RPF0161-Tom_Stanley

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00:00:37.680 | Today on the show I have a tribute to the life and work

00:00:43.240 | of Dr. Tom Stanley, author of The Millionaire Next Door.

00:00:47.320 | He died tragically yesterday in a car accident in Atlanta.

00:00:51.580 | And today I wanna honor his legacy

00:00:53.680 | with the 10 lessons that I learned from his work

00:00:57.460 | and some personal stories of how he encouraged and helped me.

00:01:00.820 | (upbeat music)

00:01:03.400 | Welcome to the Radical Personal Finance podcast.

00:01:18.940 | My name is Joshua Sheets and I'm your host.

00:01:20.920 | Today is Monday, March 2nd, 2015.

00:01:25.220 | Today we will be honoring the life

00:01:27.380 | and legacy of Dr. Tom Stanley.

00:01:28.900 | I can't think of an author or a body of work

00:01:32.420 | that has had a greater impact on my life

00:01:34.980 | and on my personal financial philosophy

00:01:37.420 | than his body of work.

00:01:39.100 | And I wanna share with you some of the lessons

00:01:41.100 | that I learned from him.

00:01:42.260 | (upbeat music)

00:01:44.840 | Last night I was looking on my,

00:01:52.300 | I had a notification pop up on my Facebook feed

00:01:54.900 | from a listener of the show who shared an article with me.

00:01:58.020 | And he said, "I know that you were a fan of,

00:02:02.060 | "are a fan of Dr. Tom Stanley.

00:02:03.540 | "I thought you would wanna know the news."

00:02:05.100 | And evidently he died tragically on Sunday afternoon

00:02:09.340 | out driving his car on Sunday afternoon

00:02:11.300 | there in Atlanta, Georgia.

00:02:12.980 | And the details of the car accident

00:02:16.180 | are not necessarily fully disclosed

00:02:19.540 | in some of the news articles.

00:02:20.540 | You can find some of the details.

00:02:21.680 | Evidently he was out for a Sunday afternoon drive

00:02:24.140 | in his new Chevy Corvette

00:02:26.660 | and somebody plowed into the side of him.

00:02:28.420 | Thankfully it wasn't any kind of accident that makes you,

00:02:32.260 | it was certainly tragic,

00:02:33.340 | but thankfully it wasn't the kind of accident

00:02:34.940 | that makes you upset when people are out

00:02:37.100 | doing foolish things in cars,

00:02:40.460 | driving at 300 miles an hour or something like that.

00:02:43.060 | Any death is sad and those are especially sad

00:02:46.820 | in this situation.

00:02:48.140 | It's quite tragic 'cause it seems the other driver

00:02:49.900 | was fully at fault and Dr. Stanley was not.

00:02:53.220 | But he died yesterday and he was at the age of 71.

00:02:57.620 | And it's very sad.

00:02:59.840 | It's always hard for me to know how to deal with things

00:03:03.220 | when people you don't really know die.

00:03:04.820 | So, but I'll tell you a little bit,

00:03:06.820 | some of the personal history.

00:03:09.020 | I never met him, but I did have some interaction with him

00:03:11.100 | that I'll share with you in today's show.

00:03:14.100 | But as I was reflecting on his life and on his work,

00:03:16.280 | I was thinking through some of the philosophies

00:03:19.220 | that I hold around financial planning

00:03:21.540 | and was looking at his books here on my shelf

00:03:24.340 | and I got a few of them down and kind of flipped through

00:03:26.100 | them to see some of my notes and my highlights

00:03:28.300 | and my learnings over the years.

00:03:30.780 | And I realized that he's probably the author

00:03:34.200 | who more than anyone else has had a greater impact

00:03:36.940 | on my life and on my thinking.

00:03:38.680 | The first book of his that I ever read,

00:03:42.980 | I'm sure was "The Millionaire Next Door."

00:03:44.980 | And I have no idea how it was recommended to me.

00:03:49.020 | But when I was very young,

00:03:51.020 | I must have been in high school still,

00:03:52.920 | I read "The Millionaire Next Door" and then I reread it.

00:03:55.340 | And I've reread it multiple times over the decades.

00:03:59.940 | In fact, I had the audio book,

00:04:01.020 | it was the abridged audio book,

00:04:02.380 | but I used to listen to the abridged audio book

00:04:04.220 | from time to time.

00:04:05.060 | It was one of the audio books that was in my car

00:04:06.780 | and every now and then I would just listen to it.

00:04:08.820 | That and let's see, "How to Win Friends and Influence People"

00:04:11.740 | was another audio book that I referred to

00:04:14.500 | again and again and again.

00:04:15.500 | I commend both of them to you.

00:04:16.820 | Just excellent, excellent works.

00:04:18.980 | I've owned six of his books and read six of his books.

00:04:22.500 | He has either two or three that I haven't read yet.

00:04:26.020 | But it started with "The Millionaire Next Door,"

00:04:28.380 | which was his first and most famous work.

00:04:31.640 | Also, I read that,

00:04:32.980 | and that was essentially a book profiling

00:04:35.940 | who are the wealthy in the United States of America.

00:04:38.420 | And I'm gonna share that with you in today's show.

00:04:40.260 | Also, I read a book called "The Millionaire Mind,"

00:04:42.380 | and that was a book where he profiled

00:04:45.540 | Deca millionaires and up,

00:04:46.900 | and that was an excellent book.

00:04:48.220 | I learned a lot from that.

00:04:49.780 | Then I read his three books called,

00:04:52.460 | which are very, not very well known,

00:04:55.220 | but extremely useful.

00:04:56.400 | I'm always surprised that people don't know about them.

00:04:58.860 | But a book called "Selling to the Affluent,"

00:05:01.640 | another one called "Marketing to the Affluent,"

00:05:03.700 | and a third called "Networking with the Affluent."

00:05:05.940 | And then finally I read his book,

00:05:07.620 | which was published a few years ago,

00:05:08.880 | called "Stop Acting Rich."

00:05:10.620 | And he's got at least another book or two.

00:05:13.260 | One is called "The Millionaire Women Next Door."

00:05:15.900 | I have not read that.

00:05:16.860 | It's been on my list for a long time,

00:05:18.380 | and I will certainly now read it just to see.

00:05:22.820 | But I can't remember if he has another book or two as well.

00:05:25.980 | But his works have had a big influence on me.

00:05:29.000 | And even just he himself influenced

00:05:32.180 | one significant decision in my life.

00:05:35.420 | And I'll just share that with you.

00:05:36.620 | And it's good to honor people.

00:05:38.740 | I like to honor people.

00:05:40.460 | And I tried to honor him while he was alive.

00:05:43.740 | In fact, I had reached out to him

00:05:44.980 | on the show a couple-- once, twice, actually, twice,

00:05:48.700 | inviting him on the show for an interview.

00:05:50.780 | And his staff declined me.

00:05:52.980 | And it was perfectly understandable.

00:05:54.940 | There's no-- it was not-- it was a very polite decline.

00:05:58.660 | But I'd always hoped that at some point

00:06:00.500 | radical personal finance would grow

00:06:02.020 | and would be a valuable outlet for him

00:06:03.780 | and that I would be able to bring him on.

00:06:05.500 | And I'm disappointed that I won't have that opportunity now.

00:06:08.460 | But I went back and checked my email.

00:06:11.620 | And that's one of the good things about the Gmail system,

00:06:14.180 | where all of your emails are archived

00:06:16.020 | and they're relatively easy to search.

00:06:17.620 | And I found some of the interaction

00:06:19.940 | that I had with him.

00:06:21.940 | And in 2009, July of 2009-- so I went

00:06:25.900 | into the financial planning business in the fall of 2008.

00:06:30.180 | The exact start date is a little bit fuzzy,

00:06:32.700 | depending on September, October, November,

00:06:35.220 | depending on where I say it.

00:06:36.740 | So it's basically the fall of 2008.

00:06:39.340 | And I was working hard to try to figure out

00:06:43.220 | the financial planning business.

00:06:44.660 | It's a tough business to get in.

00:06:45.980 | And I was new to it.

00:06:46.740 | I didn't have any experience.

00:06:47.660 | I was trying to figure out, where do I go?

00:06:49.400 | And what do I do?

00:06:50.620 | And I started looking around.

00:06:52.420 | And at some point in time, I started

00:06:54.180 | working on Dr. Stanley's blog and trying to understand it.

00:06:57.140 | And I wrote him a note.

00:06:58.380 | And I can't find the actual note that I wrote him.

00:07:00.620 | But he responded to my correspondence.

00:07:03.020 | And the question that I had asked him--

00:07:04.660 | I think I'd asked him for some resources

00:07:06.360 | or some specific resources that he

00:07:08.900 | might have written that would help financial advisors.

00:07:11.300 | And he wrote me this email back.

00:07:12.460 | It's very short.

00:07:13.140 | It was July 19, 2009.

00:07:15.900 | He said, Joshua, can't thank you enough for your kind comments

00:07:18.540 | on my blog.

00:07:19.700 | Words like yours sustain me.

00:07:21.780 | Two of the best-rated speeches that I've ever given

00:07:24.020 | were to the top of the table and later

00:07:25.680 | at the court of the table, as you know,

00:07:27.540 | part of the Million Dollar Roundtable Association.

00:07:30.260 | Both of those speeches were recorded audio

00:07:32.620 | and, as I understand, were distributed by the Million

00:07:34.820 | Dollar Roundtable.

00:07:36.580 | I would also suggest that you read the chapter on Beverly

00:07:39.060 | Bishop in my book, Millionaire Women Next Door,

00:07:41.700 | and also selling to the affluent should be very

00:07:43.900 | valuable to you in your work.

00:07:45.740 | I'll know better about my speaking programs

00:07:47.580 | in September.

00:07:48.380 | Please continue to check my website for updates.

00:07:50.660 | Regards and much continued success, Tom Stanley.

00:07:52.980 | And I just thought it was extremely

00:07:54.420 | professional and encouraging note.

00:07:55.820 | And I went and looked up the speeches that he had done

00:07:59.260 | and tried to find the audio from them.

00:08:01.140 | I don't think I was able to get them,

00:08:02.720 | or I chose not to buy them.

00:08:03.900 | But I went and looked them up, and I

00:08:04.940 | thought it was extremely useful.

00:08:06.280 | But probably the more impactful correspondence for me

00:08:10.300 | occurred in August of 2010.

00:08:14.340 | And at that point in time, I had been in the financial planning

00:08:17.380 | business for a couple of years.

00:08:19.580 | And I was starting to experience a little bit of success.

00:08:25.220 | And I spent the first two years in the business--

00:08:27.860 | I started with nothing, and I didn't know very much.

00:08:30.980 | I didn't have much money.

00:08:31.980 | I had a little bit of money, but I had just gotten out

00:08:34.220 | of college, and I was driving an inexpensive car.

