"Байлықтың Күтпеген Сыры: Америкалық Миллионерлердің Жасырын Әдеттері"

1996 book by Thomas J. Stanley and William D. Danko

The Millionaire Next Door: The Surprising Secrets of America's Wealthy is a 1996 book by Thomas J. Stanley and William D. Danko. The book is a compilation of research done by the two authors in the profiles of American millionaires. The authors compare the behaviour of those they call "UAWs" (Under Accumulators of Wealth) and those who are "PAWs" (Prodigious Accumulators of Wealth). Their findings, that millionaires are disproportionately clustered in middle class and blue collar neighborhoods and not in more affluent or white collar communities, came as a surprise to the authors who anticipated the contrary. Stanley and Danko's book explains why, noting that high income white collar professionals are more likely to devote their income to luxury goods or status items, thus neglecting savings and investments.

Under Accumulator of Wealth (UAW) is a name coined by the authors used to represent individuals who have a low net wealth compared to their income. A doctor earning $250,000 per year could be considered an "Under Accumulator of Wealth" if their net worth is low relative to lifetime earnings. Take for example a 50 year old doctor earning $250,000. According to the authors' formula he should be saving 10% yearly and should have about $1.25 million in net worth (50*250,000*10%). If their net worth is lower, they are an "Under Accumulator". The UAW style is based more on consumption of income rather than on the method of saving income. A Prodigious Accumulator of Wealth (PAW) is the reciprocal of the more common UAW, accumulating usually well over one tenth of the product of the individual's age and their realized pretax income. The authors define an Average Accumulator of Wealth (AAW) as having a net worth equal to one tenth their age multiplied by their current annual income from all sources. E. g., a 50 year old person who over the past twelve months earned employment income of $45,000 and investment income of $5,000 should have an expected net worth of $250,000. An "Under Accumulator of Wealth (UAW)" would have half that amount, and a "Prodigious Accumulator of Wealth (PAW)" would have two times. This metric has been criticized since, for example, a 20 year old making $50k a year should have a net worth of $100k to be considered an "average accumulator of wealth". That makes little sense since it would take a new graduate years of strong savings and investments to accumulate that amount. Critics further argue that formula fails to take into account compounding interest; younger people up to age 45 or so will generally have much less as a percentage of income than older wealth accumulators due to compounded growth. Most of the millionaire households that they profiled did not have the extravagant lifestyles that most people would assume. This finding is backed up by surveys indicating how little these millionaire households have spent on such things as cars, watches, clothing, and other luxury products/services. Most importantly, the book gives a list of reasons for why these people managed to accumulate so much wealth (the top one being that "They live below their means"). The authors make a distinction between the 'Balance Sheet Affluent' (those with actual wealth, or high net worth) and the 'Income Affluent' (those with a high income, but little actual wealth, or low net worth).

Anyone who spends more than they earn will fail to increase their net worth.

Buying or leasing brand new, expensive imported vehicles is poor value. Buying status objects such as branded consumer goods is a never ending cycle of depreciating assets. Even when you get a good deal on premium items, if you choose to replace them frequently, the older items hold no value and have become a sunk cost. Living in a status neighbourhood is not only poor value, but you will feel the need to keep buying status objects to keep up with your neighbours, who are mostly UAWs. The authors make the point that Hyperconsumers must realize more income to afford luxury items and become more vulnerable to inflation and income tax.

PAWs are not misers who put every penny under their mattress. They invest their money for good returns, and will consider riskier investments if they're worth the reward. Many put money not only in the stock market, but invest in private businesses and venture capital.

The authors also make the observation that UAWs tend to have children who require an influx of their parents' money in order to afford the lifestyle that they expect for themselves, and that they are less likely to have been taught about money, budgeting and investing by their parents. The authors talked about the seven most common traits that showed up among those that have accumulated wealth. Those common traits are the following; high income, low expenses, frugal, wealthy, breaking even (Spartan), spender, broke, and breaking even (Lavish). On generational wealth the authors stressed the following: the first generation to have arrived in America usually works hard, saves prodigiously, owns a small business, lives in or near that business, and passes on his wealth to his kids frugally. The next group usually works in their parent's business, but may move on. They tend to spend more lavishly and save less. The next or 3rd generation, may have sold the business already and may have already spent all the accumulated wealth. Finally the 4th generation is not hard Working at all, spends crazily and has little. Many are literally broke and nothing like their great grand parents. This is known as Generational Wealth Destruction, and is a main tenet in the authors work.

The most prominent idea shared by UAWs and American society in general is "spending tomorrow's cash today".

The "Better Than" theory is one of the main reasons many UAWs don't hold true to their promise to invest after a rise in income. The theory is that the UAW's "necessity" for that income will also rise in response to the risen income level. Most UAWs are possessed by possessions. According to a study conducted by Yale and stated in The Millionaire Next Door, individuals measure the level of their success through comparison to nearest neighbors and/or closest relatives.

In addition to the "Better Than" theory, there is a "Better Off" theory. This theory suggests that those UAWs who grow up in a poor family and land a high income career have a tendency to feel the need to be "better off" than their parents. To a UAW, "better off" implies a larger house, a respectable degree, a foreign luxury car, a boat, and a club membership. A hypothetical example is provided in The Millionaire Next Door to explain this concept. Teddy Friend is a typical UAW that grew up in a poor family but was still exposed to a rich lifestyle at school. He saw "rich kids" and decided that one day he would be "better off" than his poor parents. Sure enough, when Mr. Friend reached a high income level, he indulged himself in possessions. He bought a large home along with a foreign luxury car. Doctors have a reasonably high level of income; therefore, it is more likely that doctors have relatively low amounts of net worth. The same holds true for those that have lower levels of income. They are more likely to accumulate more in relation to their level of income. Of course, there are those who are an exception to the rule on both sides of the spectrum. Mr. Friend's parents were poor, but they lived a high consumption lifestyle leading them to be UAWs.

When children are brought up in a high consumption, UAW lifestyle, they are more likely to become UAWs themselves. More often than not, the children of high income UAWs become more devout believers in the UAW system than their parents. The children grow accustomed to extreme luxury and believe that they too must possess the same luxury as their parents, even if their income is much less. It is an extreme manifestation of the “Better Off” theory. On the other hand, PAWs may also produce UAW offspring. If the Friends had invested the money they had been consuming, they would have been considered PAWs; however, the standard of living that their son, Mr. Friend, grew up in would have been diminished. Mr. Friend would have felt an even higher desire to be “better off” than his parents were. He may still have been a UAW regardless of whether his parents were UAWs or PAWs.