Close your eyes and picture a millionaire. What do you see? A man in a custom-made suit behind the wheel of a luxury car, smoking an expensive cigar? Or maybe a woman dressed from head to toe in designer clothes, sitting in a cafe sipping a cappuccino while surrounded by shopping bags from high-end stores?
The people in these pictures could be real millionaires, but they could also be living the high life on credit. A real millionaire is much more likely to be the old guy in line behind you at the supermarket with a fistful of coupons, or the neighbor who’s always out in her garden pulling weeds in her torn dungarees.
These people belong to the “invisible rich.” They have plenty of money, but they don’t splash it around — which is one reason they have so much. If you aspire to become a millionaire, learning how these real millionaires live could be the key.
How the Invisible Rich Live
When people think about what it means to be rich, they often picture scenes out of the 1980s TV series “Lifestyles of the Rich and Famous” and successors like MTV’s “Cribs.” These shows toured the fabulous homes of the glitterati, dwelling lovingly on luxurious features such as massive swimming pools, fleets of cars, private jets, and gold-plated bathroom fixtures.
This is the opposite of how the invisible rich live. A more accurate picture of their lives appears in the books “The Millionaire Next Door” by Thomas J. Stanley and William D. Danko, written in 1996 and updated in 2010, and “Everyday Millionaires,” written by Chris Hogan in 2019.
When Stanley and Danko set out to study the wealthy, they started by looking in upscale neighborhoods, only to discover that most people in those areas weren’t really rich. So they started seeking out people with high net worth. After surveying more than 11,000 millionaires and personally interviewing over 500, they found the average millionaire looked quite different from most people’s idea of one.
Twenty years later, Hogan decided to see whether Stanley’s and Danko’s findings still held true in the 21st-century economy. With a team of researchers, he interviewed over 10,000 American millionaires. And like Stanley and Danko before him, he found several interesting — and often surprising — things these folks tended to have in common.
The millionaires next door (MNDs) whom Stanley and Danko talked to had an average net worth of $3.7 million (about $6.4 million in today’s dollars), and most of their fortunes were self-made. Typically, they were the first generation in their family to be wealthy and had not inherited anything from their parents.
Their median income was $131,000 (about $228,000 today), and about two-thirds of them earned that money working for themselves. Most of them worked between 45 and 55 hours per week.
The authors noted that many of them worked in businesses most people would label as prosaic or even dull. The group included “welding contractors, auctioneers, rice farmers, owners of mobile-home parks, pest controllers, coin and stamp dealers, and paving contractors.”
Hogan’s team also found that most millionaires are self-made. Only 21% of the millionaires they spoke to had ever inherited any money, and only 16% had inherited $100,000 or more. Only 21% of them had grown up in upper-class or upper-middle class homes. Nearly half said their families were middle-class, and over 30% described them as lower-middle or lower-class.
The millionaires Hogan and his team interviewed weren’t quite as well off as the MNDs. Only about 11% had a net worth over $5 million, while the rest had between $1 million and $5 million. They also earned lower average incomes. Only 31% of them averaged more than $100,000 in household income per year, and only 7% had averaged more than $200,000 over their careers.
However, like Stanley and Danko, Hogan’s team found that most millionaires worked in ordinary, even boring jobs. The three most common careers among them were engineer, accountant, and teacher. Many had started out in the military. Nearly four-fifths of them had made their money mainly through investing in employer-sponsored retirement plans.
Nearly all of Stanley and Danko’s MNDs — about 95% — were married. In fact, the majority of them had been married to the same person for the majority of their adult lives. However, most of them did not have two-income households, which could have given them an edge in accumulating a sizable nest egg.
For about 70% of these couples, the husband earned at least 80% of the household income, and about half of the wives didn’t work outside the home at all. (Most of the book’s subjects were older men, born in the 1930s and 1940s when this was a typical pattern for family life.)
However, this doesn’t mean the women of the house contributed nothing to its financial success. Most men Stanley and Danko spoke with said their wives were “planners and meticulous budgeters,” often more conservative with money than themselves. Being on the same page financially could explain why these marriages were generally successful ones.
By the time Hogan did his research, millionaire family life had changed a bit. Only 80% of the millionaires they interviewed were married — far less than 95%, but much more than the 49% of the general population who were. And 63% of them were in a first marriage, compared to only 38% of the general population.