00:08:37.060 | And I've told the story before, so forgive me

00:08:39.700 | if it's repeated.

00:08:41.420 | But I spent the first two years as a financial advisor

00:08:46.060 | driving a 1993 Honda Accord with 300,000 miles on it.

00:08:50.580 | And it was the first car that I had ever personally bought.

00:08:52.960 | I'd owned it for many years.

00:08:54.120 | I'd bought it with 193,000 miles on it.

00:08:56.500 | I ultimately sold it with 315,000 miles on it.

00:08:59.860 | But it was only worth $1,000 or $2,000.

00:09:02.100 | And so I remember driving it to all my financial planning

00:09:06.260 | appointments.

00:09:07.220 | And when you're a new financial advisor,

00:09:08.820 | it's really tough to understand what to be proud of

00:09:12.860 | or what not to be proud of.

00:09:14.300 | And so certainly, you can imagine

00:09:16.580 | if a financial advisor drives up to your house

00:09:18.580 | and parks this $1,000 Honda Accord in your driveway,

00:09:22.180 | to some people, they look at that and say, this is different.

00:09:25.500 | And their curiosity is piqued.

00:09:27.220 | And some people look at that and say, this is different.

00:09:30.740 | And they are a little bit-- they might judge you,

00:09:33.860 | because appearances matter.

00:09:35.220 | And they might judge you in a negative light.

00:09:37.100 | And so I'd reached the time in 2010,

00:09:38.860 | my car was starting to have some problems.

00:09:40.600 | And it had had some minor mechanical failures.

00:09:43.460 | And I'd saved some money.

00:09:44.500 | I had, I don't know, $10,000 or $15,000 saved.

00:09:47.220 | And I knew I needed to do something.

00:09:50.780 | At that point, I was starting to transition my practice

00:09:54.140 | from primarily insurance sales into investment planning

00:09:58.100 | and investment management.

00:10:00.060 | And I was starting to feel pretty insecure about my car.

00:10:03.380 | And as much as I would have liked

00:10:05.740 | to have been completely secure, I wasn't.

00:10:07.700 | I was starting to be a little bit insecure

00:10:09.460 | and just feel like maybe I was-- it was hurtful.

00:10:12.180 | It was going to hurt my ability to bring in accounts

00:10:16.780 | or something like that.

00:10:18.500 | Sometimes, if it was convenient, I

00:10:19.940 | would make sure to park around the corner.

00:10:21.740 | Usually, I didn't do much with people's houses.

00:10:23.060 | But I would park on the other side of the parking lot

00:10:25.060 | or around the corner kind of thing to kind of mitigate that.

00:10:27.820 | And that's just not good for your self-confidence.

00:10:29.900 | If you have a perceived flaw like that,

00:10:32.780 | you either need to come to terms with it or overcome it.

00:10:36.260 | So I was deciding I needed to get a car.

00:10:38.860 | And I was shopping around and trying to figure out,

00:10:41.740 | how do I get a car for $10,000?

00:10:45.220 | And that's a very difficult price range

00:10:47.860 | to find a reasonable car.

00:10:49.260 | And it's easy to find a new one.

00:10:50.620 | But I didn't want to borrow money for a car.

00:10:53.180 | And I needed something that was going

00:10:54.820 | to be appropriate for what I wanted to do.

00:10:56.580 | And I had no idea what would be appropriate.

00:10:59.100 | I actually almost wound up--

00:11:01.300 | I was trying to buy something that would look impressive

00:11:03.700 | to people.

00:11:04.620 | And I almost-- thankfully, I avoided this mistake

00:11:06.780 | by the skin of my teeth.

00:11:07.780 | But I almost wound up buying a few-year-old Mercedes sedan

00:11:12.100 | that would have been kind of fancy enough to--

00:11:15.140 | all financial advisors drive BMWs and Mercedes.

00:11:17.540 | It's absurd.

00:11:18.100 | But it would fit the market, but would

00:11:20.780 | allow me to pay cash for it and not spend too much.

00:11:23.380 | Thankfully, I avoided that.

00:11:24.540 | But at one point, I thought, you know what?

00:11:26.040 | I should just write to Dr. Stanley

00:11:27.700 | and ask him what kind of car I should write.

00:11:29.980 | So on August-- or actually, I should drive.

00:11:32.500 | On August 19, 2010, I wrote him this email.

00:11:36.660 | I just said, Mr. Stanley, one very brief question.

00:11:38.820 | What do you think would be the best kind of car

00:11:40.740 | for a financial advisor to drive?

00:11:42.700 | I don't believe in status cars.

00:11:44.780 | But I live and work as a financial advisor

00:11:46.500 | in West Palm Beach and the Palm Beach and surrounding area.

00:11:49.500 | And here, everyone, even or especially the broke people,

00:11:53.100 | have status cars.

00:11:54.100 | What should I do?

00:11:55.260 | Joshua.

00:11:56.300 | And he wrote me back.

00:11:58.380 | And a couple days later, and he said, dear Mr. Sheets,

00:12:03.260 | and just gave me this direction here, which was so helpful.

00:12:06.620 | And he wrote this.

00:12:07.580 | He said, if I were in your position,

00:12:09.700 | I would buy a previously owned Chevrolet Tahoe or the GMC

00:12:14.540 | version in white, leather interior with tinted windows.

00:12:19.380 | These cars fit in each and every category of the wealthy.

00:12:23.700 | They are among the most popular cars

00:12:25.660 | within the glittering rich, very affluent segments.

00:12:29.620 | Regards, Tom Stanley.

00:12:32.340 | And that email right there saved me untold thousands of dollars.

00:12:36.780 | Talk about the value of information.

00:12:39.220 | Those two sentences saved me thousands of dollars,

00:12:41.740 | where instead of--

00:12:42.580 | I had been previously thinking, well,

00:12:44.460 | how can I find a reasonable Mercedes or BMW?

00:12:47.180 | And I didn't want to deal with the maintenance costs

00:12:49.380 | and just the cost of ownership.

00:12:51.140 | And that email right there opened my eyes

00:12:53.460 | to the thought of SUVs.

00:12:54.940 | And I realized instantly, I knew he was right.

00:12:58.900 | Because you drive around Palm Beach Island,

00:13:01.180 | and I take people for tours around Palm Beach Island.

00:13:03.620 | Yes, usually there's some fancy Mercedes or BMW or Jaguar

00:13:07.740 | or Bentley or whatever, some status cars.

00:13:09.460 | But oftentimes, there's one or two just big SUVs parked there.

00:13:14.020 | I mean, after all, the president of United States

00:13:16.060 | drives around in a weird Cadillac limo.

00:13:18.060 | But everyone else around him is driving big Suburbans.

00:13:21.900 | It's a very easy vehicle to use.

00:13:25.580 | And I thought, interesting.

00:13:26.820 | So I started shopping.

00:13:28.140 | I didn't wind up buying a Chevy Suburban or a Tahoe,

00:13:31.900 | as he recommended.

00:13:32.660 | I wound up buying a Ford Expedition.

00:13:34.780 | And it worked perfectly for what I needed.

00:13:36.660 | It was that perfect gray man car, that perfect thing

00:13:40.780 | where no one would ever look at me and say--

00:13:44.620 | and they would say, oh, he's just driving that car

00:13:47.100 | because he has too much money, and he's showing it off.

00:13:50.180 | Because there's a very delicate balance between being

00:13:53.980 | too showy and too flashy.

00:13:56.980 | What do you think of a financial advisor that drives up

00:13:59.540 | in a Ferrari every day?

00:14:00.820 | Maybe that works for some.

00:14:02.700 | But it reminds me more of the statement of the guy who

00:14:05.660 | goes to Manhattan, and someone says,

00:14:08.940 | there's all of the broker's yachts.

00:14:10.480 | And he says, we're all the customer's yachts.

00:14:12.780 | It's a famous saying.

00:14:13.740 | And it's kind of a bit of a strong statement,

00:14:16.680 | but probably true in many ways.

00:14:18.660 | The financial advisor is the one getting rich,

00:14:20.280 | but what about the customers that are getting rich?

00:14:22.400 | So I didn't want to be too flashy.

00:14:23.820 | But on the other hand, I didn't want

00:14:25.320 | to be driving this broken down $1,000 car.

00:14:27.980 | That wasn't appropriate at that stage.

00:14:29.620 | It may have been appropriate to get started.

00:14:31.460 | And I certainly am glad I didn't just rush out and buy

00:14:34.860 | a brand new car just so I can present

00:14:37.260 | an appearance of being established in the business.

00:14:39.700 | I don't mind learning the hard way.

00:14:42.420 | But I found the Expedition.

00:14:43.620 | It was the perfect gray man car.

00:14:44.940 | And it didn't cost that much.

00:14:46.340 | Those things depreciate like crazy.

00:14:48.060 | So I bought it--

00:14:48.700 | I think it was three or four years old when I bought it.

00:14:51.040 | And it was less than a third of the retail price

00:14:54.100 | when it was new.

00:14:55.380 | So that was a massive--

00:14:56.860 | it was a good buy there.

00:14:58.460 | It was heavy on gas, which was the downside.

00:15:02.020 | But it was cheap to fix, cheap to operate.

00:15:03.860 | It worked, served me well.

00:15:05.500 | It was comfortable.

00:15:06.260 | I'm a big guy.

00:15:06.860 | I'm about 6 foot 6.

00:15:07.980 | And I'm over 300 pounds.

00:15:09.420 | So it fit me well.

00:15:12.660 | And at a relatively cheap price, relative to buying a $40,000

00:15:17.260 | BMW, it solved that problem I had.

00:15:20.540 | And I was so thankful for that.

00:15:22.220 | Avoided a very important mistake.

00:15:26.900 | I just wanted to share that story, because I really

00:15:29.100 | appreciated that at the time.

00:15:30.660 | And I, of course, thanked him.

00:15:32.460 | And I would have liked to have had the opportunity

00:15:34.820 | to thank him in person.

00:15:35.820 | But at least I can thank him here publicly,

00:15:37.980 | as he was extremely classy.

00:15:39.420 | And Dr. Stanley, from everything I've heard and read

00:15:42.140 | about him, he was the kind of person

00:15:43.660 | that I'd like to be when I'm older.

00:15:47.620 | I often think of, who do I want to be when I'm--

00:15:50.620 | I don't have that image of me as an old man.

00:15:53.100 | And I think, what do I want to be like at that person?

00:15:55.380 | What kind of character do I want to have?

00:15:56.540 | And again, I know nothing about his personal life.

00:15:58.100 | And I don't need to know anything about.

00:16:00.100 | But his reputation, at least, was a real gentleman.

00:16:02.780 | And enough of that came through in his writings

00:16:05.380 | that I really picked up on that.

00:16:07.300 | And I appreciated so many things about his writings.

