RPF-0048-Why_You_Should_Probably_Lower_Your_Financial

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00:00:15.120 | 1 o'clock a.m. Central Standard Time, 30,000 feet over Las Vegas. His friends, drunk, were asleep.

00:00:25.120 | It was just the two of us now in first class. He extended his hand to introduce himself,

00:00:30.880 | and an enormous, Looney Tunes enormous, diamond ring appeared from the ether as his fingers

00:00:37.760 | crossed under my reading light. Mark was a legitimate magnate. He had, at different times,

00:00:44.960 | run practically all the gas stations, convenience stores, and gambling in South Carolina. He

00:00:51.920 | confessed with a half smile that, in an average trip to Sin City, he and his fellow weekend

00:00:58.160 | warriors might lose an average of $500,000 to a million dollars each. Nice. He sat up in his seat

00:01:06.720 | as the conversation drifted to my travels, but I was more interested in his astounding record of

00:01:12.320 | printing money. "So, of all your businesses, which did you like the most?" The answer took less than

00:01:21.440 | a second of thought. "None of them." He explained that he had spent more than 30 years with people

00:01:28.240 | he didn't like to buy things he didn't need. Life had become a succession of trophy wives.

00:01:35.200 | He was on lucky number three, expensive cars, and other bragging rights. Mark was one of the

00:01:42.240 | living dead. This is exactly where we don't want to end up.

00:02:05.520 | Welcome to the Radical Personal Finance Podcast. I thank you for being here. Today is episode

00:02:10.960 | 48, and today is Tuesday, August 26, 2014.

00:02:18.080 | Today's show is going to be all about why you should probably lower your financial goals.

00:02:27.440 | I hope you're a little bit intrigued by my catchy title. I do my best to make these

00:02:42.320 | fun and interesting and thought-provoking and slightly catchy titles.

00:02:46.560 | Probably not exactly the content that most people are accustomed to hearing and thinking of

00:02:53.360 | for a financial and wealth-building podcast. I think it's a topic that we really need to explore.

00:03:00.560 | That intro that I read was actually the first paragraph in Tim Ferriss' book,

00:03:11.360 | The Four-Hour Workweek, subtitled, "Escape the 9-to-5, Live Anywhere, and Join the New Rich."

00:03:18.160 | I thought Tim did an awesome job with that introduction. He's a very skilled writer.

00:03:22.480 | In many ways, it paints the picture, not necessarily of the straw man. We don't need

00:03:28.320 | to have a straw man, but it does paint the picture of what I simply don't believe we don't want.

00:03:34.880 | I've read and still read a lot of success literature. I read a lot on wealth-building,

00:03:42.880 | I read a lot of finance books, I read a lot on success, on personal success. Many times,

00:03:48.960 | the primary focus of much of the literature that I read is on how to get more.

00:03:54.400 | More money, more love, more health, more of everything.

00:03:59.840 | Specifically thinking of how to get more money. It's generally assumed that more is always better.

00:04:08.720 | Now, I personally think that's kind of a crazy thought. More is not always better.

00:04:13.120 | There's a point at which enough is enough. I mean, consider, for example, food. Is more

00:04:19.360 | food always better? If you don't have enough food, you've sure got a problem.

00:04:22.560 | But you want to have just the right amount of food. You don't necessarily always need more food.

00:04:27.120 | The same thing, I think, with money is that having too little money is a major problem.

00:04:35.680 | But more money is not necessarily always better. I was tempted to say that it's kind of a sign of

00:04:43.200 | psychopathy if you just always want more and more. And I went and looked up, you know, what are the

00:04:49.040 | clinical definitions of a psychopath? And it's not quite an appropriate use of the word,

00:04:56.320 | but it's close. There's something wrong with people who are just greedy. They're filled

00:05:02.640 | with greed and avarice and just always wanting more. And I'm convinced that most of us probably

00:05:10.160 | already have enough and we can have enough. Now, I'll give you an example. I learned this

00:05:17.600 | personally by looking at people's incomes, doing financial planning. One of the things when I was

00:05:23.280 | doing active financial planning in the past, then I would always run what somebody's expected

00:05:29.760 | lifetime earnings would be based upon their current earnings amounts. So let's say that

00:05:35.120 | somebody's making $100,000 a year and they're 40 years old. I would take $100,000, I would grow it

00:05:40.560 | by an inflation rate of 3%, and then I would back it off to say the present value. And I would show

00:05:47.440 | them what the present value of their lifetime earnings is. And it's a huge number. No matter

00:05:52.480 | how much money someone's earning. 20 grand a year over enough years is a pretty good size number.

00:05:59.040 | And then I would always put that side by side with their balance sheet,

00:06:02.800 | their current financial assets and their current financial liabilities and list them out.

00:06:06.560 | And I would talk to them and I would say, "Do you see how if we just do the right stuff with this

00:06:11.760 | income that it's very feasible and possible for you to become wealthy and for you to achieve all

00:06:21.040 | of your personal financial goals?" Now, most of the clients that I would work with are at least

00:06:26.240 | middle to upper income. Generally, people of lower income are not usually sitting with a

00:06:31.200 | financial planner. Although they probably should be, but I haven't figured out how to

00:06:35.280 | do that. That's why the podcast is here. But in general, middle to upper income, if you look at

00:06:40.080 | what someone's situation is, hey, they usually have a mortgage. Let's say it's a few hundred

00:06:44.160 | thousand bucks. Maybe there's some other debt. And then we want to save a million,

00:06:48.160 | couple million bucks. And you're looking at a two, three, four, five million dollar number.

00:06:54.160 | Anybody can really do well financially. So why then would most of the financial plans that I

00:07:03.920 | prepared show somebody with massive shortfalls? And the reason it would show massive shortfalls

00:07:10.160 | is because in my experience, many clients are shooting for the moon. You know, say,

00:07:14.800 | "How much money do you want to have?" And it's always a huge number. "How much income do you

00:07:18.480 | want?" "I want a hundred grand at retirement." "Well, what do you spend now?" "Forty-seven."

00:07:22.320 | "Why do you want a hundred grand? What are you going to do with a hundred thousand dollars?"

00:07:26.640 | People often don't think about it. And I don't know what the actual percentage of

00:07:32.720 | how often I would hear this, but basically, most people's financial goals are very, very high.

00:07:39.520 | And I don't think many people have really thought about how high their financial goals

00:07:46.960 | really need to be, because it's probably not as high as they're currently being set at.

00:07:54.960 | Now, again, to be clear, I really think poverty stinks.

00:07:57.680 | But even if you are poor, just thinking about how much it stinks doesn't help.

00:08:02.880 | If you're poor, why not focus on appreciating the things about your life that are good,

00:08:08.720 | and then work like crazy to get out of poverty? And there's a balance there. So there is an amount

00:08:15.600 | at which we need to be, and then there's an amount at which it's enough.

00:08:19.840 | So here's something that I want you to remember that I constantly tell myself to,

00:08:25.280 | because let me be frank. I am given to this. When I sit down and write a list of goals,

00:08:30.080 | I'm not the kind of person that sits down and says, "Lose 10 pounds." I'm the kind of person

00:08:37.040 | that sits down and says, "I want a six-pack, and I want to complete an Ironman triathlon."

00:08:41.200 | "Well, Joshua, do you ever run?" "No, I don't like running." "Well, why would you sit that?

00:08:45.120 | Why would you set out an Ironman triathlon?" Because that's the big goal. Same thing financially.

00:08:50.400 | It's not a matter of, "I just want to be comfortable. I want to be rich. I want to

00:08:55.040 | make a million bucks a year." "Well, do you need to make a million bucks a year?" "No, I don't."

00:08:59.520 | "So why do you want to make a million bucks a year?" Because that's a big number. That's the

00:09:03.440 | number that to me sounds like I'm doing well. But the problem is this. Getting rich requires a lot

00:09:08.560 | of work. It really does. For every goal, for every reward, there's a price. There's a cost.

00:09:17.760 | And you have to pay the price before you get the reward. So if you're going to go after a goal,

00:09:23.840 | it better be worth the price. Really. My wife and I watched this last week, the movie,

00:09:31.600 | what was it called? It was called Don't Stop Believing, I think. And it was a movie about the

00:09:38.160 | Filipino singer that Journey, the band Journey, found on YouTube, the Filipino singer that they

00:09:47.680 | found to replace their lead singer after the previous singer wasn't able to continue working

00:09:52.560 | with them. They found this guy on YouTube. It's one of those really amazing stories. Here he is.

00:09:58.000 | He's from the Philippines. He grew up extremely poor. He was a street child. His mother died when

00:10:04.240 | he was 13 years old and he took off on his own and he was living just on the streets of the

00:10:09.120 | Philippines. I've been to the Philippines and I promise you living on the streets of the Philippines

00:10:13.520 | is not, it's a challenge. It's nothing like living on the streets of the United States.

00:10:20.720 | And he's just hand to mouth beggar, but he had a talent for singing. And so he sang and he built

00:10:27.920 | this career and he built this over time. But I was struck by watching the interviews with these

00:10:32.800 | rock stars. And here you have mega rich, mega famous rock stars, the entire band Journey.

00:10:38.640 | But they were talking very transparently about the price that they paid to achieve their success.

00:10:44.640 | Even Arnel was his name, the new band member. He talked about the price that he had paid to

00:10:52.560 | achieve his success. And in the documentary, I don't think the documentary was unfair,

00:10:56.080 | but it certainly made it seem like more of a, I got the impression from the documentary

00:11:02.720 | that this guy was just singing in some random hotel bar and barely making it, had never

00:11:09.520 | been discovered as a singer. And they find his YouTube video and he's transported to stardom.

00:11:14.880 | I went later and I researched, I just read his Wikipedia entry, and it was clear that he had

00:11:19.280 | been honing his craft for 25 years prior to the time that he was discovered. And he had gone through

00:11:25.520 | all kinds of work honing and developing his ability and his stage ability, and that was

00:11:31.120 | when he got his break. And I've found with most of the overnight success stories, as a kind of a

00:11:35.600 | sidebar, most of the overnight success stories I've ever researched, they're not overnight

00:11:39.760 | successes at all. It's that somebody was working, working, working, working away at their craft,

00:11:45.520 | and then they had a break. There was something that happened and they were found and they had

00:11:50.320 | a break. So back on track, the point is that for every effect that you want to have, you have to

00:11:58.160 | put in the cause. So if you want to get rich, getting rich is going to require a lot of work.

00:12:02.880 | It's going to require earning money, saving money, deferring savings, deferring spending,

00:12:09.920 | deferring gratification. There's a cost that you have to pay. And the higher you push that number,

00:12:15.600 | the bigger the cost. There is a much bigger cost. Let's use my running example.

