The Millionaire Next Door

Hello. I am reading the millionaire next door and I have a question for you. I am at page 91 in the book and the book talks about how the more one earns the less one invests (on a salary basis). If you read the book the authors create a notion that entrepreneurs have a higher net worth than highly educated individuals. I was wondering if one was the type of highly educated person that is frugal could this lead to a higher net worth than an entrepreneur? THE BOOK is basically stating that entrepreneurs who are millionaires (not on average) are wealthier than those who hold highly skilled positions. Is this not wrong. If you invest 15% of your pretax income as a corporate lawyer making a couple hundred thousand dollars a year how is this worse than a business owner who is doing the same. I felt like this book could be a little biased. I am the point in my life right now just entering college next fall and I am trying to go into college with the idea that entrepreneurship does not always create riches, frugality does. My father started a successful business with over 200 employees now and does really well for himself and is very frugal (I am not trying to brag I am just trying to give you a sense of where my mind is at). I am just trying to go into college with a level head and to think that business does not always create riches. Is this true? Every successful person in my family is an entrepreneur and everyone that isn’t is less well off. I am just really confused right now. IS ENTREPRENEURSHIP REALLY THE ONLY SURE PATH TO A HIGH NET WORTH IN THIS COUNTRY?

He did not say you have to have it one way OR the other. The main idea concept is that don’t depend on a job to be get rich, think outside the box. He profiled or studied real millionaires and derived a pattern.

I am not trying to be rude, I am just wondering. If you are not reliant on a job and think out side the box, then wouldn’t you be an entrepreneur. I am trying to say that being an entrepreneur might not be as great as the authors are trying to suggest. In the book the author made a point of that wealthy and immigrant roofing contractor who told his kids to become highly educated doctors, lawyers and accountants. Don’t you have a higher probability of having a higher net worth as a highly skilled laborer if you are frugal? That is kind of where I am coming from. The author never adressed the would be entrepreneur who was highly unskilled and ended up loosing all his money and working the average 9-5 job for the rest of his life.

Well, you are comparing highly paid profesions such as doctors and lawyers, and even within these groups you dont have that large percentage of riches. Lets use another example, teachers, engineers, nurses, …etc.

You will attend college and will be taught about being successful by someone who makes less than what you will make when you graduate.

Among those with a job, whats the percentage of those who become truely rich? Odds are better tha you can become rich on your own provided you have the knowledge/education and the drive to get there. A job is a great bridge or tool to help you achieve your goals, but if it becomes the only means of becoming rich, then the odds are not in your favor.

Ok thank you for your time. This thread was probably really dumb of me. I was just trying to figure out if it was worth it to invest money into becoming a highly skilled individual (accountant, doctor, lawyer). Essentially this is still kind of stupid because if I dont have the passion I will be miserable anyways. I am interested in investing so I should pursue it regardless of the income I will generate in the begining.

Let’s not equate high net worth with high income.

If you sell all of your assets and pay off all your debts, what is left over is your net worth. Your net worth is your wealth. The higher the net worth, the greater the wealth.

You have a high income (regardless of education) and spend all of it on the symbols of status. The big house with a high mortgage and expensive upkeep, a fancy car that will depreciate by half in the first two years, expensive schools for the kids, expensive clothes, the expensive accessories to go with the clothes, and the frequent entertaining tell everyone else that you are successful. Maintaining the appearance of success takes a lot of money, so you need to keep making the high income to keep the expensive lifestyle. If you don’t save, don’t invest, and don’t put anything aside for retirement, if you spend all your income to support your lifestyle, you won’t have a high net worth.

If you read a little further, you will see that the author’s show that the average highly paid (and often well educated) professionals don’t have any savings, have no investments, and have nothing set aside for retirement. Because they spend nearly all their high income to support their lifestyle, they are not wealthy.

The author’s are not saying that the highly paid professional could not be wealthier than the less paid and perhaps less educated wage earner. They are saying that the average highly paid professional spends all his money on the trappings of appearance and status, and does not save, does not invest, and does not have the high wealth that could have been possible just by living below their means.