00:16:10.460 | And I'm sure I will do--

00:16:12.260 | he's been on my show topic list for a long time

00:16:14.260 | to talk about some of the lessons

00:16:15.620 | that I learned from his work.

00:16:16.980 | But today, I just sat down and I penned out 10 lessons

00:16:19.860 | that I learned from him that I think

00:16:22.820 | are good general lessons that I can share with you,

00:16:25.580 | and things that were a real encouragement to me.

00:16:29.220 | And who knows?

00:16:29.980 | Perhaps at some point, maybe this audio

00:16:32.980 | can reach his family after the tears have dried a little bit

00:16:36.220 | and the funeral is over and time passes.

00:16:38.060 | Perhaps some of his family members can listen to this

00:16:40.380 | and just appreciate the impact that their husband, or father,

00:16:44.860 | or grandfather--

00:16:46.820 | I don't know any of the details-- had on many people.

00:16:50.220 | But the first lesson that Dr. Stanley taught me

00:16:52.660 | was he taught me who the millionaires are.

00:16:56.460 | This was an incredibly important lesson.

00:16:59.700 | Because if I asked you, what is the profile of a millionaire?

00:17:04.740 | Unless you had studied this topic,

00:17:06.780 | you might not give the right answer.

00:17:09.940 | The people we think of as being the average millionaire--

00:17:13.660 | and this is why his book was such a probably blockbuster

00:17:16.660 | success-- that's not who he said was the average millionaire.

00:17:20.700 | And the most valuable thing about his work

00:17:22.660 | was he backed this up with numbers, data, and statistics.

00:17:26.820 | That was how he got his start was researching this.

00:17:28.900 | He was a college professor.

00:17:30.340 | And if I've got the story straight,

00:17:31.820 | he was researching it for a large project.

00:17:34.660 | He and his co-author of The Millionaire Next Door,

00:17:37.900 | Dr. William Danko, were researching this

00:17:41.220 | for a large financial services organization.

00:17:43.060 | And that research became the foundation of, ultimately,

00:17:46.380 | all of their work in this area.

00:17:49.020 | But let me read to you the portrait of a millionaire

00:17:51.220 | so that you can have in your mind who the wealthy are,

00:17:55.620 | who the millionaires are, at least in the United States

00:17:57.980 | of America.

00:17:58.500 | And my bet is that this is similar in most

00:18:00.580 | of the countries of the world, of course,

00:18:02.700 | with some cultural distinctions depending

00:18:04.820 | on the economic system and the history of the culture.

00:18:09.780 | So let me share with you the portrait of a millionaire

00:18:12.060 | so that you can have a picture of who the millionaires are.

00:18:14.480 | And this comes from page eight of the version

00:18:16.340 | that I have of The Millionaire Next Door.

00:18:18.620 | Who is the prototypical American millionaire?

00:18:21.420 | What would he tell you about himself?

00:18:24.500 | I am a 57-year-old male married with three children.

00:18:28.740 | About 70% of us earn 80% or more of our household's income.

00:18:32.940 | And incidentally, let me go ahead

00:18:34.400 | and read the footnote that's attached to this paragraph.

00:18:37.420 | And he says this in the footnote on why

00:18:40.740 | he uses the-- refers to the typical American millionaire

00:18:45.180 | as a he.

00:18:46.100 | He says, "One profile of the typical--

00:18:47.700 | our profile of the typical millionaire

00:18:49.500 | is based on studies of millionaire households, not

00:18:51.820 | individuals.

00:18:52.960 | It is therefore impossible in most cases

00:18:55.020 | to say with certainty whether our typical millionaire

00:18:58.140 | is a he or a she.

00:18:59.860 | Nevertheless, because 95% of millionaire households

00:19:03.140 | are composed of married couples, and because in 70%

00:19:06.940 | of these cases, the male head of the household

00:19:09.260 | contributes at least 80% of the income,

00:19:11.900 | we will usually refer to the typical American millionaire

00:19:14.980 | as he in this book."

00:19:17.340 | So hopefully that'll help you if you

00:19:19.500 | struggle with the word he/she.

00:19:21.100 | So I'm a 57-year-old male married with three children.

00:19:25.220 | Notice the age.

00:19:26.260 | 57-year-old male.

00:19:27.300 | Notice married with children.

00:19:28.940 | About 70% of us earn 80% or more of our household's income.

00:19:33.180 | About one in five of us is retired.

00:19:36.460 | About 2/3 of us who are working are self-employed.

00:19:40.820 | Interestingly, self-employed people

00:19:43.100 | make up less than 20% of the workers in America,

00:19:46.660 | but account for 2/3 of the millionaires.

00:19:49.980 | Also, three out of four of us who are self-employed

00:19:55.300 | consider ourselves to be entrepreneurs.

00:19:57.780 | Most of the others are self-employed professionals,

00:20:00.220 | such as doctors and accountants.

00:20:03.580 | Do you notice how--

00:20:05.060 | and I'm interrupting.

00:20:05.940 | This is Joshua again, not the book.

00:20:07.420 | But do you notice how--

00:20:08.900 | and if you read this, just listen

00:20:10.320 | to how many of the themes that I--

00:20:11.820 | I didn't even realize until I went back and listened to this,

00:20:14.320 | how many of this data that he presents

00:20:16.460 | have influenced the themes that I talk about on the show?

00:20:19.420 | Why do I talk about entrepreneurship?

00:20:20.980 | Well, because three out of four of us who are self--

00:20:24.340 | because 2/3 of the millionaires are self-employed.

00:20:28.060 | And then most of the others are self-employed professionals.

00:20:32.500 | So entrepreneurship is a major factor in wealth building.

00:20:36.040 | Continuing here, many of the types of businesses we are in

00:20:39.180 | could be classified as dull normal.

00:20:42.140 | We are welding contractors, auctioneers, rice farmers,

00:20:46.460 | owners of mobile home parks, pest controllers, coin

00:20:50.180 | and stamp dealers, and paving contractors.

00:20:53.420 | About half of our wives do not work outside the home.

00:20:56.900 | The number one occupation for those wives who do work

00:20:59.700 | is teacher.

00:21:01.340 | Our household's total annual realized taxable income

00:21:05.000 | is $131,000 median, or 50th percentile,

00:21:09.580 | while our average income is $247,000.

00:21:13.980 | Note that those of us who have incomes in the $500,000

00:21:17.100 | to $999,999 category, 8%, and the $1 million

00:21:22.060 | or more category, 5%, skew the average upward.

00:21:27.020 | We have an average household net worth of $3.7 million.

00:21:30.780 | Of course, some of our cohorts have accumulated much more.

00:21:34.180 | Nearly 6% have a net worth of over $10 million.

00:21:38.020 | Again, these people skew our average upward.

00:21:40.700 | The typical median, or 50th percentile,

00:21:44.020 | millionaire household has a net worth of $1.6 million.

00:21:49.500 | On average, our total annual realized income

00:21:52.860 | is less than 7% of our wealth.

00:21:56.060 | In other words, we live on less than 7% of our wealth.

00:22:00.820 | Most of us, 97%, are homeowners.

00:22:03.620 | We live in homes currently valued at an average of $320,000.

00:22:08.420 | About half of us have occupied the same home

00:22:10.980 | for more than 20 years.

00:22:13.500 | Thus, we have enjoyed significant increases

00:22:15.540 | in the value of our homes.

00:22:17.860 | Most of us have never felt at a disadvantage

00:22:20.220 | because we did not receive any inheritance.

00:22:23.180 | About 80% of us are first generation affluent.

00:22:27.260 | We live well below our means.

00:22:29.260 | We wear inexpensive suits and drive American-made cars.

00:22:33.060 | Only a minority of us drive the current model year automobile.

00:22:37.060 | Only a minority ever lease our motor vehicles.

00:22:40.740 | Most of our wives are planners and meticulous budgeters.

00:22:44.860 | In fact, only 18% of us disagreed with the statement,

00:22:48.420 | charity begins at home.

00:22:50.460 | Most of us will tell you that our wives are

00:22:52.540 | a lot more conservative with money than we are.

00:22:56.220 | We have a go-to-hell fund.

00:22:58.460 | In other words, we have accumulated enough wealth

00:23:00.420 | to live without working for 10 or more years.

00:23:03.140 | Thus, those of us with a net worth of $1.6 million

00:23:06.460 | could live comfortably for more than 12 years.

00:23:09.060 | Actually, we could live longer than that,

00:23:10.780 | since we save at least 15% of our earned income.

00:23:15.300 | We have more than 6 and 1/2 times the level of wealth

00:23:18.100 | of our non-millionaire neighbors.

00:23:20.020 | But in our neighborhood, these non-millionaires

00:23:23.260 | outnumber us better than 3 to 1.

00:23:25.740 | Could it be that they have chosen

00:23:27.140 | to trade wealth for acquiring high status

00:23:29.620 | material possessions?

00:23:32.020 | As a group, we are fairly well educated.

00:23:35.180 | Only about one in five are not college graduates.

00:23:38.860 | Many of us hold advanced degrees.

00:23:41.580 | 18% have master's degrees, 8% law degrees,

00:23:45.860 | 6% medical degrees, and 6% PhDs.

00:23:50.780 | Only 17% of us or our spouses ever

00:23:53.540 | attended a private elementary or private high school.

00:23:56.220 | But 55% of our children are currently attending

00:23:59.140 | or have attended private schools.

00:24:02.000 | As a group, we believe that education

00:24:03.940 | is extremely important for ourselves, our children,

00:24:07.020 | and our grandchildren.

00:24:08.620 | We spend heavily for the educations of our offspring.

00:24:12.820 | About 2/3 of us work between 45 and 55 hours per week.

00:24:17.620 | We are fastidious investors.

00:24:20.460 | On average, we invest nearly 20% of our household realized income

00:24:24.180 | each year.

00:24:25.380 | Most of us invest at least 15%.

00:24:28.300 | 79% of us have at least one account

00:24:30.500 | with a brokerage company, but we make our own investment

00:24:33.180 | decisions.

00:24:34.860 | We hold nearly 20% of our household's wealth

00:24:37.720 | in transaction securities, such as publicly traded stocks

00:24:41.220 | and mutual funds, but we rarely sell our equity investments.

00:24:45.860 | We hold even more in our pension plans.

00:24:48.220 | On average, 21% of our household's wealth

00:24:50.660 | is in our private businesses.

00:24:53.580 | As a group, we feel that our daughters

00:24:55.580 | are financially handicapped in comparison to our sons.

00:24:59.220 | Men seem to make much more money even

00:25:01.060 | within the same occupational categories.

00:25:03.580 | That is why most of us would not hesitate

00:25:05.420 | to share some of our wealth with our daughters.

00:25:08.000 | Our sons and men in general have the deck of economic cards

00:25:11.280 | stacked in their favor.