00:12:19.600 | If I'm going to decide I'm going to go out and run a 5K, I could do that today. There's not a very

00:12:24.960 | high cost, but there are a gazillion runners that run a 5K. If I decide, however, I'm going to go and

00:12:30.240 | run an ultra marathon, a 100-mile ultra marathon, that's a very small club, and there's going to be

00:12:36.000 | a dramatic cost that I have to pay to be able to achieve that. Well, the same thing with finance.

00:12:41.200 | Getting rich is a lot of work. So let's make sure that the rewards are going to be worth making

00:12:47.680 | the sacrifice and paying the price. I think one of the most important steps on our

00:12:55.040 | list of goals should be to make a shopping list. So as we're developing our financial goals,

00:13:01.280 | which is where everything starts, what are the financial goals that are important to each of us?

00:13:04.400 | We really need to start by making a shopping list. What do you actually want to buy?

00:13:08.640 | On Friday, I did a show that was a Q&A, and the reader was talking about developing a certain

00:13:15.760 | level of retirement income. Or excuse me, the listener was talking about developing a certain

00:13:19.440 | level of retirement income. I'm constantly struck by how few people have any idea, when I've done

00:13:26.080 | retirement planning, how few people have any idea of an actual realistic budget of what they want to

00:13:31.920 | do in retirement. It was where I worked with all of my clients. The very first exercise of

00:13:36.720 | retirement planning is to sit down and create a budget, create a current. And what we would do,

00:13:41.280 | just I'll give this to you as a freebie, especially if you are close to retirement,

00:13:46.240 | this will be useful to you. What we would do is create basically four budgets. We have a current

00:13:52.960 | budget, and then we have a retirement budget. And then we have a minimum budget and an ideal budget.

00:13:59.120 | And this is very important for retirement planning. So the current budget is,

00:14:03.760 | here's what I'm currently doing. This is, excuse me, I misspoke. This would be usually three

00:14:09.200 | budgets, because it would be a current budget, and then it would be a retirement minimum budget,

00:14:15.360 | and a retirement ideal budget. Although you can do minimum and ideal for now as well.

00:14:20.000 | But usually most people are not that detail-oriented with their finance, with their

00:14:25.920 | personal finances. So I would start by saying, well, what's the minimum? What level of lifestyle

00:14:31.760 | is the minimum that you're willing to accept? You know, for example, do you eat out? Do you like to

00:14:37.040 | eat out at TGI Fridays, or do you like to eat out at Morton Steakhouse? There's a difference.

00:14:42.640 | An Outback steak and a Morton Steakhouse is going to be a major difference. Do you want to eat out

00:14:46.400 | one time a week, or do you want to eat out four times a week? Do you want to, what would be an

00:14:52.080 | example, do you want to travel to Europe, or do you want to travel to South America? South America

00:14:56.080 | is a lot cheaper to get to than Europe. So we would start by making these budgets of what you

00:15:01.440 | would actually want. And then you would figure out, well, are we anywhere close? But the thing

00:15:06.960 | is, is that it's hard for people, especially if they're not tracking their money, to be able to

00:15:11.120 | know what those are. But usually what you would find is if you eliminated a lot of expenses,

00:15:15.680 | that their budgets are actually fairly modest. This was a key takeaway if you've ever read the

00:15:22.000 | book "Your Money or Your Life," which is a highly recommended financial book. It's a key takeaway,

00:15:26.560 | as they point out, that if you take away most of the expenses associated with working,

00:15:30.560 | in general, a lot of our goals are fairly modest. So the very first thing to do is to start with

00:15:37.280 | writing down your financial goals. On Friday's show, I mentioned John T. Reed's book, "How to

00:15:43.120 | Get Started in Real Estate Investment." And when I went and dug it off my bookshelf

00:15:46.320 | to answer that question, because I wanted to read that list of real estate strategies,

00:15:52.640 | I was flipping through it, and I was reminded of how I really had benefited from this book,

00:15:57.520 | and how he starts. Now, most get-rich books usually start with all the reasons why you should,

00:16:06.080 | you know, they're generally motivation. They're generally a pep talk about how great it is to be

00:16:11.840 | rich, and how you should just want a huge amount of money. One of the reasons why I have a huge

00:16:15.760 | degree of respect for John Reed is he starts his real estate book with this exact thing that I'm

00:16:23.040 | talking about. And I had forgotten he put it in here, and it was part of the genesis of my deciding

00:16:28.160 | to talk about this today, because this is where he starts. He says, "Start by setting your goals."

00:16:32.480 | And he tries really hard to talk you down from setting your goals too high.

00:16:37.440 | He talks about what are the things that you're actually going to want to buy.

00:16:41.760 | Make a shopping list is his thing. You can know that your finance author is actually probably

00:16:50.080 | someone worth reading if they'll start with trying to talk you out of wanting to be mega rich.

00:16:54.640 | He starts with a shopping list, and he tells you what he thinks you should put on it. You know,

00:16:59.680 | he says, "You invest to make money. Wanting money implies that you have some shopping list of things

00:17:04.560 | that you cannot acquire until you get more money. Money is simply a means to an end. So exactly what

00:17:10.000 | is it that you want to buy?" And he goes on, he says, "You should want a nice house." He talks

00:17:14.800 | about how much that costs. "You should want an education for your kids." How much that costs,

00:17:20.560 | talks about college, talks about retirement, about what you should want versus not want,

00:17:25.520 | and I'll skip that. But he makes some good points that I have made, and I had forgotten how much

00:17:30.640 | he and I were aligned with. I need to see if I can get him on the show. I'd forgotten how much

00:17:34.800 | he and I were aligned philosophically and how much I had learned from him in the past about

00:17:39.440 | that retirement is really just a dumb concept that, let me see here, he actually says, "People

00:17:46.240 | who are," he says, "I'm not interested in lying in a hammock. Generally, the only people who are

00:17:51.680 | are those who have not tried it. Absent some extraordinary luck, you would have to bust your

00:17:56.720 | butt for a long time to achieve the sort of net worth that would allow you to do so, to quit

00:18:01.120 | working. As a general rule, those who are capable of such butt-busting are incapable of such leisure."

00:18:07.200 | Much more eloquent way of saying it. But let me read one, these are the about five paragraphs,

00:18:14.240 | about eight paragraphs here that I wanted to read from this book. And there's two sections here.

00:18:19.440 | And this is one of the points that I very have rarely have ever seen somebody talk about,

00:18:24.080 | but I think is so important. Section is handled, "There are costs and risks to becoming rich."

00:18:30.160 | This is John T. Reed, "One reason I am trying to get you to have a realistic view of being rich

00:18:36.640 | is that getting there will require you to give up some important things, and it will require you to

00:18:42.880 | take risks. You should think twice before you give up those things and before you take significant

00:18:49.040 | risks. Another way in which millionaires and average people are the same is the number of

00:18:54.160 | hours in their day. Everybody gets only 24. Making extraordinary amounts of money requires spending

00:19:01.200 | extraordinary amounts of time. If you spend more time making money, you must spend less time on

00:19:07.760 | other things. To maintain your health, which is worth more than money, you must get a full night

00:19:13.520 | sleep, take time to eat healthy meals, and set aside some time to exercise. To maintain healthy

00:19:20.560 | family and friend relationships, which are also worth more than money, you must spend time with

00:19:25.440 | your family and friends. Every dollar you add to your financial goals takes more time away from

00:19:30.960 | important things like health, family, and friends. So I want you to set the lowest possible financial

00:19:37.840 | goal so you leave the maximum amount of time for things that are more important than making money.

00:19:43.760 | I think it's good to want a good home and education for your kids. I believe you should sacrifice for

00:19:50.160 | those goals, but I cannot see sacrificing your health, family, or friends for goals like flashy

00:19:56.720 | cars, horses, boats, or private planes. If only I were rich, life would be a dream.

00:20:04.640 | One mindset that disturbs me about beginning real estate investors is a naive belief that

00:20:09.360 | getting rich transports you to a state of nirvana. It does not. Those of us who have acquired the

00:20:16.160 | million are almost uniformly disappointed to find that money has a very limited ability to

00:20:21.360 | improve your life. I once had supper with billionaire Ross Perot in my capacity as co-president

00:20:27.440 | of the New Enterprise Club at Harvard Business School. One of my friends told me to ask him,

00:20:32.640 | "Yes, but are you happy?" I did. His answer was, "Yes, I am happy, but I am not any happier than

00:20:40.480 | I was when my wife and I were newlyweds living in cramped, Navy-based quarters shortly after

00:20:46.240 | I graduated from Annapolis." He went on to say that being famously rich had some serious

00:20:51.680 | disadvantages. For example, he had to train his children in kidnapping avoidance. He said if you

00:20:57.680 | asked his daughter if she were Cindy Perot or whatever her first name was, she would answer,

00:21:02.880 | "No, she just left a few minutes ago." I also reject the notion that the rich are less happy

00:21:08.400 | than the average person. Money can buy happiness to an extent. The unhappiness of the rich that

00:21:14.880 | is related to their wealth comes from such things as getting divorced because one spouse spent too

00:21:20.000 | much time pursuing financial success and neglected family life. Also, many men tend to marry,

00:21:26.320 | get rich, then conclude that not only do their first car and house need to be replaced with

00:21:31.120 | better models, so does their first wife. Although I have not experienced divorce firsthand,

00:21:37.040 | it is clear to me from what I saw as a coach of divorced children that divorce provides a

00:21:41.760 | lifetime of agonizing unhappiness to those it touches. To the extent that the rich engage in

00:21:47.440 | dangerous hobbies, they may increase their family's unhappiness if they are seriously injured (e.g.,

00:21:53.360 | Christopher Reeve jumping horses) or killed (e.g., John Denver flying his own experimental

00:21:59.040 | plane that was purchased to enable him to travel more easily to visit his divorced children).

00:22:04.080 | Maybe it's a distortion caused by disproportionate media coverage,

00:22:08.640 | but the children of the rich seem to turn out worse than the children of the middle class on

00:22:12.800 | average. The rich have more ability to spoil their children, and in that case the word "spoil"

00:22:18.240 | reflects not only the way the adults behave toward the children, but also the way many of

00:22:23.440 | those children turn out as adults. I know a number of rich people whose adult children are dependent,

00:22:28.960 | divorced, and living with and off their elderly parents. The children of the middle class may

00:22:34.080 | want to do likewise, but it is not an option. Extraordinary wealth can beget extraordinary

00:22:39.920 | laziness and lack of ambition in the children of the wealthy. What a horrible turn of events

00:22:44.800 | if the parents sacrificed their whole lives to give their children a better life than they had,

00:22:49.840 | only to see those children respond by becoming leeches.

