[Editor's Note: Today's Tuesday Classic is a post that should be relevant and “evergreen” for decades to come. Get rich quick schemes come and go, but solid principles for getting rich are timeless for a reason — they work.]
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I pulled down my copy of Napoleon Hill's Think and Grow Rich off the shelf this evening. The inscription inside the cover indicates that my mother gave it to me in June of 2005 —
“Jim and Katie, Please accept this book as a means to help you become all that you desire to be. Love, Mom”.
In June of 2005, I was finishing my PGY2 year as an emergency medicine resident. My net worth spreadsheet tells me that our net worth at the beginning of 2005 was $431.98. Yes, a three-figure net worth. By the end of that year, in which the two of us made less than $40,000, we had a five-figure net worth — $17,084.38.
I read the book. I thought it was dumb and full of a bunch of hocus pocus self-improvement crap. (I didn't tell her that, but I suspect she'll read it here after somebody rats me out.) However, the richer I get and the more people I meet, both those who become financially successful and those who do not, the more wisdom I realize that the book contains.
To Get Rich, Get Your Mindset Right
The book is primarily about developing a mindset. Hill was hired in 1908 by a magazine to write success stories about famous men. He went to interview Andrew Carnegie who was so impressed with Hill's perceptive mind that he told him that he believed any person could achieve greatness if they understood the philosophy of success and the steps required to achieve it.
Carnegie explained his theory that this knowledge could be gained by interviewing those who had achieved greatness and then compiling the information and research into a comprehensive set of principles. He offered to make the introductions and cover travel expenses if Hill would do the leg work. Hill reportedly accepted the challenge within 29 seconds, which was good, because Carnegie planned to withdraw the offer at 60 seconds. That was the origin of the book.
Hill alludes to the “secret to success” in the book but never really spells it out. However, the astute reader, (who according to Hill must be ready for it) will readily pick it up during the reading of the book. It basically comes down to “you gotta want it.”
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I don't mean wish for it or kind of want it. I mean it is a deep burning desire you are willing to make real sacrifices for in order to succeed. I mean it is something you spend large percentages of time thinking about. Something you have a well-thought-out written plan to achieve. If you really, truly want to grow rich (or anything else,) you will “think” your way there and no one will stop you because you cannot be stopped. It may not happen quickly, but it is virtually a certainty that it will happen eventually.
At the end of the book, Hill warns that
Life is a checkerboard and the player opposite you is time. If you hesitate before moving, or neglect to move promptly, your men will be wiped off the board by Time. You are playing against a partner who will not tolerate indecision! Previously you may have had a logical excuse for not having forced life to come through with whatever you asked. That alibi is now obsolete because you are in possession of the Master Key that unlocks the door to life's riches.
The Master Key is intangible, but it is powerful. It is the privilege of creating, in your own mind, a burning desire for a definite form of riches. There is no penalty for the use of this key, but there is a price you must pay if you do not use it. The price is failure. There is a reward of stupendous proportions if you put the key to use. It is the satisfaction that will come to you when you conquer self and force life to pay whatever is asked.
What Determines Personal Financial Success?
Personal Finance is both personal and financial. If you are like I was, you probably assume, that it's mostly about finance, i.e. the knowledge of how the financial world works. You know, Roth IRAs and interest rates and SPIAs and standard deviations. However, the truth is that personal finance is 80% personal and only 20% finance.
What do I mean by personal? I mean who you are and what you want and what you spend your time doing and what you value. That's going to determine 80% of your success. Sure, you probably ought to pick up some knowledge along the way, but I estimate who you are is four times as important as what you know.
Make a Plan
Let's return back to 2005. I wasn't worth much on a balance sheet, although some would argue I was already ahead of most docs. Those folks forget that at that point in my life I owed a great deal of time to an employer who doesn't pay particularly well. In reality, I had more debt (time, not money but they're really the same thing) than most physicians of my era.
