post written by: Marc Chernoff

20 Things The Millionaire Next Door Does NOT Do


The Millionaire Next Door Does Not Do...The millionaire next door does a lot to get ahead, but you can be pretty sure the list excludes the following 20 points.

The millionaire next door does NOT:

  1. Pay for Lawn Service – You could save $150 a month, get some healthy exercise and maybe even a bit of a tan just by mowing your own yard.
  2. Go to a Hair Stylist – Even the cheapest barber shops charge men $15 - $20 for a haircut these days. If you’re a woman, it may cost well over $50 a visit. Dying your hair? You’re broke!
  3. Use Time as a Measurement for Success – The millionaire next door measures success based on output quality, the results. The amount of time spent on something means nothing if the results do not meet the expectations.
  4. Buy Brand New Cars – Why would anyone pay the full retail price worth half a year’s salary for the fastest depreciating assent on Earth? We are brainwashed!
  5. Carry a Monthly Credit Card Balance – Carrying a monthly credit card balance only makes sense if you enjoy poverty. Monthly interest payments can add up to hundreds of dollars over the course of a year. Do not buy “stuff” right now that you cannot afford to pay for in cash right now!
  6. Eat Out on a Regular Basis – With the recent price increases in corn, wheat and dairy products, preparing your own food is already expensive enough. If you eat out you will pay triple the price. If done on a regular basis you will waste a few thousand dollars a year.
  7. Think He Knows It All – People who think they know it all stop learning and thus become unaware of new opportunities. Once you lose awareness, you lose.
  8. Socialize with People Who Waste Money – The people you socialize with influence your habits. It is impossible to save money if you constantly hang around people who blow it all.
  9. Desire Instant Gratification – You have to think long-term to attain long-term success. The millionaire next door desires long-term deferred compensation over instant gratification.
  10. Pay Retail for Name Brand Clothing – You can easily save hundreds of dollars a year on clothing purchases by waiting for sales or shopping at discount retailers like Marshalls. Better yet, avoid name brand clothing all together.
  11. Keep His Money in a Checking Account – If you want to increase your wealth you have to set your money up to make more money. Most checking accounts yield little to nothing in interest. Think long-term (5 years +). Invest in quality stocks, bonds and mutual funds, especially those with high yield dividends and interest. Or buy some land in an area with growth potential.
  12. Replace What is Not Broken – The millionaire next door fixes things. Fixing something is usually significantly cheaper than buying a brand new replacement, especially if you fix it yourself.
  13. Visit the Tanning Bed – $25 a month for skin cancer? Where do I sign up? If you want a tan, move to Florida. For those that live in Florida and still go to the tanning bed… WOW!
  14. Impulse Buy – Impulse buying wastes money and leads to a cluttered house full of “stuff” you don’t need or use. If you see something you like at the mall, walk away. Think on it for a day or two. If it still holds value in your mind, maybe it’s worth buying. Never buy something the first time you see it.
  15. Waste Time on Senseless Activities – They say time is money. In actuality, time is far more important than money. Time is your life. If you waste it, you will fail.
  16. Focus His Attention on Negative Obstacles – If you focus all your attention on negative obstacles, you will lose sight of the finish line. You can’t get there if you can’t see it.
  17. Bet The Farm – The millionaire next door takes evenly weighted, calculated risks on long term investments. If you go “all in”, you’re gambling, not investing.
  18. Fly First-class – Would you pay $400 to sit in a leather chair for a couple of hours? That’s exactly what you do when you fly first class. Huge waste of money!
  19. Rent – The millionaire next door has a long-term mindset. In the long-term, owning something is always more cost effective than renting it. The key is to purchase quality products for long-standing use.
  20. Earn Every Dollar He Makes at His Day Job – Two words: Passive Income. You can be sure the millionaire next door invests his money wisely. These investments create a solid passive income stream that grows over time. If your money isn’t making you more money, you’ll never be wealthy.

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52 Comments

  • Cool post, and amusingly written.
    I’d say plenty of millionaires do the stuff on the list though, it’s just that maybe they didn’t while they were getting that first million or two.

    http://www.reachingabetterplace.com

  • It sounds like Kiyosaki…but it’s all true! Especially the part about tanning bed - I don’t understand people, who act like if they have to go there. It’s sick and this disease has its name.

  • Instant Gratification is the killer in America today, thats why credit card usage is at an all time high. The I want it and I want it now mentality is taking over and our finances are hurting. Good post, lets do what Millionaires do and live debt free. - Debt Free Hispanic

  • How wonderful is this post?!