More significantly, modern millionaires are much more likely to be from two-income households. Hogan’s team talked to both men and women, and most of those quoted in the book say both they and their spouses contributed to the household finances.
Most of Stanley and Danko’s MNDs also had kids and were raising them to stand on their own financially. The MNDs never received what Stanley and Danko call “economic outpatient care” — substantial gifts or other financial help — from their parents, and they were not providing any to their adult children.
The only aid MNDs believed in providing to their children was a good education. Over half of them sent their children to private schools, and many boasted about having enough saved up to put their children through college.
Hogan’s everyday millionaires made similar choices. They worked to put their children through college, but 71% of them said they had never given any financial support to adult children over the age of 25.
You’ve probably heard the expression “champagne tastes on a beer budget,” which refers to people who love luxuries but can’t afford them. Most MNDs live a lifestyle that’s just the opposite: beer tastes on a champagne budget. They tend to spend modestly in many of the areas where other consumers like to splash out.
Stanley and Danko found that the average MND owned a house worth $320,000 (about $557,000 in today’s dollars). In many cases, this was far more than the homeowner had paid for the house. Nearly half of all MNDs had been living in the same home for over 20 years and had seen its value rise significantly.
Hogan’s team found much the same thing. Their average everyday millionaire had lived in the same home for 17 years. Their average house size was 2,600 square feet. Two-thirds of them had already paid off their mortgages — taking just over 10 years to do so, on average.
Most of the MNDs Stanley and Danko spoke to drove cars that were at least two years old. They preferred to buy cars rather than lease them, and they leaned toward American-made cars. Nearly 37% of MNDs said they bought their most recent car used rather than new.
The average MND had paid $24,800 (about $43,150 in today’s dollars) for his current car. The average American car buyer at the time, who had far less wealth, was paying about $21,000 for a car, or $36,500 in today’s dollars.
Similarly, Hogan reports that the average everyday millionaire drives a four-year-old car with 41,000 miles on it. More than 4 in 5 everyday millionaires have no car loan.
More than half of Stanley and Danko’s MNDs said they had never paid more than $400 (about $700 in today’s dollars) for a suit. Their typical top price for a pair of shoes was $140 ($245 in today’s dollars), and for a wristwatch, it was $235 (about $410 today).
Hogan’s team didn’t ask about suits and wristwatches. Instead, they asked their everyday millionaires how much they typically spent on a newer status symbol: blue jeans. Their average response was $35.
The first time the authors held a gathering for a group of people with a net worth of $10 million or more, they tried to make them feel at home with a buffet featuring pâté, caviar, and two fine wines. However, their guests didn’t touch this fancy fare, except for the gourmet crackers.
For future gatherings, Stanley and Danko toned down their menu. Their guests ate much more heartily when they served club sandwiches, coffee, soft drinks, beer, and, for the evening sessions, Scotch whiskey.
Fine dining wasn’t a high priority for Hogan’s everyday millionaires, either. He reported that the average millionaire spent $200 or less on restaurant meals each month.
Stanley and Danko found that MNDs seldom purchased luxury items or high-end brands of any kind. One of their favorite retail stores was J.C. Penney; over 30% of all MNDs had a Penney’s credit card.
Hogan reports that wealthy people also have other frugal shopping habits. At the grocery store, 85% of them habitually use a shopping list, and 93% use coupons. Other research backs up this finding. In 2017, CNBC reported that some of the richest Americans — including Lady Gaga, Warren Buffett, and NBA star Carmelo Anthony — are coupon users.
Key Habits of the Invisible Rich
As you can see, the lifestyle of the invisible rich isn’t glamorous or exciting. However, it does have a lot of other benefits. Along with their financial independence, the invisible rich enjoy happy, stable marriages and kids who don’t depend on them for money as adults. And, according to Stanley, Danko, and Hogan, most of them also enjoy the work they do.
If this kind of life sounds appealing to you, adopting the personal finance habits of the invisible rich can help you achieve it. Here are seven key practices that could help you become a “millionaire next door” one day.
1. Live Within Your Means
One thing all invisible rich have in common is that they’re savers, not spenders. Stanley and Danko report that MNDs consistently save at least 15% of the money they earn each year, and often much more. Similarly, Hogan says 70% of millionaires saved more than 10% of their income throughout their working years.
Although the invisible rich could easily afford tailor-made suits, sports cars, and vacation homes, most of them don’t indulge in these luxuries. Stanley and Danko say the three words that best describe the rich people they’ve met are “frugal frugal frugal.”