00:22:53.040 | That's an excerpt from about three-quarters of a page of John Reed's book here, and

00:23:00.800 | hopefully that'll give you a sense of the whole book. It's well worth reading. Highly

00:23:04.960 | recommended buying it. But he goes on and he talks about his experience in real estate,

00:23:09.520 | and he talks about how one of his goals as a young man was to have a $5 million net worth

00:23:15.280 | and to own 100 residential real estate units. And so he traded up. He says, "In pursuit of those

00:23:21.680 | goals, I became a millionaire, then a former millionaire." He traded up from 20 units to 37,

00:23:26.560 | then from 37 to 58, and then he got sunk by the values of his properties being destroyed by the

00:23:33.920 | Tax Reform Act of 1986, the oil glut, and the overbuilding caused by the savings and loan

00:23:39.280 | debacle, and he lost three-quarters of a million dollars. He just talks about if he'd stopped when

00:23:43.920 | he had got his first 20 units in New Jersey, he would have been set for life. But he continued

00:23:49.680 | pursuing a higher number, and his wealth was destroyed. "Thinking back on it, all I can figure

00:23:55.360 | is that I picked the 5 million and 100 unit goals because they were impressive round numbers. I

00:24:02.640 | guess I figured that I would impress my friends and relatives and make my enemies envious."

00:24:07.280 | You've never read that in a success book, have you? Or heard that in a financial podcast. But

00:24:20.160 | he makes a good point, and he's coming from a position far beyond where I'm at. I'm just at the

00:24:24.320 | very beginning stages of my wealth building. But I've seen this, and I've noticed that this happens

00:24:29.840 | often. If you just moderate your goals a little bit, you lower your risk substantially. So a good

00:24:37.040 | place to start is make a shopping list and figure out what do you actually want. So example, like

00:24:42.480 | he said, you probably want a nice house. So sit down and figure out what does that mean? What

00:24:48.960 | kind of house is a nice house? Do you want it where you are? Education costs. I've got a whole

00:24:54.240 | series of shows planned on education, but how much does the education that you envision for your

00:24:59.760 | children cost? Incidentally, my opinion is you could probably get far better results if you'll

00:25:04.240 | free up your time and you spend time educating your children and not hiring it done, and it'll

00:25:09.040 | be better all around. But that's a rabbit trail for another day. Do you want to go out to eat? Do

00:25:15.520 | you want to drive fancy cars? I mean, what do you want? I would encourage you, in addition to

00:25:22.240 | the book that I just referenced, and all these books will be in the show notes,

00:25:24.880 | I would encourage you to read the book, "Stop Acting Rich" by Tom Stanley. And Tom Stanley is

00:25:31.680 | one of my favorite researchers because he actually has quantitative data to pull from with regards to

00:25:38.800 | the wealthy and what they actually do and how they actually live their lives. I'm going to read an

00:25:47.600 | excerpt from the book here, and this is from his chapter called "The Road to Happiness," where he

00:25:52.640 | talks about what the wealthy drive, and he gives a little bit of a story. But consider this very

00:26:02.000 | practical way of thinking, and remember the fact that this is by someone who has made his life's

00:26:08.640 | work the study of the affluent and their habits and their lifestyles. Incidentally, one of the

00:26:13.200 | reasons why I like this book so much is because he talks about the affluent and what he labels

00:26:19.600 | the "glittering rich," and it really helps, those words really help me a lot to specify the

00:26:28.880 | difference between those people who are actually rich but seem like the millionaire next door,

00:26:33.920 | which was one of his books, and those adults who are just glittering rich, who are so rich that

00:26:41.680 | they can't possibly overspend their money. And I'll come to an example of that in a moment when

00:26:46.720 | I read an excerpt from another book as to what your budgets would look like if you had varying

00:26:52.240 | levels of wealth. Here's from chapter 7 of Tom Stanley's book. This chapter is called "The Road

00:26:58.800 | to Happiness." Tony D. of the Washington Speakers Bureau called me shortly after my first book,

00:27:04.560 | "Marketing to the Affluent," was selected by the Best of Business as a top 10 business book.

00:27:10.560 | He had two questions for me. First, would I speak at two of BMW's North American dealers'

00:27:15.680 | conferences? And second, if I preferred to be paid in BMW currency, the use of a BMW for a year,

00:27:22.960 | or in U.S. dollars? No doubt BMW thought, or hoped, that I would be thrilled to drive a BMW.

00:27:30.960 | Perhaps they were surprised when I opted to be paid in cash. Why did I go for the dollars and

00:27:36.240 | not the barter deal? Several reasons. Driving a BMW would make me uneasy. It is at odds with my

00:27:43.680 | family's consumption patterns and beliefs. It could also have proven a slippery slope.

00:27:48.640 | Drive a car for a year, and the next thing you know I just have to have one that I would have

00:27:53.840 | to pay for, which would be harmful to my wealth. Most important, I know what a car can and cannot

00:28:00.000 | do for a person. You can't drive your way to happiness. Yet some people believe otherwise.

00:28:06.240 | They may see some fellow driving a fully accessorized BMW, Corvette, or Cadillac,

00:28:11.840 | and assume something about him. They whisper to themselves, "There goes a happy guy. If I had that

00:28:17.600 | car instead of my Toyota, I would be off the far end of the happy scale." But just what is the

00:28:23.440 | relationship between the car you drive and your level of satisfaction with life? Well, according

00:28:28.720 | to my research, there is no significant correlation between the make, or brand, of the motor vehicle

00:28:36.720 | you drive and your level of happiness with life. People who live below their means understand this.

00:28:43.040 | The data tell the story. Consider the results from my most recent national survey of high-income

00:28:48.800 | producing households. Each of the 1,594 respondents was asked about the make of motor vehicles he had

00:28:55.760 | acquired over the prior ten years, as well as his most recent acquisitions. Guess what? Not one

00:29:02.400 | significant correlation was found between the make of motor vehicle acquired and overall

00:29:07.200 | satisfaction with life. That's right. Not one of the 46 makes studied had any measurable effect

00:29:15.200 | on satisfaction with life overall. It did not matter what measure of motor vehicle acquisition

00:29:21.040 | habit was studied. The results were the same. For example, those who bought and/or leased one,

00:29:26.640 | two, three, four, five, or more BMWs over a ten-year period were not significantly more

00:29:32.640 | satisfied with life than those who did not acquire any BMWs at all. And the same applies

00:29:38.560 | to all the other makes studied. Independent of make, what is the relationship between the price

00:29:43.760 | paid for an automobile and overall satisfaction with life? There is a positive, but not

00:29:50.000 | statistically significant correlation. I have my own personal version of the happy story.

00:29:56.080 | An ABC 2020 program producer called to ask me a number of questions in preparation for my

00:30:04.560 | appearance on the show. She asked, "Why does a best-selling author drive a 2005 Toyota 4Runner

00:30:11.840 | and not a new BMW?" The answer to this question is simple. My son bought my '97 4Runner, so I had to

00:30:19.200 | get a newer car. More to the point, I would not be any happier driving a BMW. In fact, I would

00:30:25.520 | probably be less content if it cost $10,000 or $20,000 more than the $30,000 I paid for my

00:30:32.640 | four-wheel-drive, sports-edition 4Runner. And then there are the additional carry costs. It costs more

00:30:38.640 | to insure a BMW than a Toyota. After the 2020 interview was over, I did some additional

00:30:46.640 | calculations. From my survey data of high-income producers, I computed the average level of

00:30:52.480 | satisfaction with life overall by the make of motor vehicle most recently acquired. Those

00:30:58.000 | currently driving BMWs had an average level of satisfaction of 4.25 on a 5-point scale,

00:31:04.000 | 5 being the highest. Those driving Toyotas had an average of 4.20. While there is a difference,

00:31:11.840 | 1/20 of 1 point on the happy scale, it is not statistically significant.

00:31:16.560 | Yet some difference was expected, given the fact that 71% of the BMW drivers who were surveyed had

00:31:23.840 | household annual incomes of $200,000 or more. In contrast, only 46% of the Toyota drivers

00:31:30.160 | generated this much income. My surveys indicate that there is a significant correlation between

00:31:35.920 | income and satisfaction with life. In other words, earning more money may make you somewhat happier,

00:31:42.000 | but spending that money, particularly on cars, won't. If we make the appropriate statistical

00:31:48.080 | adjustments for income differences in life satisfaction, then we find that the average

00:31:53.040 | life satisfaction among Toyota drivers is higher. But surely I could afford to drive the dressed-up

00:31:58.720 | version of my Toyota 4Runner, a GX470 Lexus. Yes, I can afford a Lexus. However, I prefer

00:32:06.000 | to allocate the extra $20,000 to conducting another survey of millionaires, rather than to

00:32:11.360 | ride around with the money in traffic. Is anyone happy in traffic, irrespective of the price and

00:32:16.560 | make of the wheel they are gripping? Not only is the V6 engine in my Toyota 100 pounds lighter and

00:32:22.560 | more efficient, and provides superior acceleration than the V8 in the gilded version, by allocating

00:32:28.480 | the $20,000 to the car, the money is lost forever, but by allocating it to a survey, it will generate

00:32:34.720 | more income for me. The Lexus does have better paint, my Toyota has orange peel, a superior

00:32:41.600 | transmission, and a higher quality interior, but are those attributes worth the extra $20,000?

00:32:47.360 | Not to me. Most of all, the people who are an important part of my life do not care if I drive

00:32:54.480 | a Toyota. Nor does my choice of motor vehicle have any influence on the number of people

00:32:59.520 | who respond to my surveys or buy my books. Most people who are economically successful

00:33:05.120 | in objective terms do not need status brands to convince themselves or others in their social

00:33:11.360 | circles of this fact. Nor is their high level of satisfaction in life based on the make of

00:33:17.200 | vehicle they drive. To me, I think it's a good example of a rational way of thinking through

00:33:28.480 | a buying decision. And here's the key. You're a fool if you're caught up in the game of impressing

00:33:38.640 | other people. Now, I thought carefully about saying you're a fool, and maybe that's a little

00:33:45.280 | judgmental. Maybe I should say it is foolish, but really, it's--I guess I should temper it a little

00:33:53.440 | bit. It's completely foolish to be caught up in the game of impressing other people. Get your ego

00:34:00.080 | out of your finances. Seriously. Now, there is a place to consider something like image. There is

00:34:08.480 | a place to consider something like signaling theory, where the car that you drive needs to

00:34:13.600 | signal something as an aspect of our modern life. There is a place for that. But be careful.

