Don’t Spend, Invest—and Other Secrets From Millionaires
How millionaires teach their kids about money
Book: Secrets Self-Made Millionaires Teach Their Kids
Author: Steve Siebold
Publisher: London House
Price: $17.97 (Paperback) $7.80 (Kindle)
WHO IT’S FOR: Parents interested in sharing some key financial wisdom with their children and grandchildren, but also for those interested in seeing what’s inside the minds of self-made millionaires.
MORE SPECIFICALLY: Any parent, grandparent or teacher who wants to empower their children with money and life advice.
DOES IT BUST ANY MYTHS? Yes, that parents who haven’t been financially successful can’t teach their kids about money. They can with the help of this book.
WHAT’S THE COMMONSENSE CONCLUSION? Money is important but so is hard work and keeping good values.
INTERESTING FACT. The book is based on 34 years of interviews by tennis-player-turned-professional-speaker Steve Siebold with self-made millionaires and how they raise and educate their kids for financial success and everything that surrounds them.
WHY WE LIKE IT: The book not only offers frank insights into investing but also pairs it with lessons that help the readers become entrepreneurs and problem solvers. With supporting quotes from other millionaires as well as action steps and other key resources throughout the book, there’s lots to digest.
WHY ELSE DO WE LIKE IT? Easy to read and broken down into 160 easily digestible chapters with provocative titles like, “Avoid magical thinking”, “The world is beautiful and brutal”, “Fall in love with work” “Spend smart”, “Security doesn’t exist” and “Money is infinite”.
KEY TAKEAWAY: “There are two types of rich people: those that decide how much is enough and those that always need more. I’ve spent a lot of time with both and the people that decide how much is enough tend to feel more fulfilled.”
More Speedreader: Book review: Investing = rational thinking + emotion
Chapter 21: Decide How Much is Enough
There are two types of rich people: those that decide how much money is enough and those that always need more. I’ve spent a lot of time with both groups, and the people that decide how much is enough tend to feel more fulfilled. Now when I suggest that you decide how much is enough, I don’t mean that you have to stop building your portfolio or close down your shop. To the contrary, the day you hit the number you determine to be enough, is the day you really get dangerous! If you thought you were focused before, wait until every profit you make goes off to your favorite church, charity or cause. You may decide to bolster your personal fortune, which is fine. The point is that once you reach the number you have predetermined to be enough, you begin to see making money as a game instead of a survival or success mechanism. Now you’re just playing for fun, and once making money becomes a game, you no longer fear the ups and downs of acquiring, investing and growing it. The people that claim to need more often don’t actually need more, they just want more, and the reason is often to feed an inferiority complex. The world is full of examples. The greatest case study of a public figure I’ve made along these lines is Donald Trump. No matter how much success he achieves or how much money he makes, it’s never enough. He always wants more, and this is what leads him to make statements such as what we heard during the 2016 Presidential election and even into his Presidency. Donald Trump is a smart, well-educated, successful man. The childish behavior he exhibits and braggadocios statements he makes stem from a deep-rooted inferiority complex he’s never transcended. Until he does, he will always need more. He will spend the rest of his life pouring more success and money into a hole that cannot be filled. It’s sad, but true, and this is why I want you to avoid it. Decide how much is enough, go get it, and then play the game for fun.
Quote: “Experience has taught us that material wants know no natural bounds, that they will expand without end unless we consciously restrain them. Capitalism rests precisely on this endless expansion of wants. That is why, for all its success, it remains so unloved. It has given us wealth beyond measure, but has taken away the chief benefit of wealth: the consciousness of having enough.”
Action Step: Make an annual list of all the things you want to buy, do and experience and what they cost. This will give you an idea of how much you need.
Critical Thinking Question: Does it serve your best interests to wish for more or wish for enough?