How to Do This
Of course, it’s much easier to live within your means when you’re bringing in over $200,000 per year than it is when you’re struggling to make ends meet on minimum wage, or even on the median household income of $68,703 per year. However, no matter how small your income is, it’s much easier to live within it if you make a budget, perhaps through an app like Tiller.
According to Stanley and Danko, more than half of all MNDs stick to a budget, despite their high incomes. Hogan also says 64% of everyday millionaires have continued to live on a budget since reaching financial independence. And among those who make budgets, 93% consistently stick to them, compared to 77% of the general population.
Even millionaires who don’t have a formal budget usually make a point of setting aside money for savings by “paying themselves first.” In other words, they stash away a chunk of each paycheck in investments before they pay for anything else.
Often, they do this through a workplace retirement plan. According to Hogan, 79% of millionaires invest in an employer-sponsored retirement plan, such as a 401(k) or 403(b). However, 74% say they invest in other assets outside a company plan, meaning most of them do both.
2. Educate Yourself
Although the invisible rich don’t spend a lot in most areas, one thing they don’t skimp on is education. About 80% of Stanley and Danko’s MNDs were college graduates, and 38% held advanced degrees. Among Hogan’s everyday millionaires, 88% had college degrees, compared to just 33% of the general population.
More than half of MNDs had set aside money to put their children — and sometimes even their grandchildren — through college. When Stanley and Danko asked them if they would agree that formal education “is/was of little use to [them] in the real world of making a living,” only 14% said yes.
Formal education isn’t the only kind that matters to the invisible rich. They also do their best to learn and educate themselves throughout their lives, especially in their chosen fields — for instance, by studying trade journals. According to Hogan, 96% of millionaires are always trying to learn new things, and 86% believe challenging themselves will make them smarter.
Other recent research backs up this view. Steve Siebold, who has interviewed more than 1,200 of the world’s richest people and is now a self-made millionaire himself, writes in his book “How Rich People Think” that most rich people are avid readers for educational purposes, not just for pleasure. An Insider article on the book quotes him as saying the average wealthy person’s house has “an extensive library of books they’ve used to educate themselves on how to become more successful.”
Another Insider article reports a similar view from Thomas C. Corley, who spent five years researching the daily habits of 177 self-made millionaires for his book “Change Your Habits, Change Your Life.” According to Corley, 88% of all rich people devote at least 30 minutes per day to reading for education or self-improvement.
How to Do This
There’s strong evidence that having a college degree makes it easier to earn a good living. According to the Bureau of Labor Statistics (BLS), in 2020 at the height of the COVID pandemic, people with a bachelor’s degree earned an average of $1,029 per week and had only a 5.5% chance of being unemployed.
By contrast, those with only a high-school education had a 7.1% unemployment rate and earned only $938 per week on average. So, if you’re still young and trying to decide whether it’s worth going to college, the answer — at least in terms of future earnings — is probably yes.
For graduate school, however, the answer is less clear-cut. People with advanced degrees have the lowest rate of unemployment, just 2.5%. However, the highest earnings go to those with professional degrees, such as law and medicine, rather than doctorates.
Also, Stanley and Danko note that while many people with advanced degrees earn high incomes, that income doesn’t always translate into high net worth. They point out that because these people spend so many years in school, they get a late start on earning and investing money, which makes it harder for them to build wealth.
In short, if your goal is to become rich, it makes more sense to educate yourself in ways that don’t interfere with your ability to earn and invest money early on. One option is to work while you’re in college and invest your earnings.
You can also educate yourself during your working years by reading books and magazines, listening to educational podcasts, or watching TED talks on YouTube. This kind of informal education helps you build useful knowledge that can make you better at earning and investing down the road, all without interrupting the earning and investing you’re doing right now.
3. Choose Your Career Wisely
One of the hallmarks of the invisible rich, Stanley and Danko found, is that they “chose the right occupation.” About two-thirds of them were self-employed, with about half of them running their own businesses. The other self-employed MNDs were professionals such as doctors, lawyers, architects, and financial professionals.
However, that doesn’t mean these MNDs chose their careers based on earning potential. Instead, they chose jobs they liked enough to work hard at them, often for 10 to 14 hours per day, without feeling tired of the job. Hogan notes that 70% of millionaires are early risers, compared to 44% of people in general — and only 38% of them retired after hitting $1 million in net worth.
