All Articles
Investing

Millionaire on an average salary – is that possible?

When you picture a millionaire, what comes to mind? Lavish lifestyles, luxury cars, and sprawling mansions? The Millionaire Next Door, a groundbreaking book by Thomas J. Stanley and William D. Danko, shatters these stereotypes. The book reveals that many millionaires lead surprisingly modest lives and owe their financial success not to high incomes, but to disciplined habits and smart financial decisions.

In this blog, we’ll explore the five key principles outlined in The Millionaire Next Door, unpack their practical wisdom, and discuss how you can apply them to achieve your financial goals.

The Five Key Principles of Wealth Building

1. Live Below Your Means

One of the most striking revelations in The Millionaire Next Door is that true wealth is not about spending big – it’s about spending less. Many millionaires live frugally, saving a significant portion of their income rather than indulging in expensive lifestyles. They prioritize value over appearances, often driving used cars, living in average neighborhoods, and avoiding unnecessary debt.

How to Apply This Principle:

  • Create a realistic budget and stick to it.
  • Avoid lifestyle inflation; just because you earn more doesn’t mean you should spend more.
  • Focus on needs over wants, and learn to differentiate between the two.

By living below your means, you free up resources to invest in wealth-building opportunities rather than chasing fleeting luxuries.

2. Save and Invest Consistently

Wealthy individuals prioritize saving and investing as core financial habits. The authors of the book found that most millionaires allocate a significant portion of their income—often 15-20% – to savings and investments. This discipline allows their wealth to grow over time through the power of compounding.

How to Apply This Principle:

  • Pay yourself first by setting up automatic transfers to your savings or investment accounts.
  • Take advantage of tax-advantaged accounts like 401(k)s, IRAs, or similar vehicles in your country.
  • Start early; the sooner you begin saving and investing, the more time your money has to grow.

Consistency is key. Even modest contributions can grow into significant wealth over decades.

3. Avoid Status Symbols and Peer Pressure

The book highlights that many millionaires avoid the pressure to “keep up with the Joneses.” They don’t buy luxury items to impress others or signal their success. Instead, they focus on building wealth quietly and effectively.

How to Apply This Principle:

  • Resist the urge to compare your lifestyle with others.
  • Prioritize long-term financial security over short-term gratification.
  • Be mindful of advertising and societal pressures designed to encourage unnecessary spending.

By focusing on what truly matters—financial independence—you can sidestep the traps of materialism.

4. Be Self-Sufficient and Entrepreneurial

A significant proportion of millionaires are business owners or self-employed professionals. The authors note that self-sufficiency, hard work, and entrepreneurial thinking are common traits among the wealthy. These individuals take control of their financial destiny and focus on creating multiple income streams.

How to Apply This Principle:

  • Consider ways to diversify your income, whether through side hustles, freelance work, or starting a business.
  • Invest in your education and skill development to increase your earning potential.
  • Look for opportunities to create value, whether in your current role or by pursuing entrepreneurial ventures.

Taking initiative and embracing self-sufficiency can be transformative on your wealth-building journey.

5. Prioritize Financial Education and Planning

Finally, The Millionaire Next Door emphasizes that millionaires are often meticulous planners. They understand the importance of setting financial goals, tracking expenses, and continuously learning about personal finance.

How to Apply This Principle:

  • Set clear, measurable financial goals, such as saving for retirement or paying off debt.
  • Educate yourself on topics like investing, tax planning, and financial management.
  • Use tools and apps to track your progress and adjust your strategy as needed.

Financial success isn’t just about earning money—it’s about managing and growing it effectively.

Quintessence: Wealth Is Built on Habits, Not Income

The core lesson of The Millionaire Next Door is that wealth isn’t about how much you earn; it’s about how much you keep and how effectively you grow it. The majority of millionaires are ordinary people who have mastered the art of living below their means, saving consistently, and prioritizing long-term financial security over short-term pleasures.

This mindset isn’t reserved for the elite—it’s accessible to anyone willing to adopt disciplined habits and stick to them over time.

arvy’s takeaway

At arvy, we believe that the principles of The Millionaire Next Door are timeless and universally applicable. Building wealth is less about luck or talent and more about intentional choices. By living frugally, saving and investing consistently, and staying focused on your long-term goals, you can achieve financial independence and security.

Share with your friends. Your support means the world to us.

Subscribe to newsletter

The Weekly shows you the big picture, every Friday, in 5 minutes. Join us on our journey and let's unleash your potential as an investor together.