How to Become the Secret Millionaire Next Door

I just finished reading the book The Millionaire Next Door last month and was absolutely thrilled with the concepts laid in there, because it's exactly what I've envisioned my life to be all along. Mrs. Frugal Hacker and I dream of becoming a closet millionaire one day, hidden in plain sight, wearing very normal-people clothes, living among very normal middle class job-going people, in a very unassuming suburban neighborhood where most people take public transit to work everyday.

But then you glance look at our bank balance and net worth, and oops: 7-figures. Everyone else around us? Barely $100k, if that. How is that even possible?

Let's get this straight, we don't want to become millionaires for the sake of becoming millionaires. That would be a grave mistake. We want to become millionaires because a million dollars in net worth produces roughly $40k in passive income every year via the 4% rule. And $40k a year is a very generous "salary" for 2 very simple people living very simple lives in most parts of North America. The thrill of becoming a millionaire shouldn't be to brag, to join some kind of elite club, or to build wealth for the sake of building wealth. The goal should always be financial independence which is a noble goal in and of itself. Achieving the holy grail of Financial independence (FI) means a few things for us and for anyone who chooses to pursue it with as much vigor and passion as us:

  1. You're off the job market, which means you don't report to a boss or a CEO everyday. You only report to yourself, your immediate family, and your stuff
  2. You don't have to wake up and go to a "job" everyday, repeating the same boring commute day after day
  3. You've significantly de-risked yourself financially by not relying anymore on a single job run by a single CEO in a single industry in a single city. Instead you are funded by the slow but steady increase in productivity of the world's economy through your diversified international portfolio.
  4. You've built sufficient financial buffer in your life to handle most normal catastrophes. You'll have a savings buffer of not a thousand dollars, but several hundreds of thousands of dollars.
  5. All the skills you've gained in the pursuit of financial independence come in handy for the rest of your life. Tough life skills such as frugality, minimalism, investing, DIY tasks, budgeting, financial forecasting, spreadsheets, system hacking, understanding and then exploiting loopholes, etc. These skills will be even more indispensable when you're retired and your "salary" is much more limited, leaving no room for mistakes.

Once we become millionaires, which should hopefully happen in about 3-4 years (before I turn 35), we will continue to reign in our spending just like we do now. Perhaps even more aggressively. We will still continue to shop at Costco for most of our grocery and non-grocery purchases. We will still rake our own leaves, mow our own lawn, cook our own food, and clean our own apartments including all bathrooms. We will probably only buy used cars for the rest of our lives to save on the depreciation that someone else has paid for. Besides, you aren't what you drive as the book so conclusively states.

The frugal millionaire is the new kind of millionaire who remains a millionaire solely to pave his/her own path in life and not have to be dependent on a silly 9-5 job to fulfill basic life needs. The neo-millionaire recognizes that the best use of money is to buy time: time saved from not having to work 9 hours a day, or commute 2 hours a day. Is this a worthwhile pursuit for you? We hope so. It should be worthwhile for anyone.

The first step to "waking" up is to realize that going to a job should not and can not be the be-all-end-all of life. It is merely a means to an end. Real life only begins when you become financially independent. It's when you realize that you go to a job only to save up enough money so you don't have to go to a job anymore. Do you want to catch fish for yourself every single day for the rest of your life, or would you rather the fish catch itself and show up on a silver platter at your doorstep twice a day for the rest of your life? It's your call. Saving up to buy an automatic fishing net is the only worthwhile pursuit to get out of the rat race.

According to the book, The Secret Millionaire Next Door possesses the following key traits:

  • Is incredibly frugal in everything she buys
  • Embraces minimalism as one of the most effective means to achieve hyper frugality
  • Is very thoughtful and strategic in where she spends the 3 most limited resources in life: time, energy, and money (TEM). No wastage whatsoever will be tolerated.
  • Realizes that passive income is significantly superior to active, earned income and works incredibly hard everyday to continuously move all active income sources to passive over time.
  • Never uses a car as a means to showcase her net worth. To the secret millionaire next door, a car is merely a utility vehicle that gets you from point A to point B. A used car purchased from a far away town will do just fine. The older the car model, the prouder she gets.
  • Never accepts handouts from anyone unless in circumstances of dire emergency. She will say no to any form of economic outpatient care (EOC) from well-off parents and other potentially rich relatives. Instead, she will focus on living within her means, remaining independent in her financial decision making, and making ends meet with only the salary she gets from her passive income and work.
  • Never constantly anticipates an inheritance from her parents or grandparents. "It'll come when it comes if it comes" is the only approach she'll take, and that windfall money will never be earmarked for any purchases other than as a vehicle for further passive income.
  • Is careful in providing hand-outs to siblings and/or relatives because doing so only increases their dependence on her. This doesn't teach them to become financially savvy; it only handicaps them further to the point where they can't live on their own without constant outpatient care. Instead, her money is best spent in the form of investments in education, skills and training of her siblings/relatives, and perhaps a seed fund to help setup a sound professional services firm in a location where demand for that service is clearly visible.
  • Is thoughtful about raising her kids and teaches them the importance and power of money from an early age. Her kids will not grow up expecting handouts from parents, but will instead understand the value of frugality and minimalism even when there isn't a strong need for it. Her kids will focus on gainful education and amassing skills and appreciating assets rather than actual money, and will probably not even find out their parents are and have been millionaires for over a decade until they turn 15 or so.
  • Raises her kids in a manner that makes them not constantly anticipate their future million dollar inheritance. She also realizes that the best way to split any inheritance is to do so exactly equally between all children, regardless of how much they need it. This prevents them from assuming receipt of a larger share of the inheritance if they end up failing economically in life.


What do you think? Do you still want to become the secret millionaire next door that nobody really knows about until they see you mowing your lawn on a Tuesday afternoon at 2pm? Does this kind of life excite you? If it does, you will truly enjoy the book about how the majority of America's millionaires actually live their lives everyday.

Mr. Frugal Hacker

Born in India. Grew up in Dubai for 15 years. Studied and lived in Canada for 8 years. Backpacked in Europe for 2 months. Lived in Toronto for 1.5 years. Working in San Francisco for the past 4 years. Runner, cyclist, software engineer.