The rich are different from you and me, though maybe not quite like we think they are.
We imagine athletes, entertainers and, more recently, entrepreneurs, when we ponder the wealthy. But the enduring lesson of the classic personal finance book, “The Millionaire Next Door,” is this: Most of the rich grow wealthy because of modesty, thrift and prudence. They live happily in starter homes. They don’t subsidize irresponsible adult children. They have an allergy to luxury automobiles.
I doubt I’m the only one who returned to my well-worn copy to brush up this week, after the sad news of the death of one of the authors, Thomas J. Stanley, in a car accident. The book, which has sold more than three million copies since its publication in 1996, made its co-author, William D. Danko, a millionaire himself and helped Mr. Stanley achieve similar security and leave academia for research and writing.
Nearly 20 years later, Mr. Danko says he is still amazed at their good fortune, given that the book was never meant to be a money bible. Still, it stands today as a sort of promise that everyday people have a shot at accumulating true wealth through habits and not just outsize risk. That people in blue-collar businesses doing real work can, by saving well and not spending lavishly, achieve real comfort. And people continue to buy into it, even if such a path does require its own luck along the way to avoid job loss, natural disaster and health setbacks.
Mr. Stanley was a marketing professor when Mr. Danko first encountered him while a student in his class, a scholar more interested in the affluent as a target than as an adjective for the rest of us to try to tack in front of our names.
Mr. Stanley became a mentor, hiring him as a research assistant and encouraging him as he completed his master’s degree in business administration and Ph.D. The two got on well in part because of their similar blue-collar upbringings, Mr. Danko said, given that his father died when he was young and that Mr. Stanley was the son of a subway car driver. In 1993, Mr. Stanley told him about his idea for a book about wealthy people and asked him to be his partner on the project to crunch numbers and dig back into data the two had compiled earlier.
What they found was that there were plenty of people who lived in expensive houses with enormous mortgages in high-income neighborhoods who didn’t have much in the way of net worth. Lots of others, however, were quiet millionaires, having socked away plenty from ownership of the sorts of small businesses that young adults don’t clamor to get into. Mr. Danko has spoken often over the years of bovine semen distributors, with their long gloves and rubber boots and beat-up pickup trucks. All giggling aside, they are stand-ins for all sorts of unglamorous businesses that can yield small fortunes over time. Many of their owners and key employees are rolling in money, but you’d never know it by how they present themselves to the world.
The working title for the book in progress was “Big Hat, No Cattle,” calling to mind the phrase some people use to describe those who talk a good game but can’t back it up with action or power. But it was “The Millionaire Next Door” that ultimately stuck. They got a $50,000 advance, according to Mr. Danko, an enormous sum for a book by a couple of academics. He remembers the contract coming to him from Mr. Stanley with “PTL” written in the margins, for Praise the Lord. The publisher printed just 5,000 copies at first.
The book was eventually embraced as the personal finance guide the pair hadn’t exactly meant it to be. It also became something of an underground hit on the parenting circuit. “Mothers would buy it,” Mr. Danko recalled. “They said that our message was the one that they wanted to give to their children.”
The moms and dads who picked it up came in for some tough love if they were funneling money to their adult children. In the chapter “Economic Outpatient Care,” meant to lampoon parental good intentions gone awry, the authors noted that the more parents give their adult children, the less wealth those children accumulate. Adult children who get little or nothing from their parents once they are grown-ups end up accumulating more than those children who are beneficiaries of their parents’ largess. The giving of one-time gifts to get young adults going instead became habit-forming for everyone.
In the chapter “You Aren’t What You Drive,” the book makes a strong case against spending a lot of money on cars. The pair found that millionaires spent only 10 percent more than the average American on cars, and that one-third of the wealthy group bought used vehicles. They tend to see luxury hood ornaments and nameplates as unnecessary “high-status artifacts.” Indeed, if you do the math, as I did this week using the Dinkytown savings calculator, you can easily come up with reasonable situations in which an incremental $300 that you don’t spend on fancier cars each month can, if you save it over 45 years instead, turn into an extra $1 million by the time you retire. Seriously, you can become a millionaire just like that.
But even Mr. Danko, who ought to know better, has not always been able to resist the siren call of the Germans and their advertising. He bought one older Mercedes from a widowed friend, but his other one came new. “I was planning on buying a used one again, but the salesman was very good, and I was weak,” he said. “These luxury cars are clearly overrated when you have to get your oil changed, and it costs $200.”
Nowadays, Mr. Danko gets a $29 lube job on the wheelchair van that he drives, as he’s the primary caretaker for his brother, who has multiple sclerosis. It has dings because he can’t always see where he’s driving when he’s in reverse. He lives in the same house he always has, though he bought another one for his brother and treated himself to a good snowblower.
I asked Mr. Danko about Mr. Stanley’s spending habits, given that he makes passing reference in the book to owning an Acura loaded with options. Mr. Danko couldn’t answer; he and Mr. Stanley had not spoken for about 15 years at the time of his death on Saturday. Was there a rift over money, I wondered? Credit? Mr. Danko said he honestly did not know. “I have no animosity towards Tom Stanley,” he said. “I wish the very best for his family, and they continue to be in my prayers.”
I tried to reach them, but they did not return my calls, and I found out later that they were busy with the funeral. But I was curious that Mr. Stanley died behind the wheel of a 2013 Corvette, rammed by another driver who might soon face charges in the accident. Mr. Stanley too, it turns out, couldn’t help but have a taste for the finer things in life.
So does that make him a hypocrite? Or just a human being? All the best research tells us that we get much more joy out of doing things than having things, and a weekend drive in a car that goes really fast probably falls into both categories. But he earned that drive — and that car — by putting untold numbers of readers in a position where they’d be lucky enough to have that same choice themselves.