00:25:12.900 | They should not need subsidies from their parents.

00:25:15.980 | What would be the ideal occupations

00:25:17.660 | for our sons and daughters?

00:25:19.300 | There are about 3.5 millionaire households like ours.

00:25:23.180 | Our numbers are growing much faster

00:25:25.100 | than the general population.

00:25:27.020 | Our kids should consider providing affluent people

00:25:30.060 | with some valuable service.

00:25:32.620 | Overall, our most trusted financial advisors

00:25:35.220 | are our accountants.

00:25:36.940 | Our attorneys are also very important.

00:25:39.060 | So we recommend accounting and law to our children.

00:25:42.260 | Tax advisors and estate planning experts

00:25:44.420 | will be in big demand over the next 15 years.

00:25:48.020 | I am a tightwad.

00:25:49.340 | That's one of the main reasons I completed a long questionnaire

00:25:52.180 | for a crispy $1 bill.

00:25:54.300 | Why else would I spend two or three hours being personally

00:25:57.020 | interviewed by these authors?

00:25:58.900 | They paid me $100, $200, or $250.

00:26:03.260 | So they made me another offer to donate in my name

00:26:06.620 | the money I earned for my interview

00:26:08.080 | to my favorite charity.

00:26:09.340 | But I told them, I am my favorite charity.

00:26:12.660 | I love that statement.

00:26:15.420 | This book, remember-- well, this one is copyrighted in 1996.

00:26:19.620 | And this book-- notice the level of data and detail.

00:26:23.860 | And this was a huge deal for me, because in having the data--

00:26:28.500 | and this book is very data intensive.

00:26:30.100 | You can actually see, look, the numbers don't lie.

00:26:33.460 | No matter what it looks like in pop culture,

00:26:35.940 | no matter that it looks like the wealthy are on TV

00:26:39.580 | and the way to get rich is to become a movie star,

00:26:42.540 | that's simply not the case.

00:26:45.740 | It's better to be an auctioneer or a cattle rancher

00:26:50.340 | or the owner of a trucking company.

00:26:53.020 | And that's what he goes through and talks about.

00:26:55.460 | This was a huge, huge deal for me to understand.

00:26:59.260 | He goes on, and right in the beginning, he talks about--

00:27:02.100 | and this is the second lesson.

00:27:03.380 | I learned the difference from Dr. Stanley

00:27:05.300 | between wealth and income.

00:27:07.700 | This is a difference that many people don't seem to conceive of.

00:27:10.500 | If you listen to people, some people how they talk,

00:27:14.100 | especially people who don't have a lot of money,

00:27:17.140 | one of the things you often hear is them confusing wealth

00:27:20.420 | and income.

00:27:22.220 | In places that I've been where people are paid primarily hourly

00:27:24.820 | wages, I've often heard people talking about the raises

00:27:28.020 | that they're going to get, the level of the hourly--

00:27:30.500 | I made $2 more an hour.

00:27:31.860 | I'm going to make this much per hour.

00:27:34.820 | In the poorer segments of society--

00:27:36.500 | I don't have data to back this up.

00:27:38.060 | It's only my anecdotal experience.

00:27:39.500 | But there seems to be a much greater focus on income

00:27:42.300 | than on wealth.

00:27:43.100 | But if you get those things mixed up, you've got a problem.

00:27:49.820 | And he goes on, and he defines two terms

00:27:52.940 | which he refers to frequently in Millionaire Next Door, which

00:27:57.220 | he abbreviates UAW and PAW.

00:28:00.220 | And the UAW is an under accumulator of wealth

00:28:03.940 | versus a PAW, which is a prodigious accumulator

00:28:06.660 | of wealth.

00:28:07.700 | What you find is that certainly your income drives your wealth,

00:28:11.420 | but it's not so much how much income and much more about what

00:28:16.660 | do you actually do with the income.

00:28:18.580 | Notice that in the data I just read,

00:28:21.820 | the median income, which means the 50th percentile of income,

00:28:25.780 | is $131,000.

00:28:28.060 | So of the millionaires, that's the most common number,

00:28:31.940 | is $131,000.

00:28:34.900 | That's not that much money comparatively speaking.

00:28:36.980 | Now this data is 15, 20 years old.

00:28:41.060 | So there would have to be an adjustment for inflation.

00:28:44.020 | But that's not really that much money in today's world.

00:28:47.780 | So the key is to differentiate between wealth and income.

00:28:50.660 | Another lesson that he gives elsewhere in the book

00:28:52.740 | is he talks a lot about how the wealthy are much more

00:28:57.580 | likely to realize a very small percentage of their wealth

00:29:00.660 | as income than the other way around.

00:29:04.460 | And that's one of the measurements.

00:29:05.900 | You mentioned-- you noticed that in the data I just read,

00:29:08.280 | he said 7%, that the average millionaire only

00:29:10.380 | realizes 7% of their net wealth per year in income.

00:29:13.660 | And that's partly because they're wealthy,

00:29:15.860 | but it's also because their income is low,

00:29:17.660 | their expenses are low, and they're

00:29:20.020 | keeping their taxable realized income low to avoid the tax.

00:29:23.900 | Lesson three I learned is that it's OK to simply

00:29:26.020 | be on the way to wealth.

00:29:28.300 | And there's a formula that he gave

00:29:30.020 | to determine if you're wealthy, to differentiate

00:29:32.780 | between the under accumulators of wealth

00:29:34.660 | and the prodigious accumulators of wealth.

00:29:36.900 | That was his formula that he used.

00:29:38.620 | And here's the formula of how to determine if you're wealthy.

00:29:42.100 | Multiply your age times your realized pre-tax annual

00:29:48.020 | household income from all sources except inheritances.

00:29:52.620 | Divide by 10.

00:29:54.660 | This, less any inherited wealth, is

00:29:57.420 | what your net worth should be.

00:30:00.780 | So as long as we're ignoring inheritances--

00:30:03.140 | and that's basically the rules, let me give this to you

00:30:05.460 | in a less wordy manner.

00:30:07.420 | Take your age, multiply it times your income,

00:30:12.480 | and divide it by 10.

00:30:13.700 | And that should be-- that's what your net worth should be.

00:30:16.740 | Now the thing I like about that is that formula accounts

00:30:19.620 | for age and it accounts for income.

00:30:22.860 | And those are two things that are important to account for.

00:30:25.280 | I had this complex when I was younger that I wasn't rich yet.

00:30:29.220 | After all, I was 23 years old and I should be rich by now.

00:30:33.900 | The reality is age has a big factor in it.

00:30:37.780 | I have had people ask me and say, Joshua,

00:30:41.580 | if you're doing this show on how to get wealthy,

00:30:44.260 | how on earth are you doing the show?

00:30:45.800 | Do old people want to know how much money you have?

00:30:48.140 | If someone asked me, I probably wouldn't tell them.

00:30:50.780 | But frankly, I'm much more of the conservative perspective

00:30:54.900 | than the look at me or how rich I am.

00:30:57.180 | But for my age, I've done well.

00:31:00.660 | But I'm not 57 years old, so I'm not a millionaire yet.

00:31:04.780 | It's unreasonable to expect a 27-year-old to be a millionaire.

00:31:08.060 | It happens.

00:31:09.820 | It's unreasonable to expect.

00:31:12.140 | I think it's reasonable to expect someone

00:31:13.900 | who's been paying attention for several decades, a 67-year-old,

00:31:16.720 | to be a millionaire with the application of principles.

00:31:19.960 | So if I were 67 years old, I would

00:31:22.100 | have very little credibility simply

00:31:24.620 | because many years have passed.

00:31:25.980 | And if I'm still in the financial condition

00:31:27.760 | that I'm in today, I'd have very little credibility.

00:31:29.980 | But 29 years old, when I run that formula, I'm doing OK.

00:31:34.000 | So it's OK to be simply on the way to wealth.

00:31:40.100 | And that was encouraging to me when I would sit down

00:31:42.300 | and calculate that.

00:31:43.900 | Now, he goes on and says, "To be well positioned

00:31:46.500 | in the prodigious accumulator of wealth category,

00:31:48.500 | you should be worth twice the level of wealth expected."

00:31:51.260 | So that calculation is simply, here's

00:31:52.980 | what we expect your wealth to be.

00:31:54.900 | And you should be worth twice the level of wealth.

00:31:57.420 | Incidentally, I'm not yet-- well, you know what?

00:32:00.980 | Hold on a second.

00:32:02.740 | OK, I'm not yet in that category, primarily

00:32:05.940 | due to career changes.

00:32:07.300 | But who knows?

00:32:08.180 | I'll be there as soon as I can.

00:32:09.820 | But it's OK to be where you are was the point of the lesson.

00:32:12.260 | It's OK to be simply on the way to wealth.

00:32:15.260 | Number four lesson I learned was I

00:32:17.620 | learned to be proud of being frugal,

00:32:19.860 | or at least to be confident in being frugal.

00:32:24.780 | And frugality is a virtue that doesn't

00:32:29.700 | seem to be honored very much in our culture, at least

00:32:34.700 | not in mainstream pop culture.

00:32:38.380 | We often seem to honor extravagance and largesse

00:32:43.980 | and hyper-consumption.

00:32:47.060 | And so if you're a frugal person, it's tough.

00:32:49.580 | You need to have your backbone built up to really, I guess,

00:32:55.860 | to be confident in being frugal.

00:32:58.060 | We're not taught in society to be frugal.

00:33:00.900 | And as a kid growing up, be careful with your children.

00:33:03.900 | It's so easy to adopt society's claims

00:33:07.900 | for what should be looked like for virtue

00:33:10.420 | versus your idea of virtue.

00:33:14.380 | I remember as a young man, as a teenager,

00:33:18.340 | I was critical of my parents.

00:33:19.980 | Like, why don't you spend some money?

00:33:21.260 | Most teenagers probably are.

00:33:22.700 | They'll probably go through this someday with my son.

00:33:25.140 | But on page 28 of Millionaire Next Door,

00:33:27.860 | Stanley says, "What are three words

00:33:29.500 | that profile the affluent?

00:33:31.780 | Frugal, frugal, frugal."

00:33:36.420 | Being frugal is the cornerstone of wealth building.

00:33:40.620 | And yet even today, it's so funny to me how people--

00:33:43.740 | now, I don't have the same insecurities that I once had.

00:33:47.380 | But people are often like, why are you so frugal?

00:33:50.460 | Listen, this stuff matters.

00:33:51.580 | I got to build wealth.

00:33:53.020 | If I spend it all, I'm not going to have it.

00:33:55.620 | And so obviously, there's a level of frugality

00:33:58.340 | that is appropriate at a certain scale.

00:34:01.580 | I'm so glad to hear that evidently Dr. Stanley bought

00:34:04.620 | himself a Corvette last year.

00:34:06.580 | I mean, how great is it?