    I’m a longtime lurker, delurking to say thank you for this. The essentials of keeping/earning money are so basic. I hope to be there one day myself.

    As a funny aside, we just returned from a vaca to Mexico (given to us as a gift so it was essentially free) and on every single flight we had to walk past those snooty first class passengers and instead of thinking, “I’m envious…” I just thought, “How stupid to pay for first class on a 90 minute flight.”

    I really like your blog guys.

    Stepher

  • PrecociousChild
    April 23rd, 2008 at 4:39 pm

    You mean… 20 Things The Self Made Millionaire Next Door Does NOT Do.

  • @Richard:
    Good point. At a certain level of wealth, I assume you’re right… some self-made millionaires will probably begin to give in to temptation.

    @Wesoły:
    It all traces back to the worlds unfortunate, endless obsession with superficial appearance.

    @Stepher:
    Thanks for the kind remarks. It’s great to hear from a regular reader. ;-)

  • As a frequent poster I must add that:

    The one thing that you forgot to mention about folks who sit in first class is that the majority of them are sitting there due to upgrades and not people wasting extra cash…
    And one can use the upgrades still rather easily…I do 30 to 40 trips per year so that qualifies for the upper echelon of upgrades…so I pay coach fare (no matter what level of coach to include Internet fares) and can upgrade with U.S. Airways 3 to 5 days in advance…Example: My last trip I paid $310 round trip and sat in first class…sounds nice and frugal but had extra space comfy seat and free booze…when you fly to the Left Coast you even get real meals…

    Most of our politicians due the same thing I frequently fly from DC to Orlando and sit next to Senators Mel Martinez or Bill Nelson…most Congressmen are still sitting in steerage but if you dedicate yourself to a airline they will reward you…whether a low level worker bee who travels all the time or a U.S. Senator. The other benefits that rich due by this dedication lead to discounts at the airport clubs (have seen Newt Gingrich, Bill Bennet and Joe Liberman in the US Airways club at Reagan…saw Teddy Kennedy at Logan many years ago going into the Delta Club)…

    But I agree that paying First Class rates up front is both snobbish and unnecessary…if you don’t get upgraded get your seat booked in a exit row…it is only 3 inches less leg room the first class…and only $5 a drink…cheaper then the airport bar.

    Very few millionaires choose to mow their lawns…if they can be using that time for additional activities the $150 worth of their time is worth the sacrifice…think about how much your time is worth and you could be doing with it…really calculate how much you make to how much more beneficial the lawn guy needs that revenue…I digress..

    If you are using that time to take a MBA course, start another business, work on your investments…seems that unless you can make more hours in the day then you time is more valuable then mowing the lawn…plus as a smiling joking comment isn’t that what gyms are for???

    :-)

    p.s. One way to eliminate revolving credit…get a American Express card

  • In todays “money from thin air” economy this is not how millionaires are made.

    1. Most millionaires are born in a particular tribe which runs the banks. (Shhh…. don’t tell anyone!)

    2. Go to bank run by own tribe, borrow lots of money. Bank will give a large cheque book with lots of pages.

    3. Write cheques and buy assets, “invest” or start business. If the venture succeeds pay back the loans else bank will write it off.

    4. Do all the stuff the blogger says millionaires don’t do, enjoy life!

  • @Duck and Tinfoilz:

    You guys seem to be confusing the main subject of this article with a millionaire who inherited his or her money. “The Millionaire Next Door” refers to self made millionaires who save diligently, invest wisely and create long term financial success on their own. Most of these people are very frugal, and thus spend their money only when they must.

    @Tinfoilz:
    Your final comment suggesting that you should waste your money so you enjoy life is the exact mindset that gets people in serious financial debt.

    Thanks for the comments guys.

  • Great post.

    It’s always good to get a good list to reflect on. And some of the examples are simple but sometimes over looked.

    Keep up the great work!

    Here’s to Your LifetoSuccess,

    John Clark
    http://www.lifetosuccess.com
    http://www.habitbustingsystem.com

  • I’ll disagree with you about renting. It makes a lot of sense for single people like me to have the ability to move quickly for job changes, etc. When you don’t have kids, having a house isn’t as important.

    My roommate has ultimately lost money and easier options by buying the house he was renting. He’s now thinking of renting the house out and moving into an apartment to spend more time with his kid.

  • Point 1. and 15. contradict each other.

