This is a review of a very quick read (106 double-spaced pages in a 7 inch book) by Richard Paul Evans called The Five Lessons a Millionaire Taught Me. Mr. Evans is best known for his more literary pursuits such as The Christmas Box, but for some reason decided to dive into the personal finance literature world and share some of the secrets of his success.
Richard Paul Evans
The foreword is by Robert Gay, who apparently worked with Mitt Romney at Bain Capital, and has made all of his staff read it. Mr. Evan's personal story is quite compelling. His father was disabled without insurance when he was 12, leaving the family impoverished. A local millionaire gave a presentation to his local youth group and had a dramatic impact on his life. By the age of 31, he had a paid-off house and several million in the bank, no small task for a writer.
He emphasizes that wealth is not luck. “Only 2 percent of today's millionaires inherited all or any part of their homes or property. Fewer than 20 percent inherited even a small portion of their wealth.” Nor does it come from intelligence: “It is common knowledge among financial consultants that America's most educated citizens–doctors and lawyers–are notoriously bad at handling their money.” Instead he says that “the wealthy understand the principles of accumulating wealth and live them.”
5 Lessons in The Five Lessons A Millionaire Taught Me
1) Decide to be wealthy. It's so simple, but so true. Once you've made the commitment to be wealthy, it'll work on you subconsciously to boost your earnings, increase your savings rate, and improve your investing prowess.
2) Take responsibility for your money. Know how much you have, where it comes from, where it is going, and what it is doing. You need to track your net worth, spend your time on the most profitable activities, track your spending, and understand investing.
3) Keep a portion of everything you earn. Build a nest egg by saving and taking advantage of compound interest. He suggests 10% for wealth accumulation and 10% for debt reduction, adding that 10% into the wealth accumulation pile when you pay off your debt.
4) Win in the margins. Develop a mindset to carefully consider each expenditure, believe that freedom and power are better than momentary pleasure, don't equate spending with happiness, and protect the nest egg.
5) Give back. Money isn't life. As a wealthy person you have a responsibility to give not only of your money, but of your expertise to help others. “The sin of the desert is knowing where the water is and not telling anyone.”
In short, the book is great for inspiration and changing the way you think, while being a little short on providing practical, actionable advice. There was one piece of advice I've never seen anywhere else that you might find interesting, if not a bit odd. He recommends STARTING your nest egg not with an emergency fund, but with actual precious metal coins in a jar before going to a financial advisor to begin with “other investments” (presumably stocks and bonds.) He sees two advantages to doing this:
First, it's harder to spend the coins than cash. And second, you can actually see yourself growing richer each day as you look at the jar. Mr. Evans actually moved on after the jars to a pirate treasure chest he filled with silver. I'm not going to lie, that's a little weird, but it worked for him, and perhaps it'll work for you. If you do decide to go this route, please email me your address so I can stop in and visit some time…late at night….wearing a ski mask.
Should You Read The Five Lessons A Millionaire Taught Me
But aside from that little oddity, the book deserves a few minutes of your time and perhaps even a few of your dollars. If you're already saving 20% of your income, you may not get a lot of practical stuff out of it. But if not, this might just be the inspiration you need to get where you want to be.
Looking for other books to read? Check out our list of best financial books.
“The sin of the desert is knowing where the water is and not telling anyone.”
Good quote! 🙂
My private treasure chest is a bank safety deposit box.
I have a year’s worth of living expenses in it – definitely helps me sleep better at night.
That’s a serious emergency fund!
I once had a patient bring in a pirate chest containing her many bottles of hydrocodone/oxycodone products.
“… a pirate treasure chest he filled with silver… If you do decide to go this route, please email me your address so I can stop in and visit some time…late at night….wearing a ski mask.”
Don’t forget a weight belt… and a few friends… Silver is a heavy metal, right?
pirate chest full of coin – beware – a Chinese friend was recently burgled because thieves know they like to keep cash hidden at home – like the story of the old lady whose daughter bought her a new mattress as a surprise and dumped the old one – mother – ‘my life savings were in that mattress!’ – oops – good plan! – not.
agreed with the attitude – when I speak to poor people about finances, their response is typically ‘spend money as soon as you get it’ – yes a learned behavior and explainable in context, but they won’t lift themselves out of poverty until they start to plan for the future
like the strong association between the ability to defer gratification and time spent in prison – people who prefer to blame others for their misfortune tend to stay mired in it, while those who take active steps to change their situation can rise to great heights
or – like the Millionaire Next Door – live simply, spend less than you earn, and generally don’t buy new cars
I tell my students – typical small shop with nicely dressed staff inside and a casually-dressed person sweeping the footpath outside – who is that person ? (dunno …) – answer – the Owner !
Casual staff may dress nicely, but don’t care about the business – the one cleaning up cares about the business and that be the owner right there.
or the man in the suit with a shiny new car – are they rich? – not necessarily – usually they are a commission salesperson with a leased car and a net worth of minus $5000 in credit card debt
the guy in shorts, t-shirt and flip-flops – are they poor? – not necessarily – I used to see a painter everyday I assumed to be poor until one day a colleague told me – that guy is richer than our boss and owns one of the biggest mansions in a luxury suburb! I like the story of one such who walked into a Mercedes showroom and stood there while he was pointedly ignored by all the nicely suited salespeople – OK – so he walked over the road to the Lexus dealers, pulled a big wad of cash out of his pocket and drove away in one of those.
If you are impressed by superficial appearances – and think that spending will make you rich – (hello – people are rich because they Keep their money and Don’t spend it!) – chances are you will remain poor
I have had this book on my bookshelf for a while and picked it up earlier this year and read it. My big take away from this book was to win in the margins. I have had the opportunity to pick up some extra work this year and have used the money to help pay down our mortgage.
One of my retired partners returned from an out of town trip with his second wife. To his surprise, some one had dug up the buried gold bars in his yard. NO JOKE! My guess is his ex-wife and/or her associates were involved.
I just listened to the audio book on youtube. I wrote down some of the takeaways that I learned, enjoyed and wanted to share with others.
Freedom and power is better than a momentary pleasure. The primary way to avoid debt is to delay gratification. The ability to delay gratification in an indicator of emotional intelligence and also an indicator of future success. Delayed gratification will allow you to never borrow money, because at the end of the day compound interest is just as powerful working for you as it is working against you. There are two kinds of people. Those who earn interest and those who pay interest. That’s the fundamental difference between the wealthy and the desperate.
“But you deserve it” is the greatest marketing scam every invented. You’ve worked hard all you life and deserve this expensive car, house or vacation. When you hear you deserve it, think, someone is trying to steal your wealth.
Seven most important words. Is that the best you can do?