Millionaire Resource: Read: How Much is Enough? Money and the Good Life
By Robert Skidelsky and Edward Skidelsky
More Speedreader: Finding your ideal financial advisor
Chapter 27: Don’t Spend—Invest
The average person makes little money and spends more than they earn. They rack up thousands of dollars in credit card debt and pay an average of 22% in annual interest. This is not for you. Rich people don’t spend more than they make and rarely carry high-interest loans. The rich are investors, not spenders. They invest their money today so they’ll have more tomorrow. The rich invest in what they refer to as “sure things,” which usually means investing in areas they know well. Self-made millionaires rarely get rich through investing; they get rich solving problems. Investing allows them to grow their wealth as they create it. You’re going to see people fritter away their wealth by building enormous homes, buying exotic cars, private planes, expensive jewelry and just about every other toy you can imagine. These people tend to be young, uneducated and from poor socioeconomic backgrounds. Professional football and basketball players, boxers, artists, actors and other newly minted millionaires that believe their money train is going to last forever. An alarming percentage of them end up filing for bankruptcy and never recover. Your job is to study investment areas in which you have interest. If you like to play guitars, you might study the vintage guitar market. If you’re a baseball fan, look into investing in rare baseball cards. If you like dissecting stocks, you could study the stock market. There are endless areas to invest in, and the more you know about the market in which you’re investing, the safer and more profitable your returns will be. Investing is not as easy as most people think, and that’s why you want to start now and learn as much as you can.
Quote: “The amount of money you have has got nothing to do with what you earn. People earning a million dollars a year can have no money. People earning $35,000 a year can be quite well off. It’s not what you earn, it’s what you spend.” — Paul Clitheroe
Action Step: Write down three areas you would be passionate about investing in.
Critical Thinking Question: What is your favorite hobby, interest or activity, and is there a way you can invest in it?
Millionaire Resource: Read: The Motley Fool Investment Guide for Teens: 8 Steps to Having More Money Than Your Parents Ever Dreamed Of, by David and Tom Gardner
More Speedreader: How to win the endgame of financial independence
Chapter 39: Spend Smart
You’re going to be rich, but no matter how rich you are, excessive spending can ruin you. It happens every day to people with millions of dollars at their disposal. Spending money is easy to do, no matter how much you have. There’s an old saying you’ll want to adopt: live below your means. Everyone gets a charge out of showing off their success, especially after years of people doubting and discouraging you. You might expect me to tell you not to indulge in this, but I won’t, because taking a couple of victory laps after years of struggling is not only fun, it’s also well deserved. Just make sure you don’t overextend yourself in the process because that will put you on a treadmill of having and not having money. A lot of new rich people do this, and it’s exhausting. If you’re like Warren Buffet and you prefer to live frugally, then do it. That’s the safest way to ensure you never have a spending problem. But if you’re like most people, including me, you don’t want to live in the house you grew up in and you don’t want to drive around in your father’s Oldsmobile. You may feel like you’ve earned the right to live a life of luxury, and you’ll be right. If your dream is to drive a red Ferrari and you can afford it, drive it. If you want to live in a mansion and it’s not going to break you, build it. If you want a private jet and it’s not going to put a dent in your bank account, buy it. Just remember what it took to get you where you are today, and you don’t want to lose it. If you do the math and you want some or all of those things, but can’t really afford them, set a goal to acquire the money you need, and then buy them. When you’re rich, people rarely tell you what to do. You need to discipline yourself and protect the wealth you’ve built. It doesn’t mean you can’t have a blast buying what you want, but you may have to wait until you’re a little richer to truly afford it. Treat it like a game, and you’ll enjoy the process while never jeopardizing the wealth you’ve worked so hard to create.
Quote: “We often overspend because we are trying to fill an emotional gap in our lives. No object will ever satisfy your soul”—Dave Ramsey
Action Step: Begin building your personal library of books on money.
Critical Thinking Question: If you were to invest in your future by reading three books on money each year, how far ahead of your peers would you be in this area by the time you entered college?