In 2005 I wrote down a plan. My wife and I took that plan very seriously. It was 3 or 4 typewritten pages and we signed and dated it. What was the plan? It was a plan to reach financial independence in less than 20 years. It was no get-rich-quick scheme, but it had an extremely high likelihood of success given our strengths and assets. We would get rich eventually, it was just a matter of time. As Napoleon Hill said,
Create a definite plan for carrying out your desire and begin at once, whether you are ready or not, to put this plan into action. Now write it out. Write a clear, concise statement of the amount of money you intend to acquire, name the time limit for its acquisition, state what you intend to give in return for the money, and describe clearly the plan through which you intend to accumulate it.
He then goes on into more hocus pocus crap that turns me off from books like this.
Read your written statement aloud, twice daily….As you read, see and feel and believe yourself already in possession of the money.
The Hobby of Finance and Investing
I didn't read our statement aloud. In fact, I might not have read it even once a year. However, what I did do was spend a great deal of time thinking about that plan. As The Millionaire Next Door suggests, I got a hobby that would pay me. That hobby was personal finance and investing.
While I was still a busy resident, that period of life was soon to be over and I was going to be living in a place where my old hobbies (climbing, mountain biking, etc) were simply dramatically less available than anywhere else I had ever lived. I spent ridiculous amounts of time reading on the internet, participating in forums, and devouring all kinds of financial books.
I wasn't seeking personal transformation. I didn't like that gobbledygook crap and despised books that were full of it (such as Rich Dad Poor Dad.) I was looking for the how-to information, which was fine since I already had the 80% that mattered, I just didn't know it yet. Those few years were when I was acquiring the 20%.
Eventually, that idea ripped from The Millionaire Next Door took root in another way when I started The White Coat Investor blog. As long-time readers know, this was a for-profit enterprise from the very beginning. Why? Because I wanted a hobby, something I really enjoyed, that also paid me. And thus it has.
So, while I never sat in front of my mirror chanting affirmations, I definitely thought about my plan to become wealthy at least twice a day, every day. Does that make me greedy or a miser? I hope not. We now give away more money every year than we made in 2005. But what it did do was make me financially successful.
Modeling at Arches National Park- tax-free and straight to their Roth IRAs.
Be Entrepreneurial
I was having a chat at 3 am with a nurse in the ED the other night. He spent a few years in the Army and then left for the civilian world. He was working night shifts in the ED to support his young family, but as I got to know him, it became quite clear to me that he would be wealthy someday.
He will soon be going back to school to become a PA, which will improve his earning potential significantly. But that wasn't what impressed me so much. He is also a serial entrepreneur, having already owned two businesses on the side.
Neither was particularly successful and the latest, a shaved ice trailer in Texas, ended when a drunk plowed into the trailer and the truck used to pull it. He was smart enough to be insured, and since he was moving shortly, took the money and put it in the bank for the next opportunity.
I have no doubt that opportunity will come and that he will recognize it. I also have no doubt he will carve out 20-30% of his income as a PA and put it toward building wealth, such that he will be successful even if none of his business ideas ever take off.
Debbie Downers
I contrast this with a recent thread on the Bogleheads Forum. The original poster in the thread asked for what advice you would give to your child about an employment path. My advice was simple and true to what I tell my kids — Become a professional of some type but also an entrepreneur. It seemed fairly straightforward, reasonable advice to me. It has worked well for me but what I really like about it is that it is almost 100% certain to succeed. Even if the business never works out, carving out a big chunk of your professional income will eventually make you wealthy too. However, the response from several posters about entrepreneurial work was rather revealing. Let me quote:
I always feel like this is the worst advice for the general public. Most people have no idea how to just open a successful business and work for themselves, and it usually takes a lot of time and money to get there. If I wanted to own my own business, I would have no idea what to start up tomorrow, where to put it, etc. Even if I did start a business, I'm sure the percentage of businesses that don't make it is higher than the percentage of businesses that do.
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and
There is no way around the fact that most small businesses fail. A lot of people are far better off working for somebody else; up to you to figure out if that is the case in your situation.
and my favorite after I sarcastically agreed with a poster that “Yes, it's so hard you shouldn't even try [to start a business]”
Ok, here's some advice. Be a state Senator. Good luck.