  • @Stewart:
    You’re right, there are situations where renting makes more sense than owning. There are exceptions to every rule. However, if you look at long term statistics over the course of 10-20 years, people who own typically come out ahead of people who rent (house, car, etc.).

    @Stephan:
    Only if you think getting exercise and fresh air while maintaining your property is a true waste of time. You could argue this either way, I suppose.

  • The problem many people face is that they are not willing to wait for their rewards until they have actually earned them.

    If you spend money before you have it and life takes a bad bounce, you will find yourself forced into choosing among bad choices. But if you save the money you DO have, when life takes those same bounces, you’ll be able to capitalize on them.

    You’ll go from taking a beating to profiting from someone else’s.

    “You must choose wisely.”

  • @Bill:
    Great points! You are perfectly describing the long-term vs. short-term catch-22. You have to be willing to give up certain short-term pleasures in order to obtain long-term stability and satisfaction.

  • There are some good points here for everyone. But, a lot of the items sound good on the surface, but do not stand up as well with scrutiny.

  • @KitchKitch
    The millionaire next door works a regular job and saves his (or her) money. He invests wisely and builds wealth over time. I think the points here address this fairly well. Certainly there is always room to expand upon the information given.

  • […] Monday” is advice on the financial front… I came across this great article titled 20 Things the Millionaire Next Door Does NOT Do via a link from Simple Mom. (Yeah, yeah, I know - I’m not a mom. But they have some good […]

  • My husband and I married 7 years ago. He had gone from being a millionaire to flat broke. He was married for 23 years to someone that shopped for pleasure and had never worked a day in her life. His life changed when he met me. I am a teacher who lives rather frugally and I invest in rental properties. We have managed to put together a portfolio of rentals worth about 1.3 million. I drive a Volkswagon, he drives an old truck. We have a beautiful home…life is good.

  • #21. The millionaire next door is likely to be content with an antennae and foregoes the $40 per month ($4,800 over the next 10 years, not counting the accrued interest) for cable TV

  • I also have to disagree about the renting part. It is a falacy that owning makes you richer over time. Most houses over 20 years will gain about 4-6% per year, just barely beating inflation. If you are able to put away the cash in investments every month, in a locale that has high home values, but low rent (90% of metropolitan areas in the US), you can live in the same type of house as an owner and yet have none of the liabilities, and much more of the assets (other long term cash investments).

    A home is only an asset when it is paid off, or the value skyrockets. This takes 15 to 20 years, like you said. If you run into money troubles, your home will take several months to sell off rather than being able to up root and cancel a lease. If you are renting and putting away cash every month, you should shoot for being able to pay cash for the same home in that 15-20 year time span - then you are ahead, and much smarter than the person who bet all his cash on the house and had to go without any disposable income or back foot for 20 years…

  • The core teaching of this work is simple: everything you buy must be an asset, not an expense. All expenses must reduced as possible as they do not grow, it ‘dies’ as soon as it is used. Among assets there are good, and less good, and those that appreciate and are easily made liquid are better than not so.

    When I came to this country in 1983 from Vietnam, I had $25. I work as janitor, and broke my first million in 1999, and it continues to grow. I am now a language teacher. I am appalled by Americans who are raised here and are clueless on how to many money in this wonderful land. It is easy and I would never have had the opportunity. Hard work is rewarded, as well as a sound strategy.

    I write this simply to return the favor, and I will not be here again.

  • I find everything on the list correct, except #1. I almost didn’t read the rest. Millionaires value there time, and an hour of their time is worth more than 40 bucks. I personally know three millionaires and there advice to me was to quit wasting my time in things that I can pay someone to do for less than what my time is worth. And they specifically (all three of them separately) mentioned mowing the lawn, among other things.

  • Quick grammar note for #17: It’s “you’re” instead of “your.”

    Otherwise, it’s a very interesting post with some great points.

  • […] 20 Things the Millionaire Next Door Does Not Do.  An oldie, but a goodie! @Marc and Angel […]

  • I think you should talk to a few ‘millionaires next door’ before you create a list like this. I am one of those millionaires next door and do few of these things.

    1. Pay for Lawn Service - Agreed. I mow my own lawn, but do pay for a service to mow my investment properties. My time is better spent, plus I can write off the expense.

    4. Buy New Cars - I have not bought a used car in 10 years. Sometimes the savings isn’t everything. The trick for millionaires is to have the vehicles attached to a business and then write off the depreciation through the business.

    6. Eat out - I eat out a lot. Again…log as business expense.

    I could go on. The bottom line is that millionaires do spend money, they don’t just save it. The trick is that they find ways to minimize the actual amount they are out of pocket and the amount of tax they pay.

