Making Millions for Dummies, Book Review

I was looking through our local library the other day (big fan of libraries here!) and came across a book titled “Making Millions for Dummies”. SEE RELATED: The Power of Libraries This book is part of that popular “for Dummies” series of books that come in the bright yellow covers and explain things in a really clear manner. Furthermore, I really enjoy these books and how they explain stuff in an easy to digest manner. So naturally, I was magnetized to the book title “Making Millions” and decided to check it out. Remember that libraries are very powerful for a couple of reasons. One, they contain knowledge, and knowledge is what allows us the power to shape our destiny. And two, libraries are free for you to use as an individual, therefore you are gaining free entertainment and knowledge.

Making Millions

The book is a good overview of sound personal financial management. And in this post, I will break down and simplify the content even further to some relevant and straightforward elements on your path to financial independence.

“Poor people spend their money, rich people keep theirs.”

Certainly the quote above pretty much sums things up. In other words, according to the book’s authors, “rich people developed the attitude and discipline to pick and choose what they spend money on.” Above all, the book then goes on to challenge you to change your thinking about money:
  • Instead of “I want X”, how about “How much is X worth to me?”
  • Instead of “Others have more…”, how about “If others did it, so can I…”
  • Instead of “I’m dependent on my job…”, how about “How can I rely less on my paycheck?”

Choose Your Path to Wealth

The authors discuss and present an overview of several paths to wealth. Depending on your desires, skills, risk tolerance, a person can choose any number of them or just focus on one. I have friends that have very successfully simply focused on one way to build wealth and have continued the focus to this day. Other folks like to branch out into a couple of various paths and activities. There are some key questions that we must ask ourselves when we choose a certain approach. For example, not all approaches are practical or will generate enough profit. I may really enjoy and be skilled at a particular hobby, but can it really become a profitable enterprise in order to build wealth?
  • Will it make enough money? It is fine if some things stay hobbies. In fact, sometimes that is even better for your enjoyment and pleasure of something. Perhaps you are great at woodworking, but running a business with this skill may make the practice unpleasant.
 
  • Is it something you enjoy? I do believe we need to enjoy our money making and investing vehicles in some manner. It does not mean that every moment is bliss, but is there some core element of what you do that you enjoy? If I did not enjoy certain aspects of my career, I would certainly make a plan to change!
 
  • Is it something you have a talent for? Like many people, I have fantasized about being a singer. Wouldn’t it be amazing to write powerful lyrics, have an awesome voice, and make millions of people feel alive with music, hell yes! But I do not have a talent for singing, therefore that is not a potential career path for me. But I have other talents and natural acclivities that I have harnessed over the years.
 
  • Is it something you have the skills for? Whatever our chosen path or field, we need to develop skills in that area. Skill building in my view is a never ending process and a great joy of life. Studies have shown that people really enjoy the feeling of mastering things. It is one of the secrets of living a life of True Wealth.

Secrets of the Wealthy

I love reading and writing about things wealthy people know that many of us have yet to learn. Here are a few gems I pulled from the book:
  1. Financial security is in your hands. For millions of us I believe this is very true. And it does not mean being a mega millionaire at the age of 35. It means developing and practicing sound financial habits and management that continually build on your success.
  2. Knowledge is power. Wealthy people tend to continuously seek knowledge. Knowledge and intelligence can be utilized to better navigate our environment and thrive.
  3. Make money work for you. In the beginning, most of us have to work for money. But what we realize over time, the secret ingredient to building wealth is to make money work for you and your family.
  4. Being broke can be temporary. We all have to start somewhere. So start today with the little steps to get your finances in order. Focus on one thing at a time if it helps. Choose a credit card to pay off and close, build up that first $1,000 emergency fund, set up an automatic deposit to have $100/month placed in an index fund. This is how wealth is built, one brick at a time.
  5. Risk is managed. Most things in life have some level of risk. Risk can be managed in life and in investing. For investing, risk is managed by diversification, knowledge about an investment vehicle, and having an emergency fund…
“Luck is what happens when preparation meets opportunity.”

Wealthy people set goals and meet them.

What is important to you? We all have to decide on priorities. For some it is family, children, etc. For others, it is travel. For some people they are focused on pursuing their dream job. It is very hard to “have it all” as they say. Or in my opinion it is hard to have it all at the same time. It seems for many of us, we will need to enjoy different things in different seasons of our lives.