00:34:22.160 | Because the majority of times, those signals come into play. People are trying to signal

00:34:30.480 | something that's a complete lie. Don't be foolish. Get your ego out of your financial decisions,

00:34:41.680 | especially in the realm of cars. So my major point is though--with this is not to get off on that

00:34:47.280 | tangent--but my major point is that planning to buy a BMW adds--let's assume that you plan to buy

00:34:56.720 | a BMW. And let's say that you're carrying costs of buying a BMW versus a Toyota are an extra,

00:35:02.480 | conservatively, let's say $5,000 a year. Well, if we were to--let's use the--and

00:35:09.360 | where I'm bringing that number from is I'm assuming that you're driving a standard amount.

00:35:15.040 | Now with a BMW, you're using premium fuel instead of regular fuel. You're paying a higher insurance

00:35:19.520 | cost. You're paying higher money because now you've got to put on high-performance tires

00:35:24.000 | instead of standard automobile tires. An extra cost. I'm making that number completely up.

00:35:31.280 | Just--it could be certainly valuable--extra depreciation for the additional cost of the

00:35:35.520 | vehicle, et cetera. I made the number up off the top of my head. My point is that there could be

00:35:39.680 | a number of reasons why that number is accurate or it could not be. So don't get hung up on the

00:35:44.720 | number. So you're paying an extra $5,000 a year for the BMW. Well, in order to support an extra

00:35:52.320 | $5,000 per year, if we just use the 4% rule as a reasonable proxy for how much capital we would

00:35:58.160 | need to accumulate towards a retirement goal or a financial independence goal, we need to

00:36:02.720 | accumulate $125,000 of additional capital. So then stop and figure out, "Well, how long does it take

00:36:14.160 | me to save $125,000 or how would I have to invest to earn that $125,000?"

00:36:19.440 | It's probably easier just to adjust your tastes and lower the risk and simply choose that the

00:36:29.600 | BMW is not as important than just to choose the Toyota. It will remove a lot of risk out of your

00:36:36.560 | life. Even the whole retirement plan, frankly, as I've discussed in detail on the show many times,

00:36:45.040 | there's a big difference between being prudent and saying, "I'm going to plan for a point in my old

00:36:51.280 | age and a point in my time at which I'm too infirm to work versus I'm going to plan to save a bunch

00:36:59.760 | of money to retire at 65 to live the good life." There are so many problems with that plan. I mean,

00:37:05.760 | they're just all over the place. The majority of people, A, are never getting there, as I've

00:37:09.360 | proven in the past. The majority of people, B, don't want to get there. And the amount of work

00:37:13.920 | it takes to accumulate that much money in savings is massive as compared to so many of the other

00:37:20.560 | options that are available. I suggest to you that you consider if money is really going to solve the

00:37:32.560 | problem or not. I'm going to read another excerpt here. This is again from the 4-Hour Workweek,

00:37:39.280 | Tim Ferriss' book. This is a page and a half here. "Money alone is not the solution. There is much to

00:37:46.800 | be said for the power of money as currency. I'm a fan myself. But adding more of it just isn't the

00:37:52.800 | answer as often as we'd like to think. In part, it's laziness. If only I had more money is the

00:37:59.440 | easiest way to postpone the intense self-examination and decision-making necessary to create a life of

00:38:05.680 | enjoyment now and not later. By using money as the scapegoat and work as our all-consuming routine,

00:38:13.600 | we are able to conveniently disallow ourselves the time to do otherwise."

00:38:17.760 | Well, John, I'd love to talk about the gaping void I feel in my life,

00:38:21.920 | the hopelessness that hits me like a punch in the eye every time I start my computer in the morning,

00:38:26.560 | but I have so much work to do. I've got at least three hours of unimportant email to reply to

00:38:31.280 | before calling the prospects who said no yesterday. Gotta run! "Busy yourself with the routine of the

00:38:37.360 | money wheel. Pretend it's the fix-all, and you artfully create a constant distraction

00:38:43.760 | that prevents you from seeing just how pointless it is. Deep down, you know it's all an illusion,

00:38:50.160 | but with everyone participating in the same game of make-believe, it's easy to forget.

00:38:55.920 | The problem is more than money. Relative income is more important than absolute income.

00:39:02.720 | Among dieticians and nutritionists, there is some debate over the value of a calorie.

00:39:07.920 | Is a calorie a calorie, much like a rose is a rose? Is fat loss as simple as expending more

00:39:13.760 | calories than you consume, or is the source of those calories important? Based on work with

00:39:19.040 | top athletes, I know the answer to be the latter. What about income? Is a dollar a dollar? Is a

00:39:25.120 | dollar is a dollar is a dollar? The new rich don't think so. Let's look at this like a fifth-grade

00:39:30.720 | math problem. Two hard-working chaps are headed toward each other, chap A moving at 80 hours per

00:39:36.080 | week and chap B moving at 10 hours per week. They both make $50,000 per year. Who will be richer

00:39:41.920 | when they pass in the middle of the night? If you said B, you would be correct. And this is

00:39:47.600 | the difference between absolute and relative income. Absolute income is measured using one

00:39:55.600 | holy and inalterable variable, the raw and almighty dollar. Jane Doe makes $100,000 per

00:40:02.480 | year and is thus twice as rich as John Doe, who makes $50,000 per year. Relative income uses two

00:40:09.360 | variables, the dollar and time, usually hours. The whole per-year concept is arbitrary and makes it

00:40:16.320 | easy to trick yourself. Let's look at the real trade. Jane Doe makes $100,000 per year, $2,000

00:40:25.360 | for each of 50 weeks per year, but works 10 hours per week and hence makes $100 per hour.

00:40:32.160 | In relative income, John is four times richer. Of course, relative income has to add up to the

00:40:38.640 | minimum amount necessary to actualize your goals. If I make $100 per hour but only work one hour

00:40:44.640 | per week, it's going to be hard for me to run amok like a superstar. Assuming that the total

00:40:49.520 | absolute income is where it needs to be to live my dreams, not an arbitrary point of comparison

00:40:54.640 | with the Joneses, relative income is the real measurement of wealth for the new rich.

00:40:58.960 | So Tim goes on and he makes some good points about that, but the key that I'd just like to

00:41:05.520 | point at is many people, in my observation, and consider if this is applying to you,

00:41:10.800 | are working towards this huge number, this huge goal, thinking that somehow money is going to

00:41:16.800 | make them happier, thinking that somehow money is going to solve all of their problems. Money

00:41:22.720 | doesn't solve all of your problems. Money creates a lot of problems of its own. As part of planning,

00:41:30.560 | consider what Tim Ferriss calls his dreamlining program. And again, you'll have to read the book

00:41:37.680 | for details. I'm just going to read one paragraph from it. But basically what he talks about is

00:41:42.160 | figuring out what your dreams are and then determining the exact cost of those dreams,

00:41:46.400 | and then calculating your target monthly income for your dreams based upon various timelines.

00:41:52.320 | But the key example that really -- let's see, I read this book, May of 2007, my notes in the front

00:42:00.320 | say May of 2007. And I've never forgotten, seven years ago, I've never forgotten about this. To me,

00:42:05.600 | it's a powerful concept. I'm going to read this one paragraph. And it struck me because I was

00:42:09.760 | always this finance nerd that said, "Don't ever finance anything. Don't lease cars. Don't rent

00:42:13.600 | stuff. Buy stuff. You've got to be rich." If financeable, what is the cost per month for each

00:42:19.200 | of the four dreams? Rent, mortgage, payment plan installments, et cetera. Start thinking of income

00:42:25.040 | and expenses in terms of monthly cash flow, dollars in and dollars out, instead of grand

00:42:30.640 | totals. Things often cost much, much less than expected. For example, a Lamborghini Gallardo

00:42:38.000 | Spider, fresh off the showroom floor at $260,000, can be had for $2,897.80 per month. I found my

00:42:47.600 | personal favorite, an Aston Martin DB9 with 1,000 miles on it through eBay for $136,000, or $2,003.10

00:42:57.520 | per month. And he goes on and gives more examples. But the point is that if you figure out what

00:43:02.960 | exactly it is, if you have a shopping list, and this is how these things tie together, if you have

00:43:07.200 | an actual shopping list, you can sit down and set an actual price tag and figure out how much money

00:43:11.840 | you have. I don't have any interest in owning a Lamborghini. But if that's important and I want

00:43:17.680 | to go rent one or I want to lease one for a couple of years, whatever it is, if I have it, then I can

00:43:21.280 | figure it out. So it's not up to me to tell you what you should spend your money on. But consider

00:43:28.480 | them. Consider really choosing your hobbies carefully. I had an example with a prospective

00:43:36.320 | financial planning client many years ago. And I was sitting down with him and the guy was telling

00:43:42.320 | me about his assets. And he's like, I think I got a lot of money. I think I got some money here,

00:43:45.920 | money there, money here, money there. And he starts telling me. And I'm writing them down

00:43:49.040 | dutifully. And at the end of it, we calculate out his balance sheet and the guy's a millionaire.

00:43:53.440 | And it totally surprised him. He's like, I didn't know that. I didn't know he was a millionaire.

00:43:57.280 | But what I found is by looking into him, he lived in a normal middle class house. He lived in a,

00:44:03.920 | you know, this guy was in Boca. He was in Boca Raton or Fort Lauderdale, Florida, not exactly

00:44:10.160 | inexpensive places to live. But his primary hobby was mountain biking. He loved to go mountain

00:44:14.960 | biking. And so for him, tossing his mountain bike on the back of the car and going away for the

00:44:19.280 | weekend, it wasn't an expensive thing. It didn't cost a lot of money. Now, I'm going to read

00:44:26.560 | another section here. And this is from a book. Doing a lot of reading today. But these are just

00:44:30.880 | things as I was preparing the outline, I said, why should I reinvent the wheel if an author has

00:44:38.240 | already done a good job of getting my point across? So I'm going to read a section here on

00:44:44.000 | budgets from a book called Seven Years to Seven Figures, the Fast Track Plan to Becoming a

00:44:49.280 | Millionaire. The author here is Michael Masterson. That's actually a pen name for a man named Mark

00:44:53.760 | Ford. He actually lives here in Delray Beach near me. And he published for years the online website

00:44:59.920 | and newsletter called Early to Rise. He writes a lot about money. So one of the things that is

00:45:08.160 | interesting about this is in this book, he's talking about plans, how to become a millionaire

00:45:13.600 | in seven years. And this is really good stuff. He points out how to do it. And it's not scammy.

00:45:22.240 | It's really legitimate. It's very legitimate. So in the beginning, though, he's trying to say,

00:45:29.200 | how do you figure out how big your goal is? Seven figures can mean anything from $1 million to $9,999,000.