As one multimillionaire interviewed by Stanley and Danko put it, “The successful man is a guy who works at a job, who likes his work, who can’t wait to get up in the morning to get down to the office.”
How to Do This
Although most of the millionaires Stanley and Danko interviewed were business owners, that doesn’t mean most business owners become millionaires. In fact, according to the BLS, roughly half of all new businesses fail within five years of their startup date. Even “successful” businesses often barely manage to eke out enough profit to survive year after year.
The few business owners who have gone on to make millions have one thing in common: they love what they do. So if you’re thinking of starting a business, the first thing you need — before a business plan, startup cash, customers, or suppliers — is a passion for the business.
Keep in mind, also, that owning a business isn’t the only way to become a millionaire. Only 18% of the everyday millionaires Hogan’s team talked to were business owners. The majority of them had made their money working at ordinary jobs.
But that doesn’t mean just any job will do. Hogan says 96% of millionaires enjoy the work they do, and 64% say they love their jobs. So, if you’re choosing a career or considering a career change, don’t just look at the salary. Think about whether it’s a job you can love enough to put in the effort needed to succeed.
4. Invest for the Long Term
The invisible rich get a lot of their money from investments. The MNDs Stanley and Danko spoke with invested an average of 20% of their income every year. Most MNDs also devoted considerable time to planning and managing their investments, while 68% of Hogan’s everyday millionaires said they relied on financial advice from a financial planner.
However, both groups had one thing in common as investors: they played the long game. Hogan says the average millionaire reached $1 million in net worth at age 49, after decades of work and investing. Not one of them said that they had become rich by making a killing on a single high-earning stock.
Where stocks are concerned, MNDs tend to be “buy and hold” investors. They buy good stocks and hold on to them through market ups and downs, rather than trying to figure out when is the best time to sell them for a profit.
The buy-and-hold strategy works best when you’re able to hold on to your investments for a long time. That allows you to ride out the dips in the market and take full advantage of the rises. It also puts the power of compounding on your side. You can keep reinvesting the dividends from your stock so your earnings grow even more over the long run.
An investor who bought and held stocks in the S&P 500, reinvesting the dividends, over any 30-year period from 1950 on would have seen annualized returns of at least 9%. Even an investor who had put money into the market right before it crashed in 1929 would have earned over 8% on it by holding those investments for 30 years.
How to Do This
When you’re investing for the long term, it pays to get started as early as you can. If your company offers a retirement plan, such as a 401(k), start putting money into it as soon as you qualify. Invest at least enough to take advantage of employer matching funds, since this is basically free money.
Another way to get started with investing is to set up your own automatic investment plan. Open an investment account through a broker like M1 Finance or Stash, then set up regular automatic transfers into it from your savings account. If you don’t have much money to invest, you can use a micro-investing platform, such as Acorns, to get started with just your spare change.
An example from “The Millionaire Next Door” shows how even small investments can add up over time. The authors profile a family of “modest means” who smoked approximately three packs of cigarettes per day between them. If they had put all the money they spent on cigarettes into tobacco stocks instead, the authors calculate they could have made more than $2 million.
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5. Pay Off Debt
In general, the invisible rich prefer to avoid debt. Stanley and Danko’s MNDs said they borrowed money to invest, particularly in their businesses, but they never relied on credit to finance their purchases. Hogan adds that 95% of millionaires save up for big purchases rather than using credit, as opposed to just 67% of the general population.
Most MNDs do carry credit cards, according to Stanley and Danko. However, they’re usually basic Mastercard or Visa cards, not gold or platinum American Express cards or high-end department store cards. Hogan adds that 73% of millionaires have never carried a balance on a credit card.
Modern millionaires go even further in avoiding debt. Hogan says 90% of them have never had a business loan, 63% have never had a home equity loan or HELOC, and 68% have never had student loans. Millionaires covered in both books frequently mention that they are completely debt-free.
How to Do This
In some cases, debt can be useful. Borrowing money to buy a home, get a college degree, or start a business helps you in the long run because these are assets that will put money in your pocket. Other kinds of debt, such as borrowing to pay medical bills or buy a car so you can get to work, aren’t really investments, but they’re necessary.
It’s important to draw the line between good debt and bad debt, or borrowing money to pay for things you don’t need. Borrowing money for a big, unnecessary purchase, such as a new stereo, is bad debt.