Millionaire Resource: Read: OMG: Official Money Guide for Teenagers, By Susan P. Beacham and Michael P. Beacham
Chapter 53: Manage Your Own Money
You are going to have a lot of money, more than you know what to do with, and you’re going to have to learn to manage it. Once you cover your expenses, what do you do with all that excess cash? Invest it in the stock market? Real estate? Silver and Gold? Hide it under your mattress? The answer depends on a number of variables, such as market conditions, your current portfolio, age, tolerance for risk and future goals. If it sounds difficult, that’s because it is, and most people don’t have a clue where to start. A large percentage of people hire experts to manage their money, and there’s nothing wrong with that. Few money managers possess the knowledge to produce substantial gains and the ones that do often require $100 million in investable assets to take you as a client. But whether you decide to hire a professional or oversee your own money, it’s your job to manage it. Even if you have a Wall Street hedge fund manager investing your money, it’s your job to manage your manager. This is why you must learn everything you can about money and markets. And not just traditional markets, like the stock and bond markets. I’m talking about studying nontraditional markets where you can invest money, such as the fine arts, collectibles, vintage musical instruments, jewelry, antique automobiles, sports memorabilia, etc. These markets are no less tricky and volatile than their traditional counterparts, yet they often deliver similar returns with less risk. Becoming highly educated in the growth and management of money doesn’t guarantee that you’ll be successful, just ask the pros on Wall Street whom the S&P 500 beats every year. The bottom line is that you can’t afford to blindly trust someone else to watch your money because no one will give it the same attention as you will. Start studying now, during your teenage years, and by the time you start college, you’ll be on your way to developing real expertise.
Quote: “Do not save what is left after spending but spend what is left after saving”—Warren Buffet
Action Step: Create a spend/save ratio with your allowance: spend 75% and save 25%.
Critical Thinking Question: Are you willing to save today so you can have what you want tomorrow?
Millionaire Resource: Read: The Money Class: A Course in Basic Money Management for Teens and Young Adults, by Michael James Minyard
Chapter 63: Never Get Emotional About Money
Money is a medium of exchange: nothing more, nothing less. The world loves to make money out to be some sort of God, but it’s not. It’s only a means of facilitating trade. This is the objective reality of money, and when you approach it this way, it’s easy to keep your emotions under control. The masses believe having money changes who you are based on what you can buy, but it’s not true. The fact is that the utility value of money is convex, which means it’s valuable to have a certain amount of it, but beyond that, its importance diminishes. There’s no evidence to suggest billionaires are happier than millionaires. After all, how many cars can you drive? How many homes can you live in? How juicy of a steak can you eat? All of these things are nice to have; yet additional amounts serve little purpose. Is having two Ferrari’s better than one? For most of us, the answer is no. If you view money through this lens, it will become infinitely easier to approach it through logic-based, critical thinking. An example of logic versus emotion-based thinking is the money people spend on new cars. Approximately 17 million Americans purchase new cars every year, yet most people know that buying a new car is one of the worst investments. It’s public knowledge that you lose about 20% of the new car’s value as soon as you drive it off the lot. That means if you pay $30,000 for a new car, you lose $6,000 of your investment on the first day. No investor in their right mind would be willingly do that, unless, she was approaching the investment emotionally. How does this happen? Easily. Driving around in a brand-new car makes people feel good. It makes them feel important and successful. Having the latest model is a status symbol for the masses. This is a money trap you want to avoid. Rich people rarely buy new cars for this reason. They usually purchase automobiles that are 2-5 years old, which lessens the impact of immediate depreciation. According to the research of the late Dr. Thomas Stanley, the average millionaire drives a used Ford F-150 pickup truck. That shows you how much they care about status symbols. This doesn’t mean you can’t drive your dream car when you get rich. You can, and if it’s important to you, you should. The key is to avoid making the decision and the deal from an emotional state of mind. When it comes to growing and guarding your money, always employ your emotionless critical thinking skills and you’ll rarely suffer the regrets of irrational decision-making.
Quote: “If you cannot control your emotions, you cannot control your money.”-Warren Buffet
Action Step: Using emotionless critical thinking, write down what make, model and year of car you want to purchase in the future and ask your parents to evaluate your decision.
Critical Thinking Question: Do you spend your money logically or emotionally?
Millionaire Resource: Read: Buy-ology: Truth and Lies About Why We Buy,
By Martin Lindstrom and Paco Underhill