Stop Acting Rich Review – What Determines Wealth?

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Stop Acting RichSo you want to become wealthy? Have you ever wondered how others who have started with nothing retire with over $1 million in assets?

The best way is to study your prey — do what they do and you'll reap the same rewards. That's what the late author Thomas Stanley did for over 20 years.

In his influential book The Millionaire Next Door, Stanley discusses the typical life of a millionaire in depth. The Millionaire Next Door is an eye-opening book that goes against many misconceptions. In my opinion, this book forever changed the way I think about being wealthy.

To continue the theme, Stanley released a follow-up, Stop Acting Rich… and Start Living Like a Real Millionaire in 2009. The evidence he presents goes against the grain of what we typically see in the media and how most people assume the wealthy live. 

Our Rating - 8


In this follow-up to the landmark The Millionaire Next Door, Thomas Stanley details the habits and trends of America's wealthiest people. What constitutes true wealth? And how can you achieve it? This book provides answers.

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The Three Types of Wealthy

In this book, Stanley breaks down wealthy people into three types:

  1. Glittering Rich (GR) – The ones you see and hear about in the press. This is what most people think of when they think “wealthy.” The Glittering Rich are hyper-consumers, but no matter how much they spend, it's not going to affect their overall net worth.
  2. Income Affluent (IA) – Typically, high income, but low net worth. They try to keep up with the Joneses (Glittering Rich) but fail miserably. They have very little money saved.
  3. Balance Sheet Affluent (BA) – The most common type; these people plan to be wealthy by saving and investing. The Balance Sheet Affluent is the focus of most of Stanley's work.

From reading Stanley's previous work, I just know that one of our neighbors fits perfectly into the Income Affluent (IA) category — they lease their BMW, are constantly doing construction on their house and dress in the best clothes. Although I'm not mocking them, I know that's not how my wife and I want to live. They're a sterling example of what NOT to do with your personal finances.

Stanley perfectly frames how to become wealthy: either by a great offense (high income) or by a great defense (being frugal and saving a decent amount of income). Most folks have the chance of becoming wealthy by great defense.

The book states:

The only way you will become rich is to play extraordinary defense like those millionaires at the other end of the continuum: by living well below your means, by planning, savings and investing. We need to stop acting rich, and you need to adopt the values and lifestyles of self-made millionaires.

How Wealthy Are You?

Compared to your peers, how do you stack up? I've always been the type of person who beats his own drum and doesn't follow the herd. After all, do what everyone does and you get what everyone has.

That said, I have a computer science background and I love stats. I always want to know how my current measurements stack up. Am I on track, or do I need to amp up our savings?

Stanley has a great method to help measure becoming BA wealthy:

Use the Wealth Equation to determine how you stack up. Simply stated, your net worth [augmented] should equal 10 percent of your age times your annual realized household income (0.10 x age x income = expected net worth). If your actual net worth is above this expected figure, I consider you're affluent, given your age and income characteristics.

This was originally in his first book Marketing to the Affluent. In Stop Acting Rich, he adds the wealth index (WX) to differentiate the BA group from the IA group:

The threshold WX for those included in the BA group was 1.84. The median WX for those in this category was 2.49. In other words, the “typical” member of the BA group had an actual net worth that was 2.49 times the expected figure, given this age and income at the time he first reached the seven-figure wealth threshold. The IA, interesting enough, had a much lower net worth respective of their age: The IA millionaires ranked in the bottom quartile along the WX continuum. The highest WX within this group was 0.880; the median WX was only 0.665. This means that the typical IA had an actual net worth that was only 66.5% of what was expected, given his age and income at the time of hitting the millionaire threshold.

Tax the Rich?

Whenever the government talks about taxing the rich — known as “IA” in the book — it is targeting high-income earners. Throughout history, it hasn't been accumulated wealth that's been taxed; it's been income.

Stanley confirms that high-income earners are targeted by the government:

The average IA paid more in income tax than the typical BA generated in income during a year: $95,847 versus $89,167. Overall, IAs pay nearly six times more in tax than the BAs. IAs pay the equivalent of about 10 percent of their wealth each year in tax. BAs pay less than 2%. The large tax burden associated with being an IA is reflected in their less-than-stellar wealth index.

He then continues:

This situation will worsen, given federal and state tax increases that high-income earners now face. The road to becoming rich via the IA method is lined with income tax tolls and consumption-inspired roadblocks and detours.

So going under the radar of what currently is considered rich (the sub-$250k threshold) might be a better route to minimize your taxes and lower consumption. This is something I've always suspected, and the book's data shows this.

What Motivates the Wealthy?

I've always been interested in the psychological aspect of things in life: Why do people want to become wealthy?

Thomas states:

Most millionaires are motivated by their need to gain financial independence. For most, consumption is a nice side benefit to becoming wealthy.  It is not the most compelling reason why these people become financially successful.  When asked, they will tell you that given the choice, they would readily unload their consumer goodies before ever giving up their independence.

I agree that the things don't matter; the important point is having enough money to choose what you want to do in your life. It's the ultimate freedom that allows you to live your life to the fullest. It's not about purchasing some fancy car.

Where Do Hyper-Consumers Live?

This question is something of concern for me since I live on Long Island, N.Y.

The highest concentration of glittering rich people in America lives in the Tri-State metropolitan area of New York.  Understandably, this area also contains the highest concentration of aspirationals. Not only are we what we eat, we are also the product of where we live.

I live only a half-mile away from one of the most frequented malls in the country. During the Great Recession, I was amazed at the number of cars I see going into that mall. You would never have known we were in a severe recession. 

It's also amazing that my wife and I don't frequent the mall that often. Typically, it's “get in and get out.” We buy what we need and go home. I guess we are fortunate enough to have the discipline of not going on weekly buying sprees. 