So is borrowing for a one-time event, such as a luxury vacation or even a wedding. There are plenty of ways to enjoy a vacation on a budget, and there’s evidence that a cheaper wedding is more likely to lead to a lasting marriage than a pricey one.
Even with good debt, there’s no point in borrowing more than you need to. For instance, you may be able to avoid taking out a car loan by buying a used car rather than a new one. You can also minimize or avoid student loan debt by applying for scholarships and choosing a cheaper college.
If you have to borrow money, minimize your interest payments by shopping around for the best interest rate. And if you already have bad debt, such as credit card debt, make a plan to pay it off as quickly as possible.
6. Avoid Lifestyle Inflation
Most everyday millionaires developed their frugal habits in their youths before they became rich. In this regard, they’re just like young people who live on a tight budget. It’s easy to live frugally when you’re young and broke since you don’t have a choice.
The difference is that the invisible rich don’t give in to lifestyle inflation as their earnings increase. Instead of trading up, they hang on to their modest houses, cars, and clothes.
For instance, billionaire investor Warren Buffett still lives in the house he bought for $31,500 back in 1958. Its value has risen to about $650,000, but that’s still only around 0.001% of his wealth. Similarly, Walmart founder Sam Walton bought a Ford F-150 pickup in 1979 and drove it until his death in 1992.
How to Do This
If your goal is to become rich, focus less on looking like a rich person and more on living like these real millionaires. As long as it still runs well, keep driving your old car instead of upgrading to a new one with a hefty monthly payment. When it’s finally time to buy a new car, stick to basic, reliable models instead of fancy or high-status brands.
Follow the same rules with other purchases, both large and small. As long as your house is big enough for your family, resist the urge to trade it in for a bigger house in a ritzier neighborhood.
And even if you’ve moved up to the executive suite, don’t be embarrassed to continue buying your clothes at cheaper stores like Sears or J.C. Penney. After all, some of the folks shopping there might be millionaires; you just can’t spot them by looking.
7. Marry the Right Person
Most of Stanley and Danko’s MNDs, as well as Hogan’s everyday millionaires, were married. And, importantly, most of them had been married to the same person for the majority of their lives. That’s significant because while there are many financial benefits of marriage, they don’t apply to a marriage that ends in divorce.
According to a 2005 study published in the Journal of Sociology, married couples tend to have a significantly higher net worth per person than their peers who remain single. However, couples who marry and then divorce end up significantly worse off than their single peers.
Living like the invisible rich, then, doesn’t just mean getting married; it means marrying the right person. And for everyday millionaires, the right person is typically someone who shares their frugal values. When Hogan’s team talked to couples, they usually talked about their financial success as something they had achieved together.
Likewise, most of Stanley and Danko’s MNDs said their spouses were even more frugal than they were. One multimillionaire joked, “I can’t get my wife to spend any money!” Another recalled how his wife had thanked him politely for giving her $8 million worth of stock in his company before calmly returning to cutting out coupons at the kitchen table.
These frugal spouses played a key role in their millionaire households. As the authors put it, to accumulate wealth, it’s not enough for a couple to “play great offense” by making a lot of money; they also have to “play great defense” by spending as little of it as possible. Both sides of the game are vital if you want to save money and invest it to build a fortune.
How to Do This
The happiest couples share common values and goals, especially financial goals. If your ambition is to become financially independent, while your spouse believes money is for spending, it will be difficult, if not impossible, to keep you both happy.
If you’re still single, it’s a good idea to talk honestly about your financial goals with the people you date. This way, you can find out if you’re on the same page financially before you commit to a relationship that could be going nowhere.
If you’re already married, it’s not too late to sit down with your spouse and have a serious conversation about your financial needs and goals. They’re more likely to be on board with your financial plans if you hammer them out together as a team.
Unfortunately, following all these rules to the letter doesn’t guarantee you’ll end up a millionaire. For instance, if you find a job you love, but it only pays minimum wage, it will be hard to save much out of your low income no matter how frugally you live. Even if you start early and invest wisely, you won’t accumulate as much wealth as your better-paid peers can on the same plan.
However, even if living like the invisible rich isn’t enough for you to get ahead, it will certainly stop you from falling behind. Living within your means, steering clear of debt, and sensibly investing the money you save can’t absolutely guarantee you a wealthy old age. But at the very least, it can keep you from ending up in the poorhouse.