00:34:08.180 | That was probably one of his extravagances

00:34:11.020 | that was super fun for him to buy himself

00:34:13.140 | a fancy brand new Corvette.

00:34:14.580 | And I think that's awesome.

00:34:16.700 | So frugality is not that we never buy anything nice.

00:34:19.340 | It's that we buy it in a manner that's appropriate

00:34:21.460 | with our scale, with where we are.

00:34:24.780 | And Stanley taught that the foundation stone

00:34:28.900 | of wealth accumulation is great defense, frugality.

00:34:33.660 | The data helped me, especially as a financial advisor.

00:34:36.580 | Financial advisors are a weird lot.

00:34:39.300 | It's a weird occupation.

00:34:41.180 | And as a class, it's very difficult to discern

00:34:44.660 | among financial advisors.

00:34:46.500 | And in many ways, some ways, Stanley

00:34:49.700 | doesn't talk that much about the actual financial situation

00:34:52.100 | of financial advisors.

00:34:53.180 | He talks some about doctors.

00:34:54.380 | I kind of think of it as doctors,

00:34:55.740 | is that he talks in his work, in his research,

00:34:58.460 | that it seems like physicians often

00:35:00.380 | fall into the very spendy, hyper-consumption category,

00:35:04.980 | or they often fall into the very frugal, very rich category.

00:35:09.060 | And so financial advisors, it's similar.

00:35:11.100 | Many financial advisors are all hat and no cattle,

00:35:14.140 | as they say in Texas.

00:35:15.340 | They're all about flashy lifestyle.

00:35:17.380 | And if you were actually looking at the balance

00:35:20.700 | sheet of some people who market themselves

00:35:23.180 | as financial advisors, their personal balance sheet

00:35:25.860 | is very, very poor.

00:35:26.780 | Incidentally, that may or may not be a problem.

00:35:28.740 | A lot of people would be offended by that.

00:35:30.980 | If you're hiring somebody for their expertise

00:35:32.860 | as, say, a portfolio manager or, say, a tax specialist,

00:35:36.980 | something like that, all of those things

00:35:38.740 | can be financial advisors.

00:35:40.860 | How much of their own money they actually spend

00:35:43.540 | does not necessarily impact their qualifications

00:35:46.980 | to give you specific tax advice.

00:35:49.580 | I think it's important to note that, simply that just

00:35:52.420 | because somebody enjoys consuming all their money

00:35:55.980 | and doesn't prefer to build wealth

00:35:58.220 | doesn't invalidate their investment predictions.

00:36:01.700 | Doesn't necessarily invalidate their tax advice.

00:36:05.500 | But in general, I think most people

00:36:07.460 | would want their financial advisor to be wealthy.

00:36:10.140 | So there's this idea of expressing a certain image.

00:36:16.180 | There's a perception bias.

00:36:17.700 | And as an advisor, you need to be aware of that,

00:36:19.780 | because the way that people perceive you is the way

00:36:21.900 | that you are in their mind.

00:36:23.460 | And so that's why your financial advisor probably

00:36:26.060 | shouldn't drive a too broken down car,

00:36:27.980 | because you need to create this perception that you

00:36:32.060 | are moderately successful.

00:36:33.220 | People generally are attracted to success.

00:36:35.340 | That's why you probably shouldn't be a fat slob

00:36:37.980 | with donut crumbs in your beard.

00:36:40.220 | You probably should dress in a certain way.

00:36:42.140 | And so there's these rules that go on.

00:36:44.180 | So some financial advisors are all hat and no cattle.

00:36:46.380 | They look like they're doing well.

00:36:48.020 | And they're earning a lot, but they're spending a lot.

00:36:50.780 | But then some advisors really are really wealthy.

00:36:53.220 | And they serve people well.

00:36:54.540 | And you don't know.

00:36:55.900 | That's the thing.

00:36:56.620 | You don't know.

00:36:57.460 | You don't have any idea.

00:36:59.180 | When you're where I live in South Florida,

00:37:01.860 | there's a Mercedes in every traffic light.

00:37:04.380 | You don't have any idea, is this person

00:37:06.380 | someone who's trying to imitate the rich?

00:37:09.300 | Or is this someone who's really just rich,

00:37:11.100 | and it doesn't even matter?

00:37:12.220 | And they're just driving a nice car.

00:37:13.860 | So it's a high pressure industry, though,

00:37:17.580 | where you're pressured to look a certain way.

00:37:20.100 | And Stanley gave me a little bit of confidence,

00:37:23.020 | that no, I need to be frugal.

00:37:24.500 | And I just simply told my clients, listen,

00:37:27.220 | if you want me to be a high-consuming advisor,

00:37:30.220 | you need to find somebody else.

00:37:31.620 | But if you want somebody who actually is rich for their age,

00:37:34.380 | then--

00:37:35.340 | and wants to actually teach you how to get rich--

00:37:37.500 | I can't teach you how to spend a lot of money.

00:37:38.940 | I can teach you how to get rich.

00:37:40.620 | Then that would be one factor.

00:37:43.820 | And so that was a valuable lesson.

00:37:46.460 | The fifth lesson that I wrote down today

00:37:48.180 | is from Stanley's work, is I learned to choose my spouse

00:37:51.380 | very carefully.

00:37:52.940 | And this was a big deal to me, not

00:37:54.580 | in the sense of a scheming way of my spouse

00:38:01.180 | has to only spend this certain amount of money.

00:38:04.020 | But one of the most important decisions

00:38:05.660 | that you make in life that will dictate just

00:38:08.180 | about everything else in life is who your spouse is.

00:38:11.500 | It's a huge decision, huge decision,

00:38:13.660 | in just about every single way.

00:38:15.540 | So whether that's from the perspective

00:38:17.140 | of the amount of money they spend,

00:38:18.740 | or whether it's from the perspective of just who they

00:38:21.460 | are and their character, what they're committed to,

00:38:23.780 | the type of lifestyle that they want.

00:38:25.860 | If I want a backpack around the world

00:38:28.460 | and my spouse wants a fancy condo on Palm Beach,

00:38:32.060 | we're going to have a bit of a disagreement.

00:38:33.860 | And this is one of the things that--

00:38:35.900 | one of many factors that causes marriages to fall apart.

00:38:39.700 | Partnerships where the partners are incompatible generally

00:38:42.500 | don't turn out well over the long term.

00:38:45.140 | And careful selection of a spouse is extremely important.

00:38:50.380 | And it is definitely a major factor in wealth building.

00:38:54.260 | Stanley profiled the research of--

00:38:56.380 | and again, to the data of how important your spouse is

00:39:00.140 | to a wealth building plan.

00:39:03.300 | And as I read in the beginning, about half

00:39:05.060 | of the spouses of the wealthy are stay-at-home moms.

00:39:09.580 | And he says on page 36, he says flat out,

00:39:14.180 | he says if your spouse isn't frugal,

00:39:15.940 | you're going to have a very hard time building wealth.

00:39:19.860 | A couple cannot accumulate wealth if one of its members

00:39:22.380 | is a hyper-consumer.

00:39:24.860 | And I think this is a big deal in our society

00:39:27.340 | as far as household structure and how to handle it.

00:39:29.460 | Now, it's politically incorrect in our society

00:39:32.980 | to have any discussion of gender roles,

00:39:34.820 | especially if gender roles are distinct in any way.

00:39:38.540 | It's extremely politically incorrect.

00:39:40.300 | And we're all supposed to say, well, we're all the same.

00:39:42.220 | We have exactly the same role.

00:39:43.420 | Sorry, I don't buy it.

00:39:45.020 | I think that's actually one of the major factors that

00:39:47.620 | keeps households poor is because there's no gender distinction.

00:39:53.380 | And so from an economic perspective,

00:39:55.500 | this doesn't take advantage of-- because there's

00:39:57.420 | no gender distinction.

00:39:58.340 | We're both supposed to do the same thing.

00:39:59.540 | We're supposed to be equal.

00:40:00.240 | And it's supposed to be this perfect thing where we both

00:40:02.860 | have exactly the same roles, which

00:40:04.540 | is what society, the politically correct role the society

00:40:08.220 | works to advance.

00:40:10.220 | This doesn't take advantage of any

00:40:12.180 | of the efficiencies of the division of labor.

00:40:16.380 | The fundamental economic principle

00:40:17.780 | is that in a high division of labor economy,

00:40:19.860 | you're going to have much greater wealth

00:40:21.020 | than in a low division of labor economy.

00:40:22.980 | The same thing in a household.

00:40:24.240 | In a household with a high division of labor,

00:40:26.620 | it's much more efficient than an inefficient household.

00:40:30.860 | And so that-- now, who knows if this research was in 1996.

00:40:34.220 | I don't know what the updated statistics are.

00:40:36.060 | Maybe they've changed in the last 20 years.

00:40:38.460 | But it just has much to do with running a household efficiently.

00:40:42.340 | And if both spouses are doing exactly the same thing,

00:40:44.660 | it's by definition inefficient.

00:40:48.300 | So for me, I chose my wife very carefully.

00:40:51.940 | I didn't want to compete with my spouse.

00:40:54.980 | I wanted a frugal spouse to complement me and to help me

00:40:58.220 | in our joint journey together.

00:41:00.920 | And this was a big deal.

00:41:02.900 | A simple example is just for me personally, again,

00:41:05.420 | I don't care what you or anyone does with their life.

00:41:08.020 | You run your life how you want.

00:41:09.340 | But one of the things that was important to me

00:41:11.740 | is I avoided many people who were

00:41:14.140 | very focused on their career.

00:41:16.540 | That was not-- I'm not saying I wasn't some Casanova who

00:41:19.540 | could have any woman in the world.

00:41:20.920 | Of course, that would play a role.

00:41:22.300 | But I didn't want to compete.

00:41:24.060 | I didn't want to be married.

00:41:25.220 | There was a girl at one point that I

00:41:27.180 | was interested in that was going to be a physician.

00:41:30.220 | I didn't want to be married to a physician.

00:41:32.180 | Nothing wrong with being a physician,

00:41:33.740 | but that wasn't the lifestyle that I wanted.

00:41:36.220 | And so I chose differently.

00:41:38.180 | And so one of the things that you see in his research

00:41:41.260 | here was choose your spouse carefully

00:41:43.860 | and make sure that they complement you

00:41:45.460 | and that they'll be an asset to you.

00:41:47.980 | And this goes both ways.

00:41:49.620 | Choose your spouse carefully.

00:41:51.740 | Now, each couple has to work this out in a way that

00:41:54.460 | is effective for them.

00:41:55.780 | And that's where I don't think you can legislate certain

00:41:58.180 | things, say this is the way it is.