The best part about that last quip is that I have actually seriously considered running against my state senator, the president of the Utah senate who lives down the street from me. Of course, that was mostly because he came up with a cock-eyed plan to raise my physician license fee from $200 to $5000. I've even gone to the trouble to look at the Senate district map and noted that it quite conveniently covers the area I live and the two areas where I practice. At any rate, Senator Niederhauser better hope I don't get sick of WCI any time soon.
But really, the sad thing was the attitude toward taking any kind of a risk in life:
“It's too hard.”
“Most people will fail.”
“I can't do it. I don't even know where to start.”
You Will Be Successful
However, here is the good news for almost every person who has read this far. You are going to be successful. You are going to be rich. Why? Because you're here. It isn't because of the 20% of personal finance that is finance, although you will find that information on this site since that's 95% of what this site is. It is because your being here is evidence that you have the 80% of personal finance that is personal.
That desire, those goals, those qualities, and that discipline are going to drive you to become more and more knowledgeable each year, to increase your income, to increase your savings rate, to drive down your investing expenses, to create a reasonable investing plan, and to stick with it through the hard times. Congratulations! If you're not rich yet, you will be soon.
What do you think? Are you wealthy already? Do you believe that you will be financially independent eventually? How important do you think mindset is compared to financial knowledge? Comment below!
I do believe that you become wealthy because of a certain mindset but I disagree that it is because you want to be wealthy. Everyone wants to be wealthy.
I believe the necessary mindset is to view money as a money-making tool, and not just a means of purchasing consumption items. There different ways to use money, but ultimately it boils down to using it to invest in business. Whether you start your own business, or invest in other people’s businesses by buying shares in those businesses are two sides of the same coin.
Everyone wants be thin too, but most people want to sit on the couch and eat chili cheese fries as well. I think the point is that you have to want to be wealthy *more* than you want other things.
It’s still amazing to me that Napoleon Hill wrote that book back in the 30s, before new agey thinking had really taken hold. It really is like The Secret, but for money. Whether or not you buy into that is one thing, but the idea that I took from it, to your point about time and the checkerboard, is that money is in many ways exactly like time. If you don’t deliberately make a plan for it, it will all just flow past you. It’s so easy not to be mindful about money and to spend it without thinking — exactly the same as procrastinating or otherwise wasting time. Making that time-money connection was, for me anyway, super powerful and transformative. It helped to read Your Money or Your Life and make the money=life force connection, which is closely related. And I agree with you — if you have a plan for your money and are determined not to waste it, then it’s easy to get rich.
I love the time and checkerboard analogy too. The best time to start might have been 10 years ago, but starting now is better than waiting another decade.
The best time is always the present. Hindsight is 20:20. However, 10 years ago, we were on the upper lip of the worst bear market since the great depression.
What % of docs can retire at 65% with enough assets to live off for the rest of their lives??
For we dentists 3% is thrown around
Many are working much longer as they got whacked in the last crisis I presume but are notoroiously financially ignorant
Sad but true-Hardly meet one that has a clue about passive investing
I see some of the older physicians I work with making terrible decisions. Multiple marriages seems the biggest threat I see. I see a lot of starter families, then trading up in a few years. One guy is on wife 6. That has to be devastating financially.
Awesome post, but like you say – the people here reading already get it, and it is very tricky to “instill” this trait in others. So despite being spot on, this may be a less useful post for the people already reading your blog.
As an aside since you include some of your personal military service info – do you qualify for the post-9/11 GI Bill? I used it for my daughter to go to Duke University, and the benefit combined with the “yellow-ribbon” kick in from Duke and the VA plus the housing allowance wound up being enormous.
You should double check this, as it would definitely tilt the balance for whether the military paid you enough for your time. Just a thought.
The whole change in the GI bill thing occurred while I was in the military. I think I opted out of it as I recall, but it has been a while. As I recall, I did look into whether it would be a good idea and concluded it wasn’t, but I don’t recall the exact reason why. But now looking at the rules, I’m not sure I qualified to transfer it to my kids and I didn’t see myself using it myself. So I took my $1200 and ran with it.