    Want a huge one? I pay zero tax throughout the year. Then I pay it at tax time. Thus I have the money earning interest in investments for myself, not for the government. If you are getting a tax refund each year…you are leaving investment income on the table.

    3.

  • That’s my life in a nutshell…. but I’m not exactly a millionaire???

    Good post tho!

  • […] lot of people that are truly successful with money live a debt-free lifestyle.  If they do borrow money, they pay off the debt early to lower risk and avoid paying […]

  • Sorry…most of this makes sense…I’ve just never seen a “millionaire”, which is a relative term anyway, walking around without his/her hair cut. The investing part is kind of common sense, this just strikes me as another one of those hard-nosed, tough-love, Dave Ramsey-type money sermons.

    If you have to be told not to waste money, waste time, and to invest, then “getting rich” is the least of your problems. Just my two cents. :D

  • It’s not all about money. I’ve been both a MND and working mom and now single working mom. If you want it to be about the money, here are some other Not-to-dos:
    1. Don’t have a kid.
    2. Especially don’t have more than one kid.
    3. Divorce.
    4. Pay for private childcare, or education.
    5. Buy books or newspapers or magazines or videos or CDs or music players or game machines, especially for the children you should not have!

    I hope it’s obvious that these are five points I don’t agree with because the quality of life is more important to me than the quantity of money I have stting around making more money.

    Other ideas:
    1. Why a lawn? Get rid of it, and enjoy a garden. You could even raise vegetables, and eat the fruit of your spare time labor. I garden for pleasure, and put mulch on the lawn.
    2. There is a time to own property, a time to buy, a time to sell and a time to hire a property manager so you can sleep at night. Currently I rent, and own rental property, which is - you guessed it - taken care of by a property manager.
    3. Find something to do of value for your hair stylist and barter. Ditto for your massage therapist. I find both are essential people in my life.
    4. If the combo of a simple interest fee and balance transfer interest per month are less than what you can make in a higher interest investment account, why not carry a credit balance? Mortgages are based on the same principle, and you spend much more money in long-term interest than short-term. Have you calculated the interest you will have paid the bank over the next thirty years recently?

    About numbers 4 & 6: Guilty as charged. I will probably never do #4 again, but I love my van :)

  • I can’t say that I’ve ever seen a millionaire cut their own grass. Interesting.

    I believe that the principle is to use your time in the best way possible, making money - not doing menial chores. Those you hire out.

    Since a lot of your business depends on image, I think a good haircut is probably essential.

    While this list is good for someone trying to become a millionaire - it’s certainly not how millionaires live. Well, except maybe for eccentric ones…

  • My hubby quit mowing the lawn 18 years ago, and is still paying the same guy $20 a week to mow and edge and blow leaves away when needed. He never regretted the decision to pay someone else to do it. He was too busy making more money than that at his regular job.

  • I have read your review of the master piece book “The Millionaire Next Door”and want to say you done a good job,keep up the good work!

  • […] They do not use credit.  Debt is risky and it is a more expensive way to buy things.  Millionaires are much too smart to fall for this trap.  Live […]

  • I would like to use some of your information in my upcoming seminar entitled “Building Financial Security in an Uncertain World.” I will gladly promote your blog in exchange for this wonderful information.

    Please advise.

    Thank you!

  • Line 4 regarding buying brand new cars need not be true because of the so-called “adverse selection” (for more info see, e.g., http://en.wikipedia.org/wiki/Adverse_selection). This is especially true if one requires a so called “piece of mind.”

    In a similar fashion, line 19 regarding renting need not be true, especially in large cities or right now at the end of a credit cycle (for more info see, e.g., http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html).

  • cool

  • Time is money.

    Actually time is much more than money.. its your LIFE.

    Never heard it in those terms. Great comment. Really puts it in crystal clear perspective.

    Life is short, and we are dead a long time!
    Thanks

    TA Smith
    Creator, Smile-Therapy.com

  • Nice to see that this post is still getting attention, great lessons for anyone, no matter how much money you make.

  • “CleanFreak
    November 29th, 2008 at 8:35 pm I can’t say that I’ve ever seen a millionaire cut their own grass. Interesting.

    I believe that the principle is to use your time in the best way possible, making money - not doing menial chores. Those you hire out.

    Since a lot of your business depends on image, I think a good haircut is probably essential.