00:45:37.680 | That's all seven figures. And so he talks through what some budgets would be. I'm going to read

00:45:43.120 | these. There are four budgets. And I'm going to read some budget categories. I've pulled out a

00:45:47.440 | good bit of the text, and I'm just to shorten it. But just consider this. And the point of reading

00:45:54.640 | this is to talk about, could you actually spend millions of dollars? Because most of the time,

00:46:00.720 | when people tell me how much money you want, $5 million, $10 million, when they ask me. Or I want

00:46:05.040 | to spend $100,000 a year if they're not spending that. Now, where I live, there's lots of people

00:46:09.600 | spending hundreds of thousands of dollars a year. We'll set that aside for a moment. Because

00:46:15.200 | generally, if they're already doing that, they're earning a certain income. And it's a different

00:46:18.320 | planning situation. I'm talking just in a generalized view. And just figure out, could

00:46:23.360 | you actually spend this much money, coping with a mere million? To begin at the beginning, ask

00:46:29.200 | yourself, would a net worth of $1 million be enough for me? A million dollars earning 10%

00:46:35.520 | yields $100,000 in annual income. Set aside the whole earning 10% thing for now. Just get the

00:46:41.040 | point. Take away about $35,000 for federal, state, and local taxes. That leaves you with $65,000 in

00:46:47.760 | cash. What kind of lifestyle would $65,000 buy? Well, let's start with housing. You could spend

00:46:54.400 | a lot, but I've made it a rule to never spend more than 25% of my income on housing. 25% of $65,000

00:47:02.240 | is $16,250, or about $1,350 a month. What kind of housing would that give you? In figuring housing

00:47:12.320 | costs, I always think in terms of rental costs, because the rental market is tied to what people

00:47:16.720 | can actually afford. So think about where you'd like to live once you achieve financial independence,

00:47:22.160 | and then ask yourself, what kind of home could I rent in that neighborhood for $1,350 a month?

00:47:28.400 | If you did spend $1,350 a month on rent, you'd have about $4,000 left over to pay for other

00:47:36.720 | expenses. Utilities, upkeep, and routine maintenance on your home might be as much as

00:47:41.840 | 30% of your rental costs. That's $405. And you could expect to pay another $900 a month for food

00:47:49.040 | and household supplies. Transportation would be your next biggest expense. Figure $600 a month for

00:47:55.840 | two medium-sized Toyotas. Those are your major expenses. Do the math, and you'll see that you

00:48:01.920 | are left with about $2,000 for things like travel, entertainment, dinners out, and other non-essentials.

00:48:07.600 | Those expenses can vary greatly depending on your personal preferences. If you can be happy with a

00:48:13.040 | good meal at a local restaurant, you may be able to budget meals for two people at $80.

00:48:18.640 | If you prefer fancier places, you'll have to figure on spending two or three times that amount.

00:48:22.880 | I'm in the fortunate position of being able to pay whatever I want for restaurant meals,

00:48:27.680 | and I'm happy to tell you that, although I do enjoy the occasional $500 meal, I'm usually just

00:48:33.680 | as happy eating meatballs and spaghetti at my local trattoria. Developing a plebeian palate

00:48:38.880 | will do a lot for your future happiness if your goal is to achieve a net worth of only $1,000,000.

00:48:45.120 | The $2.5 Million Lifestyle

00:48:46.960 | Living on a nest egg of a million dollars could be completely satisfying,

00:48:52.320 | so long as you are content with modest choices. If you have a family that is larger than two people,

00:48:57.600 | or if you want to be able to live on a somewhat higher level, you may want to target your net

00:49:01.760 | worth at $2 or $3 million. For the purposes of this discussion, let's pick a number in between,

00:49:07.440 | $2.5 million. What will a net worth of $2.5 million buy you? Again, assuming a 10%

00:49:14.560 | ROI and a tax burden of 35%, you'd end up with disposable after-tax income of about $160,000 a

00:49:22.560 | year. And again, figuring that 25% of that $160,000 will go into housing, ask yourself if

00:49:29.440 | you could be satisfied living in a house or apartment in your chosen neighborhood that

00:49:33.760 | would rent for about $40,000 a year, or $3,300 a month. In my neck of the woods, near the ocean in

00:49:42.000 | southeast Florida, that would get you a nice, older, two or three bedroom house within walking

00:49:47.440 | distance of town. If you want to live in Minneapolis, you'll do much better than that on

00:49:52.560 | the same budget. Don't laugh, it's a great city. On that kind of income, you can live there in a

00:49:58.000 | modern, spacious, six bedroom house with all the bells and whistles. Figuring, again, that you'd

00:50:03.680 | spend 30% of your housing budget on associated living expenses, you'd budget about $12,000 a

00:50:10.240 | year for utilities, repairs, maintenance, and upkeep. Other associated expenses, food, clothing,

00:50:17.120 | and so on, might account for another $13,000 a year for a total of $25,000. That may seem a bit

00:50:25.520 | high percentage-wise as compared to the $1 million budget, but it's a financial fact of life that the

00:50:31.360 | more you pay for your home, the more you'll pay for living expenses. By the way, interrupt myself,

00:50:38.240 | notice that one, and it's absolutely true. The research shows it out, Tom Stanley's research,

00:50:42.240 | without question. The more you pay for your home, the more you'll pay for living expenses,

00:50:47.360 | just simply due to the associated lifestyle costs. Subtract the cost of housing, $40,000 a year,

00:50:53.600 | and associated living expenses, $25,000 a year, and you are left with about $95,000 to spend on

00:51:00.640 | luxuries. $95,000 after tax dollars a year will provide two people with a lot of extras.

00:51:06.960 | Just for fun, let's look at what a $95,000 lifestyle budget might buy.

00:51:10.720 | 10-day Hawaiian vacation for two, $11,000. 10-day London vacation for two, $11,000.

00:51:18.400 | 52 semi-fancy dinners at $200 each, $10,400. 52 dinners at a local place at $100 each, $5,200.

00:51:30.160 | Lease upgrade on two Mercedes, $14,400. Overboard holiday party for 50 friends, $7,500.

00:51:38.400 | Extravagant Christmas gifts, $3,000. Golf club membership for two, $5,000.

00:51:44.960 | Spoil and presents for eight grandchildren, $4,000. 52 spa treatments, $5,200.

00:51:53.440 | 10% charity church tithing, $9,500. Where did that money go? Money, $8,800. Total, $95,000.

00:52:03.520 | I'm going to pause for a moment here. Notice how difficult it is to spend $95,000

00:52:09.760 | after you've taken care of housing, associated living expenses with housing, and food.

00:52:16.720 | It's not easy to spend $95,000. You've got to work at it.

00:52:21.840 | Now, I would say there are many people, again, depending on where you're at in the country,

00:52:25.600 | this may be a normal lifestyle or this may be extravagantly rich. To me, this is not that,

00:52:31.120 | just based upon where I live, this is not that out of sight. This is a fairly normal,

00:52:35.200 | it's not normal. Our median income is not, the median income is not $250,000.

00:52:41.120 | And then the after-tax income is not $160,000 a year as far as the median wage. But that's,

00:52:50.240 | I would say that for a financial planner, that's probably an average client base of clients that

00:52:55.600 | are making $250,000 a year. So notice that it's fairly difficult to spend that money.

00:53:01.920 | You have to work hard at it. Again, some of these expenditures are arbitrary. You might not,

00:53:09.360 | for example, enjoy traveling abroad, or you might find your grandchildren deplorable.

00:53:13.760 | In reviewing this list, make whatever substitutions you like, so long as they are in the same expense

00:53:18.320 | categories. Overall, this is a very luxurious lifestyle, wouldn't you say?

00:53:23.360 | So it's a good example because there was $2.5 million on his numbers. You figure out it's a

00:53:32.320 | little bit challenging. Well, let's go on and let's look at two other budgets. And I apologize

00:53:36.480 | if these lists are long, but I just think it's kind of funny. Because most people say, "Hey,

00:53:40.560 | I want to have a," many people say, I shouldn't say most, many people say, "I want to have a $5

00:53:45.040 | million net worth," but the reality is that they have never sat down and figured out,

00:53:52.240 | "How much money would I spend if I had $5 million?" So let's look at the next level,

00:53:57.040 | living on a $5.5 million nest egg. A $5.5 million net worth returning 10% is $550,000 a year,

00:54:05.840 | or $357,500 after paying 35% in taxes. Deduct $90,000 for your housing expense,

00:54:14.880 | another $30,000 for upkeep and utilities, $27,500 for food, clothing, and miscellaneous.

00:54:23.600 | I don't know how you spend $27,500 on food and clothing and miscellaneous, but then again,

00:54:28.480 | I don't shop. And you'd end up with... I guess I do shop, but I don't shop for consumption clothing

00:54:34.560 | items. And you'd end up with $210,000 a year to spend on discretionary items. Let's see how

00:54:40.400 | $210,000 pans out. 10-day Hawaiian vacation for two, 10 grand. 10-day London vacation for two,

00:54:47.600 | 10 grand. 10-day Istanbul trip for two, 15 grand. Two four-day weekends in New York City, 12,000.

00:54:54.400 | 52 very fancy meals at $500 each, $26,000. 52 semi-fancy meals at $200 each, $10,400.

00:55:07.920 | 104 meals at the local place at $100 each, $10,400. Lease upgrade on two Mercedes, $14,400.

00:55:17.680 | Overboard holiday party for 100 friends, $14,000. Extravagant Christmas gifts, $5,400.

00:55:26.560 | Golf club membership for two, $5,000. Spoilum presents for eight grandchildren, $4,000.

00:55:35.600 | 100 spa treatments, $10,000. 10% charity or church tithing, $21,000.

00:55:42.400 | Where did that money go? Money, $15,000. Two season tickets for an NBA team, $8,000.

00:55:50.160 | Tennis club membership, lessons for two, $5,000. Slightly used ski-do snowmobile, $3,000.

00:55:59.200 | 120 sessions with a personal trainer, $11,400. Total, $210,000.

00:56:05.680 | Living like this takes a lot of effort. Spending this much money requires diligence,

00:56:11.760 | determination, and imagination. For one thing, you must be willing to eat out four nights a week.

00:56:17.520 | You must devote nearly all your spare time to golfing, tennis, spa treatments, and professional

00:56:22.720 | basketball games. You would have to eschew low-cost leisure activities like reading, hiking, and

00:56:28.320 | fishing, except for deep-sea fishing in luxury spots. And you'd have to...okay, I'm kidding,

00:56:35.920 | or at least half-kidding to make a point. You don't need $5 or $6 million in the bank

00:56:41.440 | to enjoy a very good lifestyle. Good point, huh? Let's look at the last one,

00:56:48.240 | and then we'll be done with these budgets. The ultimate lifestyle. Again, $9 million at 10%

00:56:53.840 | will yield an income of $900,000. After paying 35% of that to Uncle Sam, you'd have $585,000

00:57:01.920 | to spend on yourself and your spouse. If you spent 25% of that, or $146,250 a year on housing,

00:57:11.040 | you'd be living in luxury, even in California, Florida, or Manhattan.