Ah yes, here it is: http://www.benefits.va.gov/gibill/post911_transfer.asp
You had to have 10 years of active duty or selected reserve and I only had 4. So I wasn’t eligible to transfer benefits to my kids.
I so agree with the connection and connect-ability bw “spiritual or personal wisdom” and being “money savvy”. Makes perfect sense doesn’t it ? Money is resource, just like health and time and earth and home and friends and family. What we do with any of these things will affect most or all of our other resources.
So appreciating this blog !
Of course, financial knowledge matters, but it doesn’t take a lot to be successful. It’s what you do with that knowledge that really matters. Success is equal parts hard work + smart work.
Interesting comment “I already had the 80% that mattered, I just didn’t know it. Those few years were for the 20%” The thing is you need to know a lot about Personal Finance in order to figure what you don’t need to know, which is actually a large percentage of it. Same in Medicine, too, although the data base of what you need to know is much larger.
Wow! I think you got it right in 2005: “I thought it was dumb and full of a bunch of hocus pocus self-improvement crap”. I think, for the most part, your Boglehead buddies got it right.
I have always thought this was hocus pocus crap, and still do now that I’m (comfortably) retired. I’m all for the entrepreneurial spirit; good for you, but it is clearly not for everyone.
Thanks for the rah-rah cheerleader pep talk at the end. That seems out of character for you but appreciated to those of us who just blew a wad of cash on summer lifestyle creep. Blech.
I am not wealthy already but happy to be saving 45% of income now up from 4% a few years ago. Financial independence eventually? Yes. Five years or maybe seven.
Rich and financially independent are two different animals
I disagree. “Enough” = “rich” = “financially independent” to me. You want to use a different definition in your articles, feel free. But you’re not going to find a lot of sympathizers when you start arguing that $10M is rich and $5M or $2M isn’t.
Wasn’t the Napoleon Hill book the one with the suggestion that you could only achieve greatness once you stopped worrying about the pursuit of physical pleasure from the opposite sex? I think he posited that great achievements mostly come after the age of 40 because basically men seek out status purchases and spend time pursuing potential mates or being concerned with physical things. I thought it was very true advice but very strange the way he wrote it. My experience with the bogleheads blog is that it’s full of a lot more naysayers than the MMM forums, where I spend most of my forum time these days (as well as using the WCI forum for medical PF questions)
2 million in retirement is not financial independence in the northeast, doctor lifestyle
One might want to look not at one’s professional peers but at a larger group:
http://www.globalrichlist.com/wealth
BTW, if one can’t feel rich with $2M, probably $4M or $8M won’t feel all that rich either. Or at least it won’t after one hedonically adapts.
Maybe look at other places to live. 2M goes a long way in the Midwest. Also part time Medical work pays well here too.
I really appreciate this post. My father was a dentist who just wasn’t happy with the thought of a 20-30 year dental practice. His passion was California real estate, back in the 1980-1990s. He took classes to become a real estate agent, then a licensed broker who developed and sold his own properties, all while practicing dentistry. Perhaps he was lucky to be in the right place at the right time, since he retired from dentistry at 55 years of age. I think that was his version of your “hobby that pays.”
I’m really not a proponent of starting a business; maybe it’s a reflection of my risk-averse Asian blood.
However, in regards to investing I’m pretty aggressive in my asset allocation with stocks. I subscribe to the 120-age rule for the % of your money that should be put in stocks. Granted this is just with my ROTH IRA/ROTH 401K money which is actually 100% in stocks right now (small, mid, large cap index funds with 0.1% expense ratio Vanguard funds) but even my money invested as an attending will be put in index funds with the 120-age asset allocation reference.
Based on your history I feel pretty similar to you in that I’m very much into personal finance and have a “hard-knocks” business degree but am less optimistic about a business. The old, make doctor/engineer salary, save 30%, then invest the rest consistently in tax-advantaged funds is my cup of tea. And I think this alternative method is very valid as well. As long as you’re saving a high-percentage of your money and investing it that’s fine.
