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.
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.