Stanley contends that the biggest factor in determining your wealth is the choice of where you live:

The bottom line is that your choice of house and neighborhood will have the biggest impact on your balance sheet. Your choice of home, more than anything else, will have the greatest impact on your spending — either a lot or not so much.

While we don't live in a very rich neighborhood, we see hyper-consumption all around us, and it's hard not to mimic what others do. It's part of human nature.

I love the term that Stanley uses in the book for many income affluent people: “Big Hats, No Cattle.” This could definitely apply to many in the area where I live.


This book is more a compilation of the author's previous works than a completely new effort. Yes, some of the content is repetitive, and what's in the book could have been condensed into 30 or 40 pages. Even so, it's a quick read, and I enjoyed it. As with Stanley's previous books, Stop Acting Rich is slightly preachy in the conclusions he derives from the data. While I don't flat-out disagree with his conclusions, it is possible that alternative conclusions could be drawn.

If you have read any of Stanley's other works, there are some new nuggets that might be worth the price of admission. If you have never have read any of his other works, you should definitely pick up this book.

Larry Ludwig

Larry Ludwig was the founder and editor in chief of Investor Junkie. He graduated from Clemson University with a bachelor of science in computers and a minor in business. Back in the ’90s, I helped create some of the first financial websites for firms like Chase, T. Rowe Price, and ING Bank, and later went on to work for Nomura Securities. He’s had a passion for investing since he was 20 years old and has owned multiple businesses for over 20 years. He currently resides in Long Island, New York, with his wife and three children.

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  1. Hi All! This is a great discussion. I read The Millionaire Next Door in 1997 when I was flat broke and beginning to think I was doing something wrong and had the wrong set of values. I was right! Kayla, thank you for sharing your financials, but I say really give yourself a break. I look at my SS statement to look at what my actual earnings over the past few years were and use the average of those numbers in wealth calculations. I am a decade older than you and are right where you are so you are sooo golden!

  2. The argument about whether to live where the rich live when you want to get rich is an interesting one.

    I live in London in the UK, which is frequently in contention for one of the most expensive cities on the planet, although at the moment with the UK£ so low it's plummeted out of the rankings on an international scale. It's mainly the City of London (easily NY's equal in financials) that keeps the money flowing in.

    What I've wondered is whether people earn more because they live here (because of the jobs) or because they have a need to compete (because their mental 'ceiling' on what's a good income has been raised).

    e.g. They say you should surround yourself with positive people to get a positive mindset. Do rich people give you a rich mindset?

  3. Seems to be an interesting book. The title of this book really gets me thinking about the society we live in and just how superficial people are.

    I mean, so many people are hurting and yet so many people continue to buy tons of "stuff". I suppose many like buying the things they do as a result of trying to impress others and get a form of instant gratification. Personally, I think it would do many people good to really sit down and think about their spending habits.

    The big thing to think about is what a purchase will offer you as opposed to saving your money and living more within your means. That thing you bought today might bring joy to you today, but habitual saving will bring you much more. I'd have to say it's a mindset issue for most.

  4. (continue…)
    For us, a few things helped us to have a jump start:
    1) Under my parents pressure, I had to go to Ivy league school and I HAD to have a grad school degree. So I did. Because of that, my income was in 6 figure range when i was only 26 years old.
    2) Also under parents influrence, I started investing when I was sophomore in college. Had my first stock portfolio of $3000 at age 19, saved up from waitress job. Became a landlord when I was 20 buy renting out part of the condo I bought in college. As soon as I got my first job, I started 401K and IRA and continued stock investments. and kept on buying properties. So, start early is important
    3) both me and my husband are frugal. We could qualify for a million dollar home, but we opt for a $300K home and fixed up ourselves and took out a 15 year loan only.

    But with all that, we still fall short according to the book.. So there is stil much to be done.. :d

    1. Hi Kayla. Don't be too hard on yourself. You are ahead of the game than most. The issue based upon the formula is your net income. It also does not take into account how long you've had that income. Obviously if you just started at $275k then your net worth will be much lower because of previous years at a lower income level.

      I wish I had a rental unit while in college. 🙂 I should have begged, borrowed or stole money to get a rental unit.

      I too started with a small investment in some bond mutual funds.

      1. You are very right on the length of net income… We've only broke the 200K ceiling for 3 years because we just got married and combined force.. Before that, we were each 1 soilder army and it was a lot harder..

        yeah, it was my parents idea to own a condo and rent out in college. They loaned me the downpayment and co-signed the paper to get me started. But I was responsible for daily operation… So I have to thank my parents for that… and consider myself lucky to have parents who are wise and willing to help.

  5. I will share my stats since I am a IT professional myself and I like numbers.

    Household income: $275K/yr
    Networth : $860K including retirement funds, taxable funds, cash, equity in properties
    Age: 35
    Line of jobs: I work as a system engineer and my spouse is an accountant. We also run 6 rentals on the side and I created a retail business (online and store front) and gave to my parents to run.

    According to the book, we should have 0.1 x 35 x 275000 = 962.5K
    So we are still running short. This is not an easy goal to achieve. But I think it's doable if one is persistant and has a plan.

  6. Agreed that trying to live like the class above you will make you poor.
    My wife and I simplify our lives, save more than 30% of our gross income, and still enjoy life with our 2 kids.

  7. Applied equation to my own life… I have $282,061 to make me a BA. LOL. Think I am a long way off. I have multiple books lined up to read, but when I get to this one I'll make sure to come back here to purchase. 🙂

    Thanks for the review. I like Thomas Stanley's books. (@thomasjstanley)

  8. Great post.
    The point about mall traffic and the recession is spot on. I always wonder why I have a handful of things at the local Target and Walmart when I'm surrounded by people with shopping carts full of stuff.

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