June 02nd, 2015

By Noah Volz

These days it seems like everyone wants to be a millionaire and this style of book is everywhere. The basics of these types of book are: work hard, save harder, become financially independent and THEN start doing the work you love for the rest of your life, without such a strong burden of materialism distracting you. Stanley looks at how current millionaires have put this into practice and gives us insight into how to follow in their footsteps. As a small business owner for the last 10 years I identify with his primary tenet.

“Develop creativity in the way you think and look for opportunities.”

Of the 733 multimillionaires surveyed all of them provided value as business owners or executives in unique ways. It was shown that their level of intelligence as measured by grades or IQ tests did not correlate with their financial success. Instead their ability to see opportunities where no one else did was what set them apart. When you have good ideas make sure you right the down. Then right down each step in achieving them. I know it sounds like a lot of work, but orienting your brain in this way will pay off in the long run.

Another key to the book was adequate planning when it comes to taxes and investments. Stanley is a big advocate of using CPA’s and lawyers to help you make smart financial decisions. I think this may be relevant, but it seems more important once you have a net worth in the millions as taxes are extremely high at this point. What can be learned from this is that it is important to create a support network or a financial team that can help you make good financial decisions. This may include a CPA, attorney, friend, spouse, successful business owner, etc.

Stanley identifies a few common characteristics of the millionaires surveyed.

·       They are honest, self-disciplined, personable, hardworking, and organized.

·       They are socially engaged and have built a network that allows them to me more productive financially.

·       They had the courage to find a unique niche and stick to their convictions.

·       Instead of spending their money to show off their wealth they had the courage to save money and invest wisely.

One of my favorite parts was his comparison of people who are income statement affluent (ISA) and balance sheet affluent. The income statement affluent make high incomes. Making a high income does not necessarily lead to a high net worth. On the other hand balance sheet affluent were able to mobilize their assets and income and invest it intelligently in order to maintain or increase their net worth. This is the KEY to becoming a millionaire, using your money to invest in yourself.

Your net worth is a combination of all of your assets that do not depreciate or increase in value. Many of Stanley’s recommendations for homes, furniture, cloths and cars look at ways to minimize asset depreciation and retain value.

For example a new car loses about half its value when you drive it off the lot. Homes in established neighborhoods tend to retain their long term value. Cloths and shoes lose their value and it is best to not spend much money on them and get them altered or re-soled in order to maintain a balance sheet affluent lifestyle. BSA’s spend their money on assets that do not depreciate over time.

This goes to the heart of the book which states that millionaires are not wealthy because of how much they make, they are wealthy because of the investment decisions they make with their income. By having a plan that may require you to live below your means you can also create wealth in your own life.

I enjoyed most of this book and would recommend it to those who are interesting in understanding how millionaires think. The most important point to me was to be creative and think outside the box and then do things your own way.