On top of that, a lot of “high paid/profile” job consume huge amounts of hours, phyical and emotional energy. In the past I had a job where I was rapidly moving up in the corporate chain, jetting all over the world on business, etc, but I had absolutely no time to even check my 401k acct or anything(which got faltten in the tech meltdown). I realized that I while I bustin’ my hump all those night, weekends, etc, nobody was watching out for my future. Now I have a more relaxed job working 45-50hrs a week, but plenty of time on nights and weekends to have have slowly built a real estate profolio of more than a dozen property with 30+rental units in the past 7 yrs. In my eyes, working hard is key, but leave time to at the end of day to build up YOUR business whethers real estate investing, some hobby that turns into a business, etc.

I read the book years ago and I can tell you the premise I felt behind the book was more materialistic habits of the college educated…Doctors,Lawyers and higher ups (corp business execs) feel the need to live lavishly in comparison to a successful blue collar business(person) because they feel they deserve this even though many can’t afford it…And yes I firmly believe that being in business is far better off than having a high paying position…For the simple reason that many that go the corporate route never reach the top of the mountain or even that close…But at the same time these over educated types are pressured to hang their BS degrees in a fancy house,have their wife most likely not working,driving a fancy car,wearing fancy jewelry,joining beach clubs/country clubs,keeping up with the joneses…Owning your own successful business is a real cash cow…Unlike any other income you can imagine…I grew up around both kinds of men and I can say that 30 years later the blue collar businessman is having the last laugh by far…I have a relative that graduated from Yale etc and he is currently unemployed and living in a co-op while many of the frowned upon GED grad’s went on to own Boar’s Head routes,real estate,franchises etc…All the while the overeducated guy was trying to become Jack Welsh and ended up stalling at the mail room so to say…Brains and an education are no guarantee to success,neither is going into business…But what I can say is the blue collar guy will live a better life and have more time than kissing up to the man the rest of his life…

I was lucky enough to have both in my life (by being a diligent workaholic) and my business far outweighs my career…But at the same time I see many in the corp world always looking,asking,researching for blue collar business opps…They dream of making other income than that check that they share with Uncle Sam and their trophy wife who is home,unemployed,spending every day,not contributing a dime,raising a couple of bratty spoiled kids just like her and she is probably getting shagged by her personal trainer while bozo is trying to maintain her primped lifestyle…


You are correct that most new entrepreneurs fail. In fact, most new businesses of any type fail in a short period of time. However, that doesn’t mean that YOU will fail. The reason that most businesses fail is that people don’t understand key business principles, especially expense and cash flow issues.

The world has changed over the past 20 years. In the past, a person could get a job with a big company and expect to work there all their lives and retire with a nice pension. Those days are over! There is now intense competition from overseas and American companies must be lean and mean. They can not afford to have overpaid employees and they can’t afford expensive pensions and expensive healthcare.

In my opinion, the safest person can do in this environment is to be self-employed. At least you can control your own destiny if you’re self-employed.

I also believe that education is important. If you start your own business and it fails, you need some way to make a good living. Having a college degree is important and helps to open many doors throughout a lifetime.

Finally, there are a lot of key concepts in the Millionaire Next Door. In the front of that book, there is a look at the typical millionaire. They stay married to the same person (divorce is expensive). They don’t spend money of expensive suits and expensive toys. They aren’t trying to keep up with the Joneses. That’s not to say that you can’t have nice things and still be a millionaire. One of the things I do is buy a lot of things used (not new). Want a Jaguar? How about a 2002 instead of a 2007. Want a motorcycle? Does it really need to be a new $30,000 Harley or are there other brands that are really cool? Expensive suits? Who wears a suit?

The Millionaire Next Door is an excellent book. Take the advice in it to heart and you’ll go far!