00:57:16.000 | Figure $45,000 a year for upkeep and utilities, a whopping $50,000 a year for food and clothing.

00:57:24.080 | Let's stick to Italian designers, please. And you're left with about $345,000 a year.

00:57:30.000 | How could you get rid of $345,000 a year? 10-day Hawaiian vacation for $2,000.

00:57:36.960 | 10 grand. 10-day London vacation for $2,000. 10 grand. 10-day Istanbul trip for $2,000.

00:57:41.920 | 15 grand. 4 four-day weekends in New York City, $24,000.

00:57:46.480 | 52 very fancy meals at $500 each, $26,000. 52 semi-fancy meals at $200 each, $10,400.

00:57:57.280 | 104 meals at the local place at $100 each, $10,400. Lease upgrade on two Mercedes, $14,400.

00:58:09.040 | Way overboard holiday party for 100 friends, $20,000. Ultra extravagant Christmas gifts, $10,000.

00:58:16.880 | Golf club membership for two, $5,000. Really spoil 'em presents for eight grandchildren, $8,000.

00:58:24.480 | 104 spa treatments, $10,400. Charity church tithing, $40,000.

00:58:31.600 | Where did that money go? Money, $24,000. Two season tickets for an NBA team, $8,000.

00:58:38.880 | Tennis club membership for two, $5,000. 120 sessions with a personal trainer, $11,400.

00:58:44.880 | Bose home theater system, $4,100. Sony VAIO notebook computers for you,

00:58:51.600 | your spouse, and all eight grandchildren, $22,000. High definition mini-cam quarter, $3,600.

00:58:58.720 | Matching diamond and platinum ring earrings and pendant from Tiffany, $16,250.

00:59:05.920 | 52 weeks of fresh flower delivery, $4,450. Three widescreen plasma TV sets, $15,000.

00:59:14.560 | Stereo systems for two cars, $4,000. Digital cameras for you, your spouse,

00:59:20.800 | and all eight grandchildren, $13,600. Total, $345,000.

00:59:26.960 | As you can see, you can live reasonably well without working on a net worth of $1,000,000.

00:59:33.920 | Having $2,000,000 or $3,000,000 in the bank makes life easy. If you target the $5-$9,000,000 range,

00:59:39.920 | you'll be able to enjoy all the luxuries you have ever imagined, and still have money left over that

00:59:44.960 | you won't know what to do with. Of course, if you decide to target the higher end of the seven

00:59:50.000 | figure range, you'll have to expect to work harder and take more risk to achieve your goal.

00:59:56.000 | Interesting, huh? Hopefully you enjoy that. I know it's easy to get lost in the columns of

01:00:02.240 | numbers. This book was published... Let's see here. When did I get it? I don't have a note as

01:00:07.520 | far as when I got it, but the copyright date is 2006. It's funny. 2006, notice this. Sony VAIO

01:00:20.160 | notebook computers, 10 of them for $22,000. High definition mini camcorder, $3,600. Three widescreen

01:00:29.200 | plasma TV sets, $15,000. Consider 2006 to 2014 as eight years, and consider how much cheaper those

01:00:36.160 | things are today. He puts in here, "Digital cameras for you, your spouse, and all eight

01:00:40.800 | grandchildren, $13,600." Just think of how much cheaper those things are. The point is, have you

01:00:47.200 | ever actually sat down and made a budget? If you're targeting a net worth of $5,000,000, have you ever

01:00:53.360 | sat down and figured out, "Do I need to target that, or am I just targeting that for some stupid

01:00:57.600 | ego reason?" I challenge you to see if you can figure out how to spend that much money. It also

01:01:05.120 | illustrates why. Think about that lifestyle that he went through of $9,000,000, of a $9,000,000 net

01:01:13.280 | worth. Why, when Tom Stanley talks about the glittering rich, who can walk in and buy a brand

01:01:19.200 | new Mercedes and not pay any attention to it, who can spend money lavishly without even paying

01:01:24.240 | attention to it? That's one of many reasons why the rich continually get richer. Because once you

01:01:29.600 | reach a certain point of mass, it's hard to spend the money. You can't possibly spend the money.

01:01:35.520 | And so because you can't possibly spend the money, you either give it away, or it grows over time,

01:01:40.400 | or you become very imaginative at spending the money. I shouldn't say you can't possibly, because

01:01:44.960 | the financial newspapers are rife with examples of people who have blown through massive fortunes.

01:01:55.200 | How I'm always perplexed, but they do. It's so easy in today's world, and in the United States

01:02:03.120 | of America. I want to be specific about that. The rest of the world is not the same. But in the

01:02:07.600 | United States of America, or in any well-developed economy, I don't know what the politically correct

01:02:14.560 | term or even the right term is. Western world, I'm not sure. In today's modern rich economies,

01:02:20.160 | it's so easy to live rich. The poorest person, I guarantee, the poorest person listening to this

01:02:27.120 | show right now lives better than John D. Rockefeller lived in many ways. I'm reading a

01:02:35.120 | biography of Rockefeller right now, and it's just, I mean, the poorest person lives better than he

01:02:43.040 | does. So what is wealth? Is wealth the number of dollars in the bank? Or is wealth the amount of

01:02:49.120 | time and the energy that you have? A billionaire doesn't get more than 24 hours in a day.

01:02:55.280 | Where do you spend your 24 hours? I think it makes all the sense in the world to focus on living

01:03:02.320 | rich. If we spend eight hours a day in bed, make sure it's a really great bed. If we spend eight

01:03:08.800 | hours a day in an office, make sure it's a really awesome office that you like being in. And make

01:03:13.600 | sure if you're going to spend eight hours a day doing something that it's something that you want

01:03:16.800 | to do. A rich person really can't get that much better coffee than what you can get for a few

01:03:25.200 | bucks. If you want a bottle of wine, you can't drink more than a bottle a day. You could afford,

01:03:33.360 | on a fairly modest income, you can afford that. A brand new, what are these things cost? $8,000,

01:03:40.640 | $9,000? A brand new $9,000, let's call it $10,000 because I can't remember what the actual number

01:03:44.800 | is. A brand new $10,000 Kia Rio is an amazing car compared to a 1990 Cadillac. Which would you

01:03:54.960 | rather go in? The Cadillac that's kind of flying down the highway, the springs up and down? It's

01:03:59.280 | better than a 1990 Mercedes. The Kia Rio will drive all day long at 75, 80 miles an hour, has

01:04:05.680 | air conditioning, it'll get 40 miles a gallon. And it'll be more comfortable, safer than the

01:04:12.720 | 1990 Cadillac. Now, maybe there's exceptions to that. Maybe a 1990 Rolls Royce would be better.

01:04:17.360 | But the point is that things are cheaper now than they've ever been. A millionaire can't eat more

01:04:23.760 | food than you can. The rich, the glittering rich, if they want to stop for a hamburger, they're

01:04:30.240 | still going to stop at the same fast food restaurants that you are. They're going to fly in

01:04:34.160 | the same airplanes, unless it's a private plane, but they're going to get there as fast as you are.

01:04:39.680 | They're going to drive on the same road, whether or not you're sitting in a $300,000 car or not,

01:04:46.160 | if you're sitting in traffic, you're still sitting in traffic. You know, it's interesting, I live

01:04:52.400 | very close to Palm Beach Island and also to Jupiter Island, which are two of the

01:04:57.760 | enclaves of the rich. And I'll tell you, there is a very sharp

01:05:01.600 | culture difference between the old rich and the new rich, the nouveau riche, you know,

01:05:11.280 | if you were going to go with the way that you usually see it written. And that culture, I think,

01:05:15.200 | is the nouveau riche is the guy who struck it big in acting, or who struck it big in, you know, in

01:05:22.000 | sports or something. And it's just, how can I spend on everything that glitters? The old money,

01:05:26.880 | you know, frankly, the other reason by my best guess, why people live on Palm Beach Island,

01:05:32.320 | they live there for privacy, and they live there to have a community of people who are like them.

01:05:36.320 | It's hard if, you know, it's hard if you're if you are mega wealthy, it's hard to be rich with,

01:05:44.000 | excuse me, hard to be friends with people who aren't, because it's difficult for people to

01:05:48.720 | understand each other's lifestyles. It's not that they're not friends, but it's that it's just hard.

01:05:53.920 | So the money pays for a certain level of privacy, and it pays for a certain level of social club,

01:06:01.200 | people understanding you. My major point is there are costs to achieving your goals, and it takes

01:06:07.520 | time to make money. So is your wealth measured in money? Or is your wealth measured in time?

01:06:13.120 | Is it measured in energy? Physical financial wealth is a burden. It really is. You have to

01:06:20.320 | give up something to get it. At the very beginning, you have to give up hours of your time, you may

01:06:25.840 | then later have to give up energy, you may have to give up focus. Having multiple houses is a burden,

01:06:31.680 | now you have to manage these multiple houses. Wealth is a burden. People quickly say, well,

01:06:36.960 | it's a burden that I'm ready to take. True. And I think a certain level of it is valuable,

01:06:43.360 | but it really is a burden. The key is that if you see yourself as constantly being able to just buy

01:06:49.520 | more, buy more, buy more, you're being manipulated. The idea of conspicuous consumption is pure

01:06:57.600 | manipulation, it's pure propaganda that has been fed to our culture intentionally by the marketing

01:07:05.040 | industry. You're being manipulated. Get rid of your ego, shut off the manipulation,

01:07:12.800 | turn off the TV, stop paying attention to the ads, and think about what you actually want.

01:07:17.440 | It's all marketing. It's amazing how if you'll cut some of that influence out of your mind,

01:07:24.080 | if you'll cut the commercials off, if you cut yourself off from the Madison Avenues and the

01:07:29.280 | magazines, the ads in the back of the magazines and all that stuff, if you just cut all that off,

01:07:34.800 | your desire over time will die. I learned this myself with traveling. When I was in college,

01:07:43.040 | I lived in Costa Rica for a semester and studied abroad. When I was there, I didn't have a car,

01:07:47.920 | and I was living in Costa Rica, which is not a poor country, but it's also not one of the

01:07:52.320 | mega-rich countries. One of the things that I learned while being there is that I really wished

01:07:59.760 | I had a car, but many people didn't have cars because they're very expensive in Costa Rica.

01:08:07.600 | After I got back from that trip and I got back to the States, I was just so excited about

01:08:14.400 | simply having a car. I didn't care what it looked like. I was just excited about the pure having of

01:08:22.960 | a car being valuable. If you cut off the influence and you cut off the input, you can make some

01:08:29.680 | substantial progress toward your goals. I'm going to close by reading an excerpt from

01:08:37.200 | the end of Tom Stanley's book where he has a letter. This is how he finished his book. He has

01:08:45.120 | a letter that somebody wrote to him and then his response, which really illustrates my point.