00:42:00.380 | But two frugal people working together and taking

00:42:02.780 | advantages of the efficiencies of a division of labor

00:42:08.940 | within their relationship and taking advantage

00:42:12.220 | of complementing one another and having complementary skill

00:42:15.300 | sets instead of competitive skill sets,

00:42:18.260 | this idea that many couples seem to have--

00:42:20.580 | many of my friends that we have to compete with each other.

00:42:24.620 | I'll put as far as at least with a nice easily measured

00:42:28.460 | metric of wealth accumulation, I'll

00:42:32.460 | put them up against each other.

00:42:33.740 | And I think the spouses that work together

00:42:36.300 | towards common goals will win every time.

00:42:40.100 | One of the things that quote here in this section

00:42:44.060 | says a self-made millionaire stated it best when he told us,

00:42:47.340 | I can't get my wife to spend any money.

00:42:50.100 | And I'm proud to say I feel the same way about my wife.

00:42:52.860 | She is an amazing woman, but I can't get her to spend

00:42:56.060 | any money.

00:42:56.580 | I try and try and try.

00:42:57.700 | She's more frugal than I am.

00:42:59.540 | And so that builds instead of this antagonistic relationship

00:43:06.020 | where the woman earns all the money and the man spends it all

00:43:08.860 | or the man earns all the money and the woman spends it all,

00:43:11.320 | instead of this antagonistic relationship,

00:43:14.020 | it becomes a joy where then I look at it and I say,

00:43:17.620 | how can I do nice things for my wife?

00:43:19.260 | And how can I spend money on her in a way

00:43:20.960 | that will bring her pleasure?

00:43:23.180 | So this is a big deal, and people

00:43:24.660 | don't often talk about it.

00:43:25.740 | When's the last time--

00:43:26.860 | it's like I would put a higher degree on the value of a college

00:43:31.260 | education if after working as a financial planner knowing

00:43:33.660 | that these kinds of conflicts are what destroy financial lives

00:43:37.380 | and what destroy marriages and destroy families.

00:43:39.940 | And when your marriage is destroyed

00:43:41.400 | and your family is destroyed, now your career

00:43:43.240 | is destroyed for some people.

00:43:44.580 | And now when your career is destroyed,

00:43:46.160 | your whole financial plan is destroyed,

00:43:47.780 | knowing the actual real world effect of this,

00:43:50.200 | I would think this would be something that we would be

00:43:52.460 | talking about in a high school classroom.

00:43:55.620 | Might be important to understand how to effectively choose

00:44:00.140 | your spouse.

00:44:01.780 | Now, it is the parents' job to teach children

00:44:06.180 | those considerations.

00:44:07.100 | So I don't lay the blame at--

00:44:09.380 | I lay the blame at us as parents.

00:44:11.140 | This is our job.

00:44:13.060 | But this is the kind of stuff that really impacts life,

00:44:17.060 | not necessarily what all of the schooling is about.

00:44:20.500 | Stanley says it very straightforward.

00:44:22.020 | He says, "Most people will never become

00:44:24.020 | wealthy in one generation if they are married

00:44:26.540 | to people who are wasteful."

00:44:29.140 | Big deal.

00:44:30.700 | So that was the fifth lesson.

00:44:32.060 | I learned to choose my spouse very carefully.

00:44:34.060 | And I'm thankful to my parents that they taught me

00:44:36.180 | that at an early age as well.

00:44:38.500 | Number six, Dr. Stanley taught me not to go with the crowd.

00:44:43.060 | Example from my perspective here of how

00:44:46.220 | I'm relating this lesson is oftentimes financial advisors

00:44:49.260 | who are new in the business.

00:44:51.860 | I always feel bad.

00:44:52.720 | Those of you who are attorneys and who are physicians who

00:44:54.620 | are listening, I'm sorry.

00:44:56.180 | But it seems like the first people that financial advisors

00:44:58.520 | target if they don't have any natural network or any marketing

00:45:01.060 | plan is they start calling attorneys and doctors.

00:45:03.540 | And it's tough.

00:45:04.100 | I had several clients who were attorneys,

00:45:05.540 | several clients who were doctors.

00:45:06.900 | And you guys get targeted all the time.

00:45:08.900 | And I'm sorry.

00:45:09.540 | It's just big income, self-employed professional,

00:45:13.060 | usually big spenders, oftentimes big spenders.

00:45:15.320 | And so we're able to, hey, this would be a great fit.

00:45:18.220 | But what I learned was not to go with the crowd.

00:45:21.260 | And for me personally, I didn't enjoy

00:45:24.540 | working with the majority of people

00:45:26.060 | involved in those professions.

00:45:28.180 | It's not that I didn't have any problem with it.

00:45:29.480 | Some individuals.

00:45:30.220 | It's just that I didn't fit very well with the majority of people

00:45:33.420 | in those professions.

00:45:34.980 | I didn't play the same lifestyle necessarily.

00:45:39.620 | I did have-- again, I had some clients who

00:45:41.380 | I was a great personality fit.

00:45:42.620 | But these people were also atypical

00:45:44.260 | within their profession.

00:45:46.580 | And it's always hard to generalize.

00:45:49.060 | But what Dr. Stanley taught me was

00:45:51.060 | that I should look for auctioneers

00:45:53.500 | and owners of plumbing businesses and farmers

00:45:56.420 | and scrap metal dealers and things like that.

00:45:59.620 | And I found that I actually get along far better

00:46:01.780 | with those people in general.

00:46:04.660 | If I were to take a proportion of farmers

00:46:07.740 | versus a percentage of attorneys,

00:46:09.940 | I'll have a better personality fit with all the farmers

00:46:12.620 | than with all the attorneys.

00:46:14.780 | So when I took that personality fit

00:46:16.420 | and I compared it to Stanley's research

00:46:19.540 | into where the wealth is, I was able to find people

00:46:23.340 | that I really enjoyed working with.

00:46:25.780 | I was able to find--

00:46:26.620 | I would much rather be doing business

00:46:28.860 | around the back of a pickup truck

00:46:31.060 | than at the top of some high rise.

00:46:32.980 | Not that I can't go in and be effective in the high rise.

00:46:34.900 | It was just, OK, fine.

00:46:35.900 | And I'll work on here.

00:46:36.820 | I liked working in little industrial parks.

00:46:38.900 | And I'd find all kinds of blue collar business owners.

00:46:42.940 | Some guy has a hurricane shutter company

00:46:45.060 | and makes a million bucks a year.

00:46:46.460 | And I found another guy.

00:46:47.460 | OK, this guy has a plumbing company

00:46:49.100 | and is running this plumbing company.

00:46:51.340 | You wouldn't really know it was that big unless you knew.

00:46:53.740 | But you found out it was incredibly profitable.

00:46:55.940 | And this guy here is a drywall company.

00:46:57.540 | And this person has an insulation company.

00:46:59.460 | And all of a sudden, I started to find

00:47:01.020 | I can build a client base with these entrepreneurs

00:47:03.300 | that I really like working with who

00:47:05.900 | don't look at what society says is wealthy,

00:47:08.460 | but actually are extremely wealthy.

00:47:11.180 | It was a big deal to me to learn that.

00:47:14.100 | Very, very useful.

00:47:16.540 | The data that he provided gave me the courage and confidence

00:47:19.500 | to not go with the crowd and just to recognize that I

00:47:21.980 | needed to find my own niche that would work effectively with me.

00:47:26.220 | Number seven, Dr. Stanley taught me to choose my housing

00:47:28.940 | very, very carefully.

00:47:32.180 | If you read any of his work, you will

00:47:34.940 | be forced to come away with the fact

00:47:36.660 | that housing is a major decision with regard

00:47:40.420 | to the productivity of being able to build wealth.

00:47:43.580 | It drives everything else.

00:47:46.020 | And he's very clear that half the affluent millionaires

00:47:49.260 | in America do not live in high status neighborhoods.

00:47:53.420 | Now, that means half of them do, but half of them don't.

00:47:58.060 | And I'll cover that half and half concept in lesson number

00:48:00.540 | 10.

00:48:01.020 | But what this means is that your house actually

00:48:03.280 | drives many of your expenses.

00:48:06.060 | A, it's a big expense.

00:48:07.540 | And comparatively speaking, the size

00:48:09.500 | or the cost of your house, I mean,

00:48:12.380 | that's just going to be a big expense.

00:48:13.980 | Most people, their biggest expense in their life is taxes.

00:48:17.220 | Number two is housing.

00:48:18.320 | So when you actually sit down and run an income statement

00:48:21.620 | and figure out an income and expense statement and say,

00:48:23.980 | where are the expenses going, you'll

00:48:25.540 | find that for the majority of people,

00:48:27.340 | the largest category is tax.

00:48:30.620 | The second largest category is housing.

00:48:32.900 | Well, we can make a big difference in overall expenses

00:48:36.420 | if we can tackle the big categories.

00:48:38.900 | It's a fundamental rule.

00:48:40.640 | Focus with the 80/20 analysis.

00:48:42.440 | Focus on the 20% of categories that

00:48:45.260 | are going to give you 80% of your results.

00:48:47.460 | One is tax.

00:48:48.600 | Two is housing.

00:48:49.260 | Three is usually transportation.

00:48:50.600 | Most people have a lot of cars.

00:48:52.080 | And then it breaks down from there.

00:48:55.280 | So just the choice right off the bat of how big your house is

00:48:58.200 | and how big the mortgage payment is

00:48:59.680 | or how much money you spend on it is a big deal.

00:49:02.820 | Plus, that house, the actual value of the house,

00:49:06.540 | is all consumption.

00:49:08.280 | It may or may not work out fine.

00:49:09.700 | It may or may not appreciate in the long run.

00:49:11.200 | But it is consumption.

00:49:12.400 | It's not investment.

00:49:14.040 | So if you simply make the choice to not buy a $400,000 house

00:49:17.200 | but to buy a $300,000 house, then by definition,

00:49:20.720 | you are not consuming $100,000 worth of money.

00:49:23.360 | And you're able to invest it.

00:49:24.520 | That's going to make a substantial difference

00:49:26.360 | over time.

00:49:28.320 | And then housing drives every other decision in life,

00:49:32.840 | is what he's clear with his research.

00:49:34.540 | If you live in a high-status neighborhood

00:49:36.840 | and you want to drive kind of a broken-down six-year-old pickup

00:49:39.480 | truck, you're probably not going to feel so comfortable.

00:49:43.360 | So people who live in high-status neighborhoods,

00:49:45.480 | in order to feel comfortable, are

00:49:47.600 | going to need to upgrade their cars more frequently.

00:49:50.600 | They're going to need to keep their house in maybe

00:49:53.640 | more fancy-looking shape.

00:49:56.400 | So then it's going to be higher maintenance costs.

00:49:59.760 | Perhaps you could paint every 10 years,

00:50:01.480 | but you need to paint every six years,

00:50:03.060 | because that's what this neighborhood requires.

