The authors recall their surprise when they were hired by a trust fund to study decamillionaires (people with a net worth of over $10 million). Their subjects arrived wearing plain, regular clothes and rejected the fancy food offered. Stanley and Danko argue that people this wealthy are almost always frugal. They lament that the media loves rags to riches stories about those who spend lavishly and have incredible lifestyles, sending the wrong message about how to build and maintain wealth. Unfortunately, most people think a lifestyle of outrageous spending is the norm for the wealthy. The authors wonder what the American audience would think of a realistic millionaire who, through ingenuity, discipline, and frugality, accumulated a couple million dollars. They believe many would feel “threatened” by the idea that they must spend less in order to become rich.

The authors report that millionaires spend much less on clothes than people believe, and that these “mundane” and disciplined practices are not sensational enough to be celebrated (35). In fact, many lower earners and savers spend more on their clothes than millionaires because they want to seem wealthy. They might even think that the typical millionaire, who does not bear markers of high status, has less wealth than they do. The authors suggest that spending more than necessary on high-status markers is a poor use of funds; these things will simply depreciate or go out of fashion.

To build wealth, it is crucial for both partners in a relationship to be frugal: Couples cannot accumulate money if one spouse is overspending. The authors compare having an income to financial “offense,” while saving is like “defense.” Everyone needs to do both to become wealthy. A crucial aspect of “defense” is budgeting—it is how millionaires build and maintain wealth. The authors admit that some millionaires earn so much they can get away without budgeting. However, they feel these people are “freaks of economics” who are overly celebrated by the press (41). The average millionaire carefully budgets their spending, ensuring that they save money and have a plan for a comfortable retirement.

Most self-made millionaires are goal-oriented and consciously set daily, weekly, monthly, and yearly objectives for themselves. Most of their goals revolve around creating security and opportunities for themselves and their families, rather than spending all their wealth. People who are more financially secure are, predictably, much happier than those in the same income and age category who are not. People who have high incomes but low net worths live in fear of economic and professional downturns. The authors discuss “Teddy,” a man who grew up poor and longed for a more comfortable lifestyle. With a high-income job he purchased a house, boats, cars, and more, but always felt inferior to others; he was on a constant treadmill of working and spending. Teddy learned how to be an “under accumulator” from his parents, who never saved anything. The authors assess how much wealthier Teddy’s parents would have been if they had spent their cigarette and alcohol money on investments, showing how small expenses become big expenses over time. People like Teddy can transform themselves from being over-spenders into savers, but it requires cutbacks and sometimes professional help from a financial advisor.

Smart ways to include wealth include legally reducing one’s taxable income and investing in things which will appreciate in value but cannot be taxed as income. The authors advise the reader to keep their “realized income” as low as possible in order to avoid taxation. For instance, a retired person might only sell as many stocks or bonds as they need to live, allowing the rest of their wealth to continue to compound. Stanley and Danko claim that even high-earning, well-educated people can be very careless and naive about money and planning. They advise the reader to purchase less expensive homes in more affordable areas, keeping their mortgages low—this allows them to save more money.

The authors’ research provides persuasive evidence that multimillionaires tend to behave differently from the stereotype of the flashy free spender. They challenge American culture, blaming Americans and the media for overvaluing status symbols and eschewing security and discipline. By including exchanges with real people, they have interviewed and sharing their stories of failure or success, the authors make their claims more credible and impactful. For instance, they refer to the “depressing” reality that many seniors face when they realize they have not saved enough for retirement. They recall an elderly cardiologist who had little savings due to his overspending and how he asked, “Will I ever be able to retire?” (67). This drives home the authors’ main point: Frugality today leads to wealth tomorrow.

Chapter Lessons

• Being frugal is an absolute necessity for most millionaires
• Earning income is “offense” while saving is “defense” and everyone needs to do both
• Over-spenders live in fear and insecurity while savers have peace of mind
• Minimize annual expenses such as indulgences, income taxes, and mortgage payments as much as possible

Reflection Questions

• What is the better skill in your household: “offense” or “defense”? How could you improve your weakness?
• The authors show how people learn financial habits from their parents. Which habits have you learned that you will like to keep, and which would you like to outgrow?