    While this list is good for someone trying to become a millionaire - it’s certainly not how millionaires live. Well, except maybe for eccentric ones…”

    in response to the above post:

    do you know any millionaire? The people you are thinking are millionaires are probably people who earn 100000+ per year and do not save a penny…they just spend to look like millionaires on cars, houses, lawncare etc. The real millionaire live in unassuming houses, drive older cars and don’t waste their money.

  • I think most ppl r missing the point about millionaries taking care of their own lawn. Most millionaries look take middle class people and they look like they dont have a million dollars. They would rather spend a couple hours a month mowing the grass then pay someone. Most millionare live in a modest middle class neighborhood. The little things like that is how they became millionares making 60k a yr with a family of 4. It is called living bellow your means and not worrying about keeping up with the jones’. You will also find that a lot of them do not have credit cards beside a bank card and operate a cash budget

  • They call these things common sense, though commen sense seems to have lost its commoness some time ago.

  • I couldn’t help but think as I read all the comments on this article that a net worth of a million dollars, while it is not that much anymore at all, is still beyond the reach of most of the souls who responded to this article. While this may come across very pompous, most of you will never understand what large responsibilities come along with large amonts of net worth, and what it takes to manage it.

  • Of course there is no formula for success except perhaps an unconditional acceptance of life and what it brings.

  • I’m not sure I agree with #17. I am a 28 years old private investor of the stock market, and while not a millionaire right now, I am pretty close. I drive a piece of crap car, I don’t own a house, and I have a wife but no children. My financial strategy consists of a freelance job that pays the bills, and everything else in the stock market. I have no preference for buying or shorting, and I keep a minimalistic portfolio of three stocks or less at one time.

    To me it seems pretty pointless to diversify your assets in your 20s. It’s more important to focus on eliminating debt and accumulating a nest egg as fast as you can early on.

  • I have a problem with the rent part: http://articles.moneycentral.msn.com/Banking/HomebuyingGuide/WhyRentToGetRicher.aspx?page=1

  • well, you should work and at the same time enjoy the fruits of your labour. i believe the trick is to not spend more than you are making. if you do, thats a great recipe for all mind ailments you can imagine. but again, you should’nt be squirelling every cent awaay and leeding a pauper’s life! Don’t people want to be millionaires to enjoy life??

  • Here’s a funny quote to make you smile :)

    Money is the root of all evil, and man needs roots. :)

  • This list reminds me of Rich Dad Poor Dad definitely on assets and liabilities. If you want to aquire money and if you never had it you have to suffer for it to appreciate it. Going out to eat is virtually pointless and serves to undermine aquiring debt. Getting less quality and quantity on the short haul ith saving and investments in long term success will pay off. My uncle became a millinaire and these are on point for nonmillionaires. YOu need investments to appreciate to grow in positive like looking in future trends like medical technology or alternative energy are good picks thatyou can tell anybody! Seriously I wouldn’t pick risky stocks though especially if that is all you have cause your assets could be thrown toward gambling. This is the big thing though is gambling away your instant gratification is a killer along with staying content with your lifestyle as is right now cause adjustments need to be made for the long term success. Reading more books from your local library on ssubjects many think boring are also ways to become successful. Mainly mathematics and economics along with some basic natural sciences and technology with health information like insurance and etc will help tremendously in investment information. As with most things, it takes a lot of work and still people fail so the time you put into it will pay off if your clever, smart and lucky enough to succeed. Understand yourself though on how your strengths not your weaknesses at all.

  • I have been meaning to read, “The Millionaire Next Door” for some time now. In order to goad myself into doing so I will be live blogging the book, with a post after each chapter.

    Follow along if you like at
    http://brownian-notions.blogspot.com

  • Wonderful points altogether, you simply gained a new reader.

  • Having just come from my financial adviser after an annual review of my portfolio, I decided to look up “millionaire next door” since this is the first year I’m one of them.

    The two that really are spot on are #’s 5 (I haven’t carried a credit card balance in 15 years) and 11 (Checking surplus goes into savings, which when it triggers a point goes into a laddered CD. When I get to a level there, I start rolling over and investing the matured CD’s in mutual funds and bonds.)

    I’ll add the top 2 things I have done that have helped me amass wealth fairly painlessly (besides of course, finding a good paying job)…

    1. Don’t have kids (not an option for some people, but it’s a choice I’m more glad than ever I made)

    2. Put savings first - I put over half my net income into my 401k and savings every month and live on about 40% of my net. My spouse does the same. Actually she saves way more aggressively than I do.

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