00:50:05.200 | You're going to need to keep your lawn in fancier condition.

00:50:07.480 | It's just everything is associated with it.

00:50:09.440 | So the choice of what type of neighborhood to live in

00:50:13.000 | is going to drive every other expense.

00:50:16.600 | Now, of course, there's the corollary of,

00:50:18.360 | well, if you get in a neighborhood

00:50:19.780 | that you don't want to be in, then what's

00:50:21.800 | the point of having money at all?

00:50:23.180 | So there is a natural choice.

00:50:26.720 | But there's going to be a comfort level.

00:50:29.800 | You don't necessarily want to be at the lowest cost.

00:50:32.360 | That might not be comfortable for you.

00:50:33.920 | That might violate just a standard of living.

00:50:36.440 | It might violate safety for your family

00:50:38.140 | or the type of lifestyle that you want to be exposed to.

00:50:41.200 | But if you just make the choice to live in less house

00:50:43.760 | than you afford, than you could spend,

00:50:47.040 | it'll affect every other area of your life.

00:50:49.460 | It's much easier to accumulate wealth

00:50:51.920 | if you don't live in a high-status neighborhood.

00:50:55.160 | So as an example of how I applied this in my life,

00:50:58.280 | when my wife and I were shopping,

00:51:01.600 | we originally were shopping.

00:51:02.720 | I wanted to spend about $100,000 on a house,

00:51:05.920 | if I could find one.

00:51:07.120 | And the goal of spending the $100,000 on the house

00:51:10.360 | was I wanted to keep as much capital

00:51:11.960 | available for investment as possible.

00:51:14.080 | And the goal was, let's do a starter home idea.

00:51:17.040 | And let's spend $100,000 on a house.

00:51:18.800 | Let's plan to live there for four or five years.

00:51:20.500 | We'll probably outgrow the house.

00:51:21.960 | And then we'll have a good rental property

00:51:23.280 | to move out of while we're building up other investment

00:51:25.680 | assets.

00:51:26.160 | That was the original plan.

00:51:27.800 | We couldn't find something that was suitable to the lifestyle

00:51:30.760 | that we wanted to live in that price range in Palm Beach

00:51:33.040 | County, where I live, especially that was close enough

00:51:36.000 | to my office to outweigh that.

00:51:38.680 | So the compromise that we made was

00:51:40.480 | we upgraded the cost of this community, the neighborhood

00:51:43.320 | that we were searching for.

00:51:45.120 | And I said, if we can be in close proximity to my office,

00:51:52.040 | then we can spend more money.

00:51:53.560 | And so by being in close proximity to my office,

00:51:55.840 | instead of buying cheaper farther away,

00:51:57.640 | we bought more expensive closer.

00:51:59.520 | That allowed us to get rid of a second car, which pulled out

00:52:02.000 | a whole set of expenses.

00:52:03.840 | It also allowed me to trade non-deductible expenses

00:52:07.620 | of commuting costs with ongoing non-deductible costs

00:52:11.760 | for a deductible mortgage interest cost.

00:52:14.960 | And it also allowed me to trade all of the focus

00:52:17.600 | on all those miles on a car for depreciating cost, which

00:52:21.600 | is going to be constant expense, versus having

00:52:24.800 | an extra $100,000 of value locked up in a house, which,

00:52:27.840 | yes, it is a consumption.

00:52:29.400 | But at least it has the potential to appreciate.

00:52:31.960 | And probably, with the area that we live in,

00:52:35.120 | we're at an above average, long-term above average,

00:52:38.720 | above the average rate of inflation in my area.

00:52:42.600 | But in choosing, it was very important to us

00:52:45.320 | that we didn't buy in one of the fancy neighborhoods.

00:52:48.000 | So the neighborhood we live in is kind of right

00:52:49.960 | on this interesting cusp.

00:52:51.200 | It's not quite blue-collar working class,

00:52:55.160 | but it's also not quite fancy.

00:52:58.000 | It's not quite super posh.

00:53:00.200 | It's in a great location, but it's

00:53:01.640 | kind of an old-fashioned neighborhood.

00:53:03.280 | It's kind of a normal neighborhood.

00:53:05.000 | Old-fashioned.

00:53:05.600 | We don't find-- most of the neighborhoods where I live

00:53:07.900 | are just large, gated communities, golf communities,

00:53:10.920 | things like that.

00:53:12.280 | So one of the key things, though, is we said, OK,

00:53:15.860 | instead of doing the starter home plan,

00:53:17.920 | we'll just buy a house that can hopefully fit us

00:53:20.120 | for a very long period of time.

00:53:22.240 | And so it should be big enough to handle a family,

00:53:24.360 | to not have to outgrow, but not too big.

00:53:26.120 | I want a bunch of extra rooms.

00:53:28.600 | So it feels pretty big, but it's not too big,

00:53:31.120 | comparatively speaking.

00:53:32.400 | And it's nice enough to not feel like you've got to move,

00:53:34.480 | but it's not so nice you've got to upkeep it.

00:53:36.440 | And I'll give you an example.

00:53:37.320 | One of the things that was important to me

00:53:38.480 | in choosing a neighborhood, I wanted a neighborhood

00:53:41.080 | where I didn't feel like I had to mow my lawn every week.

00:53:43.720 | And so thankfully, this neighborhood

00:53:45.160 | is kind of an interesting mix of some--

00:53:47.080 | houses are very fancily landscaped,

00:53:50.840 | and some houses are not.

00:53:53.080 | But I don't feel like I have to drive a fancy car.

00:53:55.760 | I don't feel like I have to-- this social pressure

00:53:58.120 | of upgrading the car every few years, those types of things.

00:54:01.520 | And so it's worked out well.

00:54:03.040 | Now interestingly, in hindsight, would we

00:54:06.000 | buy the same house if I didn't have

00:54:07.520 | that same geographic limitation?

00:54:08.880 | No, because now that I don't have that office location,

00:54:11.920 | I never anticipated that I wouldn't

00:54:13.720 | have that office location.

00:54:16.280 | Then now I could live in another part of town

00:54:19.480 | and get the same for cheaper, maybe.

00:54:21.640 | But it's fine.

00:54:22.320 | It's perfectly fine.

00:54:23.400 | And it's a great location.

00:54:24.800 | And it's the kind of house that who knows,

00:54:26.560 | we may stay here for the rest of our lives.

00:54:28.320 | It certainly has that capacity.

00:54:31.280 | But just simply that simple choice of housing

00:54:33.640 | and where you buy and when you buy and all that stuff

00:54:36.160 | can make a massive long-term difference.

00:54:40.440 | Very careful.

00:54:41.400 | He does give one interesting rule,

00:54:43.240 | which I'll share with you.

00:54:44.960 | It's from page 68.

00:54:45.920 | He says, "If you're not yet wealthy, but want to be someday,

00:54:51.000 | never purchase a home that requires a mortgage that

00:54:54.280 | is more than twice your household's total annual

00:54:56.920 | realized income."

00:54:58.960 | So never take out a mortgage that's

00:55:01.000 | higher in amount than twice your household's annual realized

00:55:05.520 | income, annual income.

00:55:07.280 | And thankfully, we followed that rule pretty close.

00:55:10.240 | It was just about right.

00:55:11.640 | So over time, it should be fine.

00:55:14.120 | So it was a valuable lesson, very valuable lesson.

00:55:17.640 | And again, these examples, when have you

00:55:20.640 | taken the time to sit down with somebody and say,

00:55:22.840 | let me teach you how to make a very careful housing decision.

00:55:25.320 | Because this one decision, which is a massive decision

00:55:28.360 | and is so easy to get caught up in the joy and the thrill

00:55:31.240 | and the emotion of spending big money, be careful.

00:55:37.400 | And let me give you some ideas.

00:55:39.640 | Number eight, Dr. Stanley taught me

00:55:41.080 | that you aren't what you drive.

00:55:42.680 | He makes a big point.

00:55:43.560 | I'm not going to belabor the point,

00:55:45.020 | but he makes a big point of profiling carefully

00:55:47.720 | the makes and models of cars that millionaires drive.

00:55:50.720 | And what you find, the largest brand, at least back then,

00:55:54.760 | that people drive was 9.4% of millionaires drive Fords.

00:55:58.560 | And this can make a massive impact on your life.

00:56:00.680 | We know that well.

00:56:01.360 | It's been beat to death since then.

00:56:02.440 | But he does a good job with the data

00:56:04.020 | and actually illustrating that.

00:56:05.860 | Number nine is Dr. Stanley taught me the term

00:56:08.360 | economic outpatient care.

00:56:10.760 | And economic outpatient care is a beautiful term,

00:56:13.720 | which basically refers to how much money do

00:56:16.080 | you have to send your kids after they're

00:56:17.760 | supposed to be independent and on their own?

00:56:20.480 | And then the next question is, how

00:56:22.920 | do you prepare your children so that they're not

00:56:25.560 | dependent on you sending them money

00:56:29.640 | after they're launched into the world on their own?

00:56:33.040 | And this is going to be a massive function in my life

00:56:35.280 | over the next two decades with raising our children.

00:56:39.000 | I need to equip my children to be independent.

00:56:42.840 | I don't want my children to know that we're wealthy.

00:56:45.520 | That's another careful thing about the house

00:56:47.680 | and the neighborhood that you live in.

00:56:49.760 | You've got to be careful.

00:56:51.600 | It's better if your children don't

00:56:53.040 | know that you're wealthy.

00:56:54.400 | He actually gives 10 fantastic rules

00:56:57.040 | for affluent parents and productive children,

00:56:59.280 | how to train your children to be productive.

00:57:01.800 | I'll read them to you.

00:57:02.760 | They're from page 203.

00:57:04.920 | I won't elaborate them.

00:57:06.520 | But number one, here are the rules.

00:57:08.040 | Number one, never tell children that their parents are wealthy.

00:57:11.440 | Never tell children that their parents are wealthy.

00:57:17.000 | Most people who are--

00:57:18.920 | many people of children of parents who are wealthy,

00:57:21.400 | they just wake up and they're like, wait a second.

00:57:23.440 | I didn't know their mom and dad were so rich.

00:57:25.840 | Number two, no matter how wealthy you are,

00:57:27.600 | teach your children discipline and frugality.

00:57:31.400 | Teach them that.

00:57:32.760 | And equip them with that character trait.

00:57:35.280 | Equip them with that virtue and make sure

00:57:37.040 | that it's drilled into them.

00:57:39.600 | Number three, assure that your children won't realize

00:57:42.200 | you're affluent until after they have established

00:57:44.640 | a mature, disciplined, and adult lifestyle and profession.

00:57:51.080 | Make sure that they're established

00:57:53.720 | before they know you're affluent.

00:57:55.600 | Number four, minimize discussions of the items

00:57:58.000 | that each child and grandchildren will inherit

00:58:00.560 | or receive as gifts.