01:08:54.880 | I think he's done such a great job of writing this. This chapter is entitled, "All that glitters

01:09:01.280 | is not the millionaire's goal." It opens with a quote, "That man is richest whose pleasures are

01:09:07.760 | cheapest." Henry David Thoreau. There is something else about wealthy people that sets them apart

01:09:14.000 | from others. Most wealthy people have a wide variety of interests and activities. In fact,

01:09:19.920 | there is a substantial correlation between the number of interests and activities that people

01:09:24.560 | are involved in and their level of financial wealth. Some wealthy people feel that owning

01:09:30.720 | a vacation home, for instance, would restrict them, obligate them to spend a lot of time there,

01:09:36.320 | and if they do not spend much time there, they feel guilty for allocating lots of dollars on

01:09:40.720 | something that is underutilized. Most millionaires came to this realization without first having to

01:09:46.080 | make the mistake of purchasing a vacation home. Many respondents have told me about the emotions

01:09:52.400 | associated with owning vacation homes. First, joy and euphoria, shortly followed by a loss of

01:09:58.880 | interest, and then resentment at having to pay for something that is rarely used but drains financial

01:10:04.480 | resources. Many rich people, however, rank high on the cosmopolitan scale. They like variety and

01:10:11.360 | change in their lives. Being tied down to a vacation home is just so parochial. They say

01:10:18.080 | the same thing about owning a boat. So if millionaires don't own vacation homes, what do

01:10:24.160 | they do? I asked the DECA millionaires I surveyed about some of the activities that they engaged in

01:10:30.160 | during the prior 12 months. Here are some of the more popular activities reported.

01:10:34.960 | Visiting museums, 83%. Raising funds for charities, 75%. Consulting tax experts, 75%.

01:10:45.120 | Attending fundraising balls, 75%. Participating in civic activities, 69%.

01:10:52.240 | Attending major league sporting events, 69%. Vacationing overseas, 69%. Attending Broadway

01:11:01.840 | plays, 67%. Participating in trade or professional association activities, 56%.

01:11:09.040 | Shopping for original art, 56%. Gardening, 55%. Attending antique fairs or sales, 55%.

01:11:16.960 | Fishing, 33%. Skiing in the Rockies, 33%. Vacationing in Paris, 28%.

01:11:26.080 | Popular activities that DECA millionaires listed in their diaries over a 30-day period included

01:11:32.800 | socializing with children or grandchildren, 95%. Pay attention to this one. Planning investments,

01:11:40.480 | 94%. 94% of DECA millionaires in the last 30 days have spent time planning investments.

01:11:48.720 | Entertaining close friends, 87%. Watching their children or grandchildren playing sports, 66%.

01:11:57.520 | Studying art, 63%. Playing golf, 60%. Attending religious services, 52%.

01:12:05.280 | Jogging, 48%. Praying, 47%. Attending lectures, 44%. Caring for elderly relatives, 44%.

01:12:16.000 | Playing tennis, 30%. What do these wealthy people know that many vacation homeowners,

01:12:23.520 | boat owners, and seekers of prestige brands have overlooked? You cannot be in two places at one

01:12:31.040 | time. Mostly what they know is that it is life activities that give pleasure and satisfaction,

01:12:39.600 | not the watch on your wrist. The following letter exchange is a reminder that we should all take

01:12:46.160 | time to stop and smell the roses. Dear Dr. Stanley, I have finished your book,

01:12:52.240 | The Millionaire Next Door. I have some experience with some millionaires, and I'd say you have them

01:12:57.440 | down real well. They know who they are. Frugal. Cheap. I sure don't believe in living beyond my

01:13:04.320 | means and never have. It is a great idea to invest in your own business, or in stocks, or real estate.

01:13:10.320 | The only error I see in your book is that this is the end-all and be-all of life.

01:13:17.280 | Owning cars. The expensive model looks better, lasts longer, runs faster, needs less repairs,

01:13:23.200 | has better resale value, and is generally a lot nicer to own. I've owned both types of cars. A

01:13:29.760 | nice Mercedes costs more than a Ford because it's a better car. A number one Oxford or Hickey Freeman

01:13:36.800 | man's suit is better than a seer's off-the-rack suit. The material is better, the workmanship is

01:13:42.000 | better, the style is better, and it lasts at least five times longer. I've had both. A cheap

01:13:48.400 | golf shirt from Walmart costing $6-10 will last about one or two years with proper care. A $50

01:13:55.360 | Ralph Lauren golf shirt is a lot better quality and with good care will last about 20 years.

01:14:00.560 | I know. I've had both. A Casio $20 watch from Walmart will keep just as good time as a Gubelin

01:14:07.440 | watch from Switzerland, but I hope you don't think it's just as good a watch. I've got both,

01:14:12.880 | and I don't think so. A vacation in Emporia, Kansas, Athens, Georgia, or going through the

01:14:20.000 | south of France or to Athens, Greece. I don't think they are all equal vacation spots, and I've been

01:14:26.080 | to all of them. Shopping at Walmart or Sears is not quite the experience as shopping at Neiman

01:14:32.080 | Marcus or Saks Fifth Avenue is. It is great to make money and save money, but if these types

01:14:38.160 | don't let up after a while and smell the roses, they are a little bit nutty, aren't they?

01:14:43.040 | As I recall it, Mr. Sam Walton lived a life pretty much like you seem to feel is great.

01:14:48.400 | Unfortunately for Mr. Walton, I seem to recall him getting some terrible form of cancer

01:14:53.760 | and meeting an early death. I wonder if he said to his doctors and close ones on his deathbed,

01:14:59.120 | "Gee, I wish I would have spent more time at the store." What do you think?

01:15:02.640 | Sincerely yours, Mr. H. Affluent, Florida

01:15:06.800 | Dear Mr. H., Accumulating wealth is not the end-all and be-all of life. Yet it is considerably

01:15:16.160 | easier to accumulate wealth if you get great satisfaction from elements in your life that do

01:15:22.640 | not require hyper-spending. Far too many people believe that in order to smell the roses,

01:15:28.480 | in essence to enjoy life, they must purchase prestige brands. Yet the data indicates that

01:15:34.800 | there is little correlation between this type of spending and happiness. But those who spend with

01:15:39.920 | the hope that happiness will result will be disappointed. Basic to happiness are factors

01:15:47.120 | such as health, family, job, and values. If you have good health, a loving family,

01:15:54.400 | are surrounded by a network of caring friends, have a job you enjoy, doing without certain luxury

01:16:00.640 | items is not painful. But what if your work pays well but is not satisfying? You may think that

01:16:06.560 | loading up on luxury goods will cure your discontent, but hyper-spending will only make

01:16:11.680 | things worse. Displaying luxury brands may or may not impress your neighbors, but it will not

01:16:19.040 | transform an unhappy person into a happy one. Or as many millionaires have told me,

01:16:24.240 | money makes life easier, not better. Most millionaires were happy even before they

01:16:32.000 | became financially independent. They set goals and achieved them. One of their goals was to

01:16:38.160 | accumulate wealth. They built their wealth slowly but steadily and controlled their spending instead

01:16:43.920 | of the other way around. These are confident people, people in control of their lives.

01:16:49.520 | Products and houses do not control them. Certainly, smelling the roses has something

01:16:57.120 | to do with being married to a wonderful spouse. Most millionaires, 91%, are married, on average,

01:17:05.280 | for 36 years to the same spouse. Fully two-thirds have never been divorced. I have often said that

01:17:12.480 | if you want to live forever, marry the wrong spouse. Do so and every day will be an eternity.

01:17:18.880 | No amount of luxury goods will make you happy if each day is an eternity. But marry the right

01:17:25.360 | person and every day will be a joy. Millionaires are not misers, especially when it comes to

01:17:31.680 | funding the educations of their children and grandchildren, and even nieces and nephews,

01:17:36.320 | or donating to noble causes. Certainly, part of smelling the roses is the realization that

01:17:42.720 | you helped finance your son or daughter's business school, medical school, or law school education.

01:17:48.400 | This variety of rose has an aroma superior to owning even dozens of expensive cars,

01:17:54.640 | watches, suits, boats, or even vacation homes. Those who are frugal in spending tend to be the

01:18:01.680 | most generous in terms of donating to charity and other so-called "good causes." But those who are

01:18:08.720 | hyper-spenders, including many high-income, low-net-worth types, have few dollars, if any,

01:18:13.520 | to give. Generous givers smell the aroma that emanates from the flowers produced by helping

01:18:19.760 | others who are not so fortunate. You mentioned that the founder of Walmart, Sam Walton, may have

01:18:26.160 | not smelled the roses. I never had the honor of meeting Mr. Walton, but from my reading I have a

01:18:31.840 | different view of the man. I have come across his profile and picture more often in sports

01:18:37.200 | periodicals than in the business press. From his profile, I can only surmise that Mr. Walton was

01:18:42.880 | not an all-work, no-play type. Often, he was depicted on a bird-shooting hunt, along with

01:18:49.440 | his pickup truck, Remington shotgun, and favorite hunting dog, Ol' Roy. In honor of Ol' Roy, you

01:18:56.320 | might note the brand name on Walmart's private label, Dog Food. Yes, it is the Ol' Roy brand,

01:19:02.720 | in a wide variety of sizes and textures. It was not only Mr. Walton's choice of motor vehicle,

01:19:08.800 | a Ford pickup truck, that impressed me. His shotgun was a Remington 870 Wingmaster pump.

01:19:14.160 | I purchased the same gun because I figured that if it were good enough for a billionaire,

01:19:19.040 | it was certainly good enough for me. I do not know how much he paid for his Wingmaster,

01:19:25.040 | but I paid $449.92 for mine at a Walmart store. You can pay $2,000, $5,000, $10,000, or even

01:19:34.720 | $50,000 for a shotgun. But you can't buy a better shotgun than an 870 Remington. To date, they have

01:19:41.680 | sold more than 10 million 870s. It is strong and extraordinarily reliable. It gives me all the

01:19:48.080 | rows I need, and I have a feeling that Mr. Walton felt the same way. Yet the aspirationals at my

01:19:55.120 | gun club, a small minority, refer to my shotgun as obsolete, an iron boat anchor. They own Gilded

01:20:03.120 | Shotguns, European brands of the four- and five-figure variety. Their comments about my

01:20:08.640 | Remington never bother me in the least. In fact, I think of them as humorous. Plus, they provide

01:20:15.440 | input for my research. The clay pigeons that I shoot at do not seem to care how much I paid

01:20:20.560 | for my shotgun. It shoots straight and has never jammed. I bought mine to shoot, and not in an

01:20:26.720 | effort to display status among my fellow club members. My status comes from my score, not the

01:20:32.400 | gun. Plus, being around my good friends, all are frugal, when shooting, is much more important

01:20:38.720 | than the price of the gun. This is in sharp contrast to those people who feel the need to own

01:20:44.480 | the Gilded variety of every gun they shoot, every suit they wear, and every car they drive.