Most businesses do fail, also. Your blog is much less risky thought since it’s not like you’re putting down 6 figures for a sleep study center or are setting up a pricey dental clinic after accruing 300,000 of dental school debt.
WCI, I really like this post. And three thoughts pop into my mind as a result of reading and thinking about your comments…
First, I do think there’s a sort of orthodoxy at the bogleheads forum where too many posters think the only way someone should invest is via index funds and some asset allocation formula. You know I think that *is* a great way to invest. But our economy and world needs entrepreneurs starting businesses and real estate investors willing to house renters and provide space to small businesses.
Second, regarding business failure rates as an excuse or rationale to *not* start or own a business. I think failure rates are often overstated and then for serial entrepreneurs they become pretty meaningless. If the failure rate is 50% but some young entrepreneur tries three ventures, it’s very likely (nearly 90% probability?) that he or she will end up with a success. The other thing is that intelligence and hard work give you a huge edge. I kind of suspect that someone could look at the “failure rates” of premed students to get into medical school and conclude becoming a physician (or a dentist or some other white coat professional) is just too high… but tons of people are successful at those ventures.
Third, and sorry for going on so long, but entrepreneurship is something you learn (often the hard way). People do get better and better at it. Actually when I say this, I realize I also observe that with real estate investors. They get better and better especially over those first five years.
Yes I agree, It is the Hawthorne effect, that which you concentrate on improves. Because we are focused on and interested in finance we are watching it and it will improve, and we will be more mindful. You are doing a great service providing this forum, thank you. I am meeting with my CPA and focusing more on decreasing my work hours (in 999 days ) and this forum has given me tools to put this into practice, Thank you!!
I think you mean Donald Downer.
This one was actually written before that thread. Thanks for reminding me though.
Great inspiration.
The definite numbers to define” wealthy” or ” rich” vary between one’s background and profession.
Get the positive mindset and workable plan. We are already heading that direction and will be there.
You really got my attention especially since I ran for State House Rep 2 years ago. I am bored and not happy with the various political activism and service volunteering I am doing, and not feeling like I’m very effective or good at it (and hearing Bill Clinton praise his wife last night gave me a mild midlife crisis). Maybe I should give up on my negative “I don’t want to start a business, how much work and risk!!” and start figuring out what business I’d invest almost as much time as I do on websurfing lately.
Thanks for the kick in the behind.
It’s amazing how many billionaires have read Think and Grow Rich. I have read it and listened to it. Now I’m going to have to listen to it again….Somehow, despite reading hundreds of books on finance/personal finance at this point, I have never read The Millionaire Next Door. Guess what’s now going to be my next book?
What a timely post, especially as new attending Physicians are joining our ranks.
What Napoleon Hill talks about is creating a vision and holding it.
This lack of vision is a big problem among Physicians of all stripes. Even when Physicians call me for help with Stress, Overwhelm, and Burnout, this is where they get stuck. And many are unwilling to change anything while they expect others to change.
Hey WCI! I love this article. Having a specific desire is the foundation of success in any aspect of life, not just obtaining financial wealth. I’ve read “Think and Grow Rich” a few times now and each time I pick up on new things. I, like you, don’t believe that it’s some hocus pocus power that all of the sudden manifests whatever you think about into real life. Rather, by constantly thinking about your desire your mind goes about ways to achieve that. If your goal is to obtain financial freedom, and you think about it often enough, you will begin to look for ways to bring it about. It’s not magic, just extreme focus on achieving a clear desire.
Hey Jim!
Thanks for what you do.
You, my friend are an excellent leader and a great role model to many. I would love to be able to vote for you someday. It would be amazing to see how transformative you would be in any Senate.
Can you imagine the gold mine this site would become for my political opponents if I ever ran for office?
I listened to Think and Grow Rich via audiobook last year. Super kooky stuff sometimes but also some very practical things, i.e. imagining your dead role models at a brain trust type meeting you have every day in your mind versus actually talking to your (living) forward-thinking friends and colleagues about possible ventures. I will say, though, that the burning desire to do something is the impetus for a number of our cultural greats, who, as a function, become extremely wealthy. That reminds me, I’ve got to get back to writing a book!