00:58:02.320 | Don't focus on that.

00:58:03.880 | Number five, never give cash or other significant gifts

00:58:07.120 | to your adult children as part of a negotiation strategy.

00:58:10.480 | I hate this.

00:58:11.680 | I hate it when people use money as a leverage tool,

00:58:14.360 | as a negotiating tool.

00:58:16.400 | In my mind, it can certainly be immoral.

00:58:19.360 | Don't give it as a negotiating strategy.

00:58:22.520 | Number six, stay out of your adult children's family

00:58:25.560 | member-- matters.

00:58:26.760 | Excuse me, matters.

00:58:27.560 | Stay out of your adult children's family matters.

00:58:30.200 | Number seven, don't try to compete with your children.

00:58:33.400 | Don't boast about how much money you have.

00:58:35.120 | And it sends a confusing message if you tell your kids,

00:58:37.760 | well, I was your age.

00:58:38.640 | I had this much money.

00:58:40.440 | Number eight, always remember that your children

00:58:42.760 | are individuals.

00:58:45.040 | They're different.

00:58:47.240 | There are going to be inequalities among your children.

00:58:50.840 | Nine, emphasize your children's achievements,

00:58:53.400 | no matter how small, not their or your symbols of success.

00:58:58.440 | Focus on what people achieve, not what they have.

00:59:05.080 | Focus on what you achieve.

00:59:07.200 | Number 10, tell children that there

00:59:08.640 | are a lot of things more valuable than money--

00:59:10.640 | good health, longevity, happiness, a loving family,

00:59:13.520 | self-reliance, fine friends.

00:59:15.640 | If you have five of these, you're a rich man--

00:59:18.320 | reputation, respect, integrity, honesty,

00:59:21.080 | and a history of achievements.

00:59:22.240 | Money is icing on the cake of life.

00:59:24.240 | You don't ever have to cheat or steal.

00:59:25.840 | You don't have to break the law or cheat on your taxes.

00:59:28.600 | It's easier to make money honestly than dishonestly

00:59:31.280 | in this country.

00:59:32.400 | You'll never exist in business if you rip people off.

00:59:35.080 | Life is the long run.

00:59:37.720 | You can't hide from adversity.

00:59:39.080 | You can't hide your children from life's ups and downs.

00:59:42.160 | The ones who achieve do so by experiencing and conquering

00:59:45.280 | obstacles, even from their childhood days.

00:59:47.800 | These are the ones who were never

00:59:49.520 | denied their right to face some struggle, some adversity.

00:59:53.360 | Others were, in reality, cheated.

00:59:56.240 | Those who attempted to shelter their children

00:59:58.400 | from every conceivable germ in our society

01:00:01.040 | never really inoculated them from fear, worry,

01:00:04.560 | and the feeling of dependency.

01:00:06.840 | Not at all.

01:00:09.520 | There are many other things, but I'm

01:00:11.020 | going to close with number 10.

01:00:14.280 | And Dr. Thomas Stanley taught me principles and not rules.

01:00:21.800 | As an example, when you consume the millionaire next door,

01:00:25.680 | you might get the idea that everything

01:00:27.520 | is about not buying fancy houses and not buying cars.

01:00:30.520 | But he's very fair in the millionaire next door.

01:00:32.640 | But if you consume the millionaire next door

01:00:34.520 | in the millionaire mind and stop acting rich, all of a sudden,

01:00:38.120 | you find out that he does profile

01:00:41.240 | these different levels of wealth.

01:00:42.960 | Probably the most best example of this

01:00:45.800 | is in his book, Stop Acting Rich.

01:00:47.600 | He profiles a segment of society called the glittering rich.

01:00:52.280 | And the glittering rich are, in essence, as my memory serves,

01:00:56.320 | they are a group of society where

01:00:57.920 | they have so much money that they can't possibly

01:01:00.680 | spend it all.

01:01:02.440 | And to go out and buy a brand new fancy $150,000 Mercedes

01:01:07.920 | is the equivalent to them of maybe a median income

01:01:13.040 | earner going and buying a Happy Meal.

01:01:15.400 | And it's hard for people to process that difference

01:01:17.680 | in amount of money.

01:01:19.560 | But realistically, if you have $100 million,

01:01:24.000 | it's going to be challenging that your kids are not

01:01:26.200 | going to have at least the impression

01:01:28.240 | you have $100 million, that you have at least some money.

01:01:31.320 | Now, you might lead them to believe,

01:01:33.320 | and they might come to believe over time

01:01:35.240 | that you have $20 million.

01:01:37.560 | But it's going to be a big difference versus somebody

01:01:39.880 | who has $1.2 million.

01:01:41.440 | That's not the point.

01:01:43.200 | So Stanley focuses on the principles, not necessarily

01:01:45.600 | the rules.

01:01:47.640 | So many people get bogged down, and I did for a time,

01:01:50.520 | and get bogged down in the rule.

01:01:51.840 | For example, we don't buy new cars.

01:01:53.320 | Never buy a new car.

01:01:55.240 | Well, the question is, is it that we never buy a new car,

01:01:57.860 | or is it that rather we make intelligent decisions

01:02:01.120 | we're frugal with our money, and we make careful buying

01:02:03.800 | decisions, always choosing what's

01:02:05.280 | best for us at the moment?

01:02:07.920 | Those are two different things.

01:02:10.200 | Now, the data shows that many millionaires

01:02:13.360 | don't buy new cars, but it also shows that many millionaires

01:02:15.920 | do buy new cars.

01:02:18.880 | The data shows that most millionaires

01:02:20.600 | don't lease their cars, but the data

01:02:22.100 | shows that some millionaires do lease their cars.

01:02:25.160 | So if you just simply preach rules

01:02:26.840 | that never buy a new car, never lease a car,

01:02:29.480 | then in a situation where maybe buying a new car

01:02:31.480 | is a better decision, you're not going to be thinking that way.

01:02:36.760 | The only reason why many millionaires in the United

01:02:39.600 | States of America don't buy new cars

01:02:42.780 | is simply because we have a very efficient market where

01:02:45.560 | there's lots of high-quality used vehicles available,

01:02:49.200 | and there's a substantial discount

01:02:50.820 | from the new price versus the used price.

01:02:52.840 | And so you can get a good buy on a great quality product.

01:02:57.560 | But that's not the same as if, for example, there

01:02:59.920 | were very low inventory, or if the quality of the used car

01:03:03.520 | were very low, or if the price difference between a new car

01:03:08.000 | and a used car were negligible.

01:03:10.840 | If you could buy a four-year-old used car for $29,000,

01:03:14.240 | and you could buy a brand new car for $30,000,

01:03:16.960 | it'd be crazy to not buy the new car.

01:03:20.000 | But that's not the market we live in.

01:03:22.000 | So what happens is people often memorize a system of rules,

01:03:25.920 | and they don't understand the underlying principles

01:03:28.440 | about the efficiency of a market and the availability of a market

01:03:31.600 | and what's available.

01:03:33.280 | And then they just say, buy a rule.

01:03:35.200 | And so instead of grasping the principle of frugality

01:03:37.840 | in every decision--

01:03:39.800 | let's say you're teaching your children.

01:03:41.520 | If you don't teach your children the principle of frugality

01:03:44.560 | and making careful buying decisions,

01:03:47.320 | then they may never indeed buy a new car.

01:03:50.640 | But they might get ripped off on the used car,

01:03:53.120 | and they may spend all of their money buying new TVs,

01:03:56.280 | new gaming systems, new cell phones, and new clothes.

01:04:00.680 | Meanwhile, they're feeling good and virtuous about the idea

01:04:03.560 | that they never bought a new car, because that was what mom and dad

01:04:06.320 | said I never did do.

01:04:07.840 | So the key is teach the principle of frugality.

01:04:10.640 | And it may be a better decision for a brand new entrant

01:04:14.520 | into the workforce to say--

01:04:16.920 | who understands frugality-- to go out and survey the market.

01:04:20.440 | For example, a couple of years ago,

01:04:22.640 | after the Cash for Clunkers program

01:04:25.360 | took out a bunch of the inventory in the used car market

01:04:27.720 | in the United States of America, it

01:04:29.280 | was tough to find a used car at a certain price range.

01:04:32.360 | So the prices dramatically increased.

01:04:36.360 | And in some cases, you might find an oversupply

01:04:39.160 | of new cars of a certain model.

01:04:41.000 | And there may be many benefits to go out and buy a new car.

01:04:43.520 | So I could make a case where a certain young person could

01:04:46.160 | go out, and they're well served by buying a brand new, say,

01:04:50.840 | a Ford or a Honda Civic, a very practical car that can

01:04:53.800 | be had for many, many years.

01:04:55.960 | And the long-term value--

01:04:58.400 | the long-term cost is going to be low,

01:04:59.980 | because it's a high residual value.

01:05:01.720 | The car can be run for many years,

01:05:03.080 | and there are advantages to buying it new.

01:05:04.220 | And there's not that much of a discount for buying it and used.

01:05:07.120 | That person could buy that new car,

01:05:08.800 | and that can be a very sound decision,

01:05:10.480 | because it's a frugal decision, coupled

01:05:12.800 | with frugality in other areas of their life.

01:05:15.720 | So the point is, Dr. Stanley does a good job in his books

01:05:18.400 | of talking about principles.

01:05:21.880 | He explains in one of his books--

01:05:23.400 | he gives the anecdote of when he went out and bought

01:05:25.800 | a brand new Toyota 4Runner, because his previous Toyota

01:05:28.920 | 4Runner was low on miles--

01:05:32.400 | excuse me, was getting old.

01:05:33.840 | And I think he gave it to his son,

01:05:34.840 | and he needed to go buy a new car.

01:05:36.240 | But he explains how, even though he bought a brand new Toyota

01:05:38.720 | 4Runner, he bought a brand new Toyota 4Runner.

01:05:43.160 | He talks about why and how he made the choice

01:05:45.540 | to buy a Toyota 4Runner and not a Lexus GX470.

01:05:49.160 | He wants the six-cylinder engine instead of the eight-cylinder

01:05:51.660 | engine.

01:05:51.880 | It's a lower curb weight, so therefore more fuel efficient,

01:05:54.200 | much cheaper price.

01:05:55.040 | He didn't value the other benefits.

01:05:56.480 | It would have hurt his lifestyle and things like that.

01:05:58.720 | So the point is frugality, not rules.

01:06:02.360 | Principles, not rules.

01:06:04.400 | Principles, not rules.

01:06:07.440 | He did a great job of teaching me that lesson.

01:06:09.360 | I think that's a lesson that we would

01:06:10.900 | be well-served to understand.

01:06:12.240 | Understand the principles behind why we do certain things

01:06:20.340 | and teach those.

01:06:21.700 | Because then we can create thinking human beings who

01:06:23