STRATEGIES FOR WEALTH BUILDING

1. Live below your income

In order to build wealth, you must make something to work with. Most folks spend everything they earn and more. This leaves no room for investments. To build wealth quickly, one must live well below their means. Some FIRE folks challenge themselves to up their savings rates to 25% or 50% or more of their income. That is a very high and hard to achieve savings rate. And, keep in mind any amount of consistent savings and investing is a win and a step in the right direction, even a small percentage or amount. In order to live below our means, we have to analyze our spending habits. We live in a hyper consumer driven society. From the book, “You can’t build wealth until you assess your spending habits and overcome poor ones.”

Some ideas:

Shop secondhand stores
Look for cheaper entertainment options
Control housing costs
Be prepared for child expenses
SEE RELATED: Frugality – 10 Ways

2. Managing debt and freeing up money

From the book, “It’s nearly impossible to live debt free.” This is why it is critical to learn effective ways to manage debt. Also, it is imperative over time to reduce debt levels as much as possible. In my view, it is also important to have a strong sense of what is “good” vs. “bad” debt. From the book, “good debt allows you to leverage limited assets into more assets.” Create a budget and always look for ways to trim the budget.

3. Saving

Why it matters? I recently heard the saying “savings will save you!” I loved it so much I wrote it down and placed the saying in my wallet. Anticipate that unexpected expenses will come up. Home maintenance, car repairs, vet bills, rate hikes, etc. The goal would be to find pleasure in saving. Pay yourself first and make it automatic.

4. Investing For Wealth

The book describes a bunch of different ways that people build wealth. But many of the ways I do not pay much attention to because they will never really happen. For example, winning the lotto, inheriting money, inventing something, starting a business. Importantly these are rare nice to haves, but none are things we can really count on for sure. It does describe a more straightforward way of building wealth for most of us: Investing for wealth A. Determine risk tolerance. We need to know what kind of investor we are. Do we like to make risky speculative bets or more prudent investments with a long term (decades long) outlook? B. Value Investing. This is the style of investing made popular by Warren Buffett. “If you understand how a business works and its financial condition, then risk over the long run is minimal.” With value investing, temporary dips in the stock price are buying opportunities for good companies or mutual funds. It takes educating onself, diversifying, patience, watching fees, etc. C. Own the broader market in different weights. Most experts like Buffett suggest folks own a broad mutual fund that tracks the S&P 500 or broader market instead of trying to pick individual stocks. Overall in the long run this has served many well. SEE RELATED: Berkshire Class B Forever Buffett Stock

5. Real Estate

The first step here for most folks is home ownership. Home ownership has many long-term advantages. For most people it allows them to build some equity in an asset over time. Single family homes in general tend to not appreciate very much each year. The Case-Shiller index shows that they tend to rise a little over 1% each year after you take into account inflation. But, as the mortgage note is paid down, one tends to build equity in the home and has a place to live and raise their family. It is important to understand mortgage options and terms. There are fixed rate mortgages where the interest rate never changes and there are adjustable rate mortgages (ARMS).

Investment Property

Beyond the home we live in and “consume”, some people branch out into other aspects of real estate investing. For example, this can be single family, multi-family, commercial, development, flipping, Real Estate Investment Trusts, crowdfunding through a platform such as Fundrise, etc. Remember that physical real estate investing takes a ton of time and effort. It is a lot of work and capital (or access to it), to find a property, purchase it, close escrow, fix up, maintain, market, rental application screening, lease contracts, property management, etc. Once this is all set up, collecting a monthly rent check can become pretty routine. If a person does not have the time, money or energy to do direct physical investment in real estate, there is the route of Real Estate Investment Trusts (REIT’s). REITs were set up in the 1960’s as a way to give all investors – not just the ultra wealthy and institutions – the ability to invest in large real estate projects. Under law, a REIT must distribute 90% of its taxable income back to investors via dividends. Importantly with REIT’s, a person will want to compare and analyze them using the funds from operations (FFO). Experts say to look for a history of growth in the funds from operations. Look at the types of properties, are they “Amazon” proof?, etc. SEE RELATED: Real Estate Investing – A Comprehensive Overview

CONCLUSION

Recall the book is about making millions. Most millions are not “made” overnight. Most people spend decades slowly building their net worth and wealth. A very few might get lucky or develop a world changing idea and successfully bring it to market. Whatever your path, this book was a nice overview of some of the ways one can build large amounts of wealth.          

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