01:20:50.800 | These types of people think that anyone with means who acts otherwise is suffering,

01:20:55.600 | never smelling the roses. Nothing could be further from the truth. Yes, even some billionaires and

01:21:03.280 | maybe many deca-millionaires prefer to drive pickup trucks. And there are plenty of wealthy

01:21:09.200 | people who shoot Remingtons. In contrast, I recently read an article that mentioned the

01:21:14.560 | sale of a shotgun for $287,500. It was originally made for Tsar Nicholas of Russia. The gun not only

01:21:22.880 | had a lot of history, but it also had hand engraving all over it. To me, it looked really

01:21:28.480 | ugly, like the gilding of gildings. I understand that most things that the Tsar owned were top-of-the-line

01:21:35.840 | brands. He used these "things" to tell his subjects and himself that he was superior.

01:21:42.160 | Well, we know what happened to him. In contrast, most of the self-made rich in America do not have

01:21:48.560 | the same urgent need to document their superiority via the display of prestige brands.

01:21:54.560 | What does this tell us about people who try to act rich by spending and displaying but are not?

01:22:00.880 | While searching for roses to smell, they overdress, overdrive, and overact. No, they are not Walmart

01:22:07.360 | type shoppers, but they would enhance the probability of actually becoming rich if they

01:22:12.800 | would patronize stores of this type. America is a nation of excesses, and these excesses,

01:22:19.600 | especially when it comes to consumption, have a profound influence upon our young.

01:22:24.800 | They are constantly told that spending is the American way. Often, their role models are highly

01:22:31.280 | compensated professional athletes and entertainers. Day after day, the public relations machinery

01:22:36.960 | keeps cranking out stories about the multi-million dollar mansions that this athlete has purchased

01:22:41.760 | or the fleet of exotic cars that this movie star owns. By sensationalizing and glorifying these

01:22:47.600 | powerful role models, the press sends a message. It says that happiness is obtained by spending

01:22:53.920 | freely on cars, homes, and parties. But in reality, spending will not make people happy,

01:22:59.600 | and very few people grow up to become star athletes or movie celebrities.

01:23:04.480 | Recently, our local newspaper published an article that featured in glowing terms

01:23:10.400 | the home of a professional baseball player. The article mentioned that the interior space

01:23:15.040 | of the highly decorated nine-bedroom home was 25,000 square feet. Apparently, this fellow is

01:23:21.440 | an all-star in terms of spending. What else is so interesting about this home? Nationwide,

01:23:27.600 | only 3% of America's deca-millionaires live in a home that has nine or more bedrooms.

01:23:32.960 | The square footage of this baseball player's home is four and one-half times larger than the

01:23:38.240 | medium square feet (5,600) of the primary homes owned by the chief executive officers of Standard

01:23:44.480 | & Poor's 500 firms. These are America's Major League caliber business leaders who run companies

01:23:51.440 | that generate billions in sales revenue and employ millions of Americas. Could it be that many of

01:23:57.600 | these CEOs do not feel the same need as the baseball player to display their success and

01:24:02.800 | supposedly enhance their status via homes, car, and accessories? Perhaps just being the head of

01:24:09.200 | a major corporation has a lot of status attached to it all by itself. And, in terms of making a

01:24:15.120 | real contribution to our economy, these CEOs have a much higher batting average than the baseball

01:24:20.720 | player. In fact, in this regard, he probably belongs in the minor leagues. Nonetheless,

01:24:26.080 | he is still a role model, a poster child for the "Smell the Roses" society of hyper-consumers in

01:24:31.680 | America. We cannot count on the press to paint an accurate picture of how carefully most achievers

01:24:38.320 | allocate their dollars. Yet most achievers are very satisfied with their lives. Their satisfaction

01:24:44.000 | has little to do with the brands that they own. We would do well to adopt the values of the

01:24:49.200 | majority of the real achievers in America, and not those who are of the "star" variety.

01:24:54.720 | The big house baseball player, a one-in-a-million young phenom, was born with his extraordinary

01:25:00.720 | talent. But most achievers know that their type of success was not predetermined. Often it takes

01:25:06.800 | twenty or thirty years before they break into their own version of the really big league.

01:25:11.120 | What happens when owning the better brands takes priority over achieving? When it's about having

01:25:19.520 | money just to spend, people can't survive. It is one thing to enjoy an increased standard of living.

01:25:26.240 | It is another when it is all about money for spending on prestige brands. Individual

01:25:32.560 | achievement, small and large, today and tomorrow, is what leads to an increased standard of living.

01:25:38.560 | It is about the Bill Gates of the world creating firms that make products that make our lives

01:25:43.600 | better and more productive. It is about the teacher who labors to teach a class of fifth

01:25:49.200 | graders math. These are the things and activities that lead to improvements in life. In short,

01:25:56.080 | when it becomes about brand, less energy and money is spent on things and activities that

01:26:00.880 | will actually benefit people, which may explain why America has to import its engineers from India,

01:26:06.960 | a place where academic achievement is highly valued. It is not easy to break bad habits,

01:26:11.840 | but doing so will make us happier and ultimately lead to richer lives for all,

01:26:17.600 | now and tomorrow. Sincerely, Thomas J. Stanley.

01:26:20.960 | Get his book.

01:26:27.040 | The nice things are toys, and it is fine to accumulate them, but accumulate them after

01:26:35.600 | you build wealth. Don't increase the risk you take with your financial plan just to accumulate

01:26:43.040 | some nice things. Money makes life easier, but there are lots of things that it cannot buy you.

01:26:50.160 | It may make it easier to achieve many things, and there is a certain amount of money that

01:26:56.800 | is necessary. Being poor is not fun, but money can't buy you everything. As the saying goes,

01:27:09.680 | money can buy you a house, but it can't buy you a love-filled home.

01:27:15.200 | Money can buy you a clock or a fancy watch, but it can't buy you more time.

01:27:22.240 | Money can buy you an amazing bed, but it can't buy you a good night's sleep.

01:27:27.040 | Money can buy you a book or even an entire library, but it can't buy you knowledge or wisdom.

01:27:36.160 | Money can buy you a diploma, but you can't buy an education.

01:27:41.520 | Money can buy a doctor, but it can't buy you good health or energy or vitality.

01:27:51.440 | Money can buy you food, but it can't buy you an appetite.

01:27:54.240 | Money can buy a position, but not respect. Money can buy blood, but not more life.

01:28:04.240 | Money can buy sex, but not love or a joyful marriage.

01:28:10.880 | Money can buy insurance, but not safety. Money can buy a companion, but it can't buy you a friend.

01:28:21.280 | Money is not everything.

01:28:24.320 | Consider what you actually are trying to buy

01:28:30.800 | with money and consider figuring out that shopping list.

01:28:35.600 | Consider the importance of actually describing exactly what you want and exactly how much you

01:28:46.640 | need and making an actual realistic budget. Whatever your target level of wealth is,

01:28:53.760 | sit down and figure out, "Okay, if I had to spend that much money, how much money,

01:28:57.680 | you know, what would I buy? What could I spend?" The research is fairly conclusive when you study

01:29:05.040 | it. Again, read all of Tom Stanley's books. Those who accumulate money, it is important,

01:29:11.440 | but it is not the most important. You do have to pay a price to accumulate money.

01:29:16.400 | Whatever that price is, it's important to make sure

01:29:19.680 | that it's worth it, that the juice is worth the squeeze, as they say.

01:29:25.600 | Money can buy power, but it can't buy respect. Money can't buy sleep, but it can buy a bed.

01:29:31.840 | Money can't buy you love, but it can buy sex. You possess money, you buy money, and you possess.

01:29:37.600 | Money can buy a house, but it can't buy a home. So even with money, you still feel all alone.

01:29:43.280 | Money can buy you friends, but it can't buy family. Money can't make you happy, that's just a

01:29:48.480 | fallacy. It can buy a bath, but it can't buy purity. It can buy bodyguards, but it can't buy security.

01:29:54.880 | You all people around the world start by eight, because money can buy war, but it can't buy peace.

01:30:00.640 | Some do everything and anything to get the peas. The society we're living in,

01:30:05.120 | it's a necessity. It's got the power to turn your best friends to enemies.

01:30:09.280 | It's funny, but money doesn't follow us to the beach.

01:30:12.080 | If you think something you don't need, you keep it. Then you're stolen from somebody else who's hungry.

01:30:21.040 | Everything that you do is everything you are. Everything that I am is everything you ever need.

01:30:32.960 | Does happiness live in a mansion with a swimming pool? I know people with plenty of money that are miserable.

01:30:40.960 | We all need to earn in this world we live. Most work for it, some steal, but many worship it.

01:30:46.960 | Some self-raise and for it, some seek employment for it. We need it to survive, so some clean the toilets for it.

01:30:52.960 | I need things to live, but never will I live for peace. Abolish the queen, I don't want to see that witch's face.

01:30:58.960 | I'm not for it, no, not me. Some will try to tell you that it doesn't grow on trees.

01:31:02.960 | I heard the saying said many a time, but they were wrong. 'Cause if it doesn't tell me, then where do you get the paper from?

01:31:08.960 | Most think they'd be happy if they only had more of it. Some waste it, some feel more important 'cause they're born with it.

01:31:14.960 | Some have got the nerve to say a portion of a fortune if the truth is you don't need a fortune to be fortunate.

01:31:20.960 | Say you don't need and keep it, then you're stolen from somebody else who's hungry.

01:31:30.960 | Everything that you do is everything you are. Everything that I am is everything you'll ever be.

01:31:42.960 | Share, share, share. I can be rich in anything, don't you take from me.

01:31:48.960 | Share, share, share. I can be rich in anything, don't you take from me.

01:31:58.960 | All the books that I read from will be in today's show notes. I thank you for listening. I hope that you enjoyed today's show.

01:32:06.960 | Hope I gave you something to think about. Have a great week everybody. Talk to you tomorrow.

01:32:12.960 | [Music]

01:32:30.960 | Don't need and keep it, then you're stolen from somebody else who's hungry.

01:32:39.960 | Everything that you do is everything you are. Everything that I am is everything you'll ever be.

01:32:51.960 | Share, share, share. I can be rich in anything, don't you take from me.

01:33:15.960 | [Music]

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