Good Luck,


Its true that most businesses fail… Heck MOST Investors fail… 95% will never make money or buy a house for profit… That is a shame… I would say it is because they just wanted to replace their day job and have a subordinate mentality. Everyone should read the other business book E-Myth by Michael Gerber. In it he writes about an owner who was a great pie baker and thought they could run a pie baking business… In reality they had no idea of the cost of business.

I see this all of the time. A new investor will say” heck if I make 15k on this transaction that’s 4months salary”… Not realizing that they also need to make money for business expenses and rainy days. Most sell themselves short.

When I hire contractors to work on my houses I see the same thing… Many trades i.e. painters and plasterers will work for wages not taking into consideration that their tools and vehicle will need to be replaced eventually and when that time comes they don’t have the money because they were working for wages.

In my family my wife is a school teacher, My Son is a Fireman, another on is in Nursing School, My Daughter is getting her degree to teach High School English, another son wants to be a CHP officer the other son is in the construction business, probably working for wages. I bring this up because they all see me making money in real estate but they won’t take the jump. Maybe they don’t have to since I am. But it is still weird that the security of their “Profession” mainly a government profession is better for them then the gamble of riches.

And the reality is we don’t want everyone to be rich… If everyone was no one would be…

Michael Quarles

4444, you are obviously a very smart, top level student looking for an excuse to not put in the effort to go through college.

So listen closely because I am going to give you some very good advice, arrived at through a lot of years of experience.

Go to college and wring as much out of it as you can. Go at it like you are going to get your money’s worth and then some. Make them give you as much knowledge as you can squeeze out of them.

Knowledge is power. It’s a bromide and it is also one of the truest truths you will ever hear.

College is a source of knowledge, if you are willing to absorb it. Absorb all of it. You’ll be surprised as you go through life what you end up needing that you never thought you would ever use.

College is a great source for networking and establishing relationships with people who are going to end up in positions of power. Networking is very valuable if you want to be successful.

It is a heck of a lot easier to be an entreprenuer if you have money and good credit. It’s really a b*tch to have a brilliant idea and try to get a business off the ground when you have $79, no job, and you’ve ruined your credit because you have no money to pay your bills.

A nice fat salary can give you a launch pad.

College is good training about putting your head down and powering through tough times. Not that getting through that sociology class you don’t like is as tough as having your work force go on strike and burn your factory down, but it is at least some practice at sticking to it and seeing things through to the end.

The top highly skilled people with salaries are always going to be better off that your average entrprenuer. Your top entreprenuers are always going to be better off than your average guy on a salary.

You want to be at the top of the food chain? Then train yourself and prepare to be at the top of the food chain. College is a valuabe tool. Use it to your advantage.

If you have drive and you learn your business, I don’t think it makes much difference whether you choose a salary or choose to start your own business.

Frugal? Yes. No one gets rich by spending their money. Everyone I know who has serious money will pinch every penny until it screams. If a penny is going to leave their hands, they are going to get good value in return.

If you are frugal, it will lead to financial success, regardless of whether you decide to take the big salary, or you decide to start your own business.

I totally agree with this. I never skipped a class in 4 years and was a sit-in-the-front row kind of guy because I had mentality of getting every ounce out of it. Sure, there was tons of garbage to listen/sit thru, but education (much like investing and business) is about looking for gold nuggets, sorting the wheat from the chaff, etc.

they don’t have the money because they were working for wages.

I see this all the time…People buy businesses and don’t realize they are simply buying a job…Owning a good business is to create wealth,not to buy a job just for a working salary…My mentor in business always told me the best money is the money you don’t have to work for…

The Millionaire next door just confirmed what I already knew…But all the same it’s a great book…I think the best piece of advice I was ever given was to remain humble no matter how much you make…No one likes the show off guy who looks,dresses and talks like a pimp…Plus in the end it’s a waste of money…

Education is very good to have,college is never wasted time…But don’t think it’s a free meal ticket…In the end you will most likely never use %95 of what you were taught in school in real life/business…All that’s important is the school you went to,your GPA and the % in which you graduated…

But don't think it's a free meal ticket..In the end you will most likely never use %95 of what you were taught in school in real life/business...All that's important is the school you went to,your GPA and the % in which you graduated..

