacks have helped accelerate my path to financial freedom. Lastly, my level of financial defense means I’m able to not only earn, but invest a large amount of cash into growing assets.

Have you read The Millionaire Next Door? What lessons did you find most valuable? What actions did you take after reading the book?


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