Back in the mid-1990’s, two guys named Thomas Stanley and William Danko wrote a book called The Millionaire Next Door. It was a compilation of their research profiling unassuming people who possessed a net worth of over one million U.S. dollars.

That was 20 years ago, so a million dollars today isn’t quite what it was then. Based on the current value of gold, US$1 million in the mid-1990’s equates to about US$3.5 million today.

That kind of money would give just about anyone a comfortable retirement. Even if $500,000 of that wealth were tied up in a debt-free home, you’d still be left with an annual passive income of $240,000, assuming an 8 per cent yield on the other $3 million. Not too shabby.

So how do you amass a nest egg like that? Here’s a summary, in my own words, of what Stanley and Danko reported about how unassuming people end up becoming very wealthy:

1. They start working early toward clearly defined, long-term goals.

Stanley and Danko found that millionaires would not wait until their income increased to begin investing. They would “save today's cash for tomorrow.” In Steemit terms, they would keep “powering up.”

Furthermore, when their income did increase, they resisted the urge to increase their standard of living. By keeping their focus on their clearly defined goals, they would be able to maintain the internal motivation required to make sacrifices and delay gratification.

2. They rigidly follow a household-spending budget.

Many of the millionaires that Stanley and Danko profiled claimed to have spouses who were “planners and meticulous budgeters” and who were even more conservative with money than they were. As partners, they were aligned on their goals and plans, and united in their commitment to meticulously plan their monthly household cash flow.

As John Maxwell says, it’s crucial to keep “telling your money where to go instead of wondering where it went.”

3. They forsake a status lifestyle in favour of financial independence.

Stanley and Danko found that the typical “millionaire next door” drives a boring middle class car and lives in an average middle class neighborhood. They are motivated by a desire for financial freedom, not by a need to be admired and respected by other people. Status objects depreciate and therefore lack value in the eyes of financially astute people.

People who are smart with money consider the opportunity cost of purchasing stuff that goes down in value. For example, rather than buying a new car on credit every two years, they quantify the future value of 30 years of car payments in light of compound interest.

4. Their parents trained them to be financially self-sufficient.

Stanley and Danko found that, at the time of their research, 80 per cent of America’s millionaires were “first-generation rich.” In other words, their parents weren’t loaded. They were forced to make their own way. By sacrificing and battling to achieve their financial goals, these millionaires developed the character to take responsibility for their own outcomes.

5. They refuse to fund lavish lifestyles for their children.

Just as they were taught to be self-sufficient, the “millionaires next door” also insist that their children find their own way. They connect their own success with the sacrifices that they had made and insist on their kids taking the same path.

Not only does this continue the generational blessing of sound fiscal responsibility, but it also insures that their children do not end up whittling away at their parents’ savings accounts later in life.

6. They tend to be entrepreneurial.

Stanley and Danko found that about half of the millionaires they profiled owned a business, and many of them worked in non-glamorous blue-collar professions. Rather than slave away for someone else, those who end up wealthy tend to prefer a working environment in which they can leverage off of the time of others.

Interestingly, they also found that millionaires who have more traditional jobs tended to prefer opportunities where they could serve or “target” wealthy people. Examples included financial planning, accounting and law.

In the future economy, I believe this entrepreneurial mindset will become increasingly more important. As automation ramps up, future wealth will belong to those who find creative ways to add value to the people around them.

7. They take calculated investment risks.

The unassuming wealthy avoid leaving significant amounts of money sitting around in low interest-bearing savings accounts. They educate themselves to achieve higher returns. In the past, that has come through the share market and real estate. Although Stanley and Danko found that millionaires occasionally invest in higher risk private business ventures, they tend not to gamble or speculate on things they don’t understand.

Millionaires invest in their financial education and the evaluation of their investment strategies. On average, millionaires invest almost twice as much time and energy into financial planning than non-millionaires in similar professions.

How much is enough for you?

If you can live a simple, minimalist life, you won’t need anywhere close to $240,000 per year. For most of us, a passive income of $80,000 per year, or even less, would be life changing.

In my day job, I mentor property investors. I first shared some of the ideas in this post in an article I wrote for PropertyInvesting.com

Follow Me: @jasonstaggers