You’re right about that. I haven’t used 5% of what I learned. However, I took a bowling class in college and that did make me a better bowler!

On the other hand, that piece of paper (degree) has opened MANY doors over the years!


Our focus is wrong. We are focusing on being millionaires and not being rich. Rich people and upper middle class people look the same to everybody. They are both millionaires but upper middle class people are working to stay there. Doctors lawyers executives are upper middle class. Rich people don’t have to go to WORK to stay where they are. Entrepreneurs can be rich as long as there is no block on the organizational chart that they fill. If there is a block for them then they are self employed and thus upper middle class. If there is no job description for what they do then they are rich. The real difference between rich and upper middle class is rich people own their status and upper middle class people’s status is owned by their employer.


I agree with your idea, but your wording isn’t quite accurate. Most doctors, lawyers, and other professionals are not millionaires - that was the point in The Millionaire Next Door. They have high incomes but relatively a low net worth. The definition of a Millionaire is someone with a net worth of $1,000,000. Of course, we both know that a net worth of a million dollars won’t buy you a cup of coffee at the corner gas station. Only if those assets are producing income will you be able to enjoy that java.

However, I agree with your premise that those that are truly “rich” are those that can live their lives without having to work to provide for daily living expenses. Of course, if you ask 100 people for their definition of rich, you’ll get 100 different answers. For some people, it would be an annual income of $X per year. For others, it would be having a net worth of $X. For you and me, it might be the ability to work when we want and to have a certain lifestyle.


Just finished the book. I learned a lot about who I want to become and how my childhood impacted my desires. It was interesting how the afluent in america tell their kids to become highly skilled individuals (like lawyers, doctors and accountants). I got a small academic scholarship to a big state school and got in as a “business major”. I plan on expanding my knowledge and have always wanted to write for the school newspaper. I plan on majoring in either finance or entrepreneurship, but who knows. I plan on finding what I am truly passionate about. What i realized is that anyone in america can live “happily” both financially and materialisticly with knowledge and a budget. I just plan on finding something that I am passionate about and as of now investing is something that I would love doing (all asset classes, though). I would like to thank everyone for their advice.

Interesting thread.
I read this book a few years ago and wanted to point out a small detail.

The original question was entrepreneurs having a greater net-worth than highly educated professionals.

One key ingredient in this that has not been touched on is that a successful entrepreneur can add the value of his business to his net-worth. Most professionals can’t do this because they work for someone else or own a piece of a business with a partnership structure designed to net-out all available cash to the partners.

I went to university and got a degree in business administration. It has taken me almost 10 years to unlearn what I was taught and re-educate myself in doing creative real estate deals. University is a machine designed to produce middle managers for fortune 500 companies. Why do you think they keep making endowments to them?

If you want to benefit yourself, you need to create your own education plan and learn useful information. Visiting sites like these and doing the courses for sale are a great way to do this. By earning degrees that others recognize, you are, in effect, seeking validation from those other people. STOP! they aren’t going to pay your mortgage.

I would recommend that young people stay very skeptical when studying at university. Always ask “why do they want me to think this way?”


Dave NB Can,
Very good post…As I still feel that college is never wasted time it is even more important to understand how the real world of business works…I did have this issue when I was in college…I clearly remember the day in my business administration class when I asked the professor what experience he had to be teaching the course and how many different industries/businesses he has owned/operated in his years…He answered zero,he learned it all from reading…From that day forward I never looked at any professor the same…I learned everything that made me successful from real life mentors…People I can call/IM/meet in person…While college helped me to get in the door of my career my street knowledge moved me up the ladder of life…Book smarts and SAT scores will only get you so far…But if you can be smart enough and open minded you will excel in the game of business…Eyes and ears open,mouth shut and be humble and no question is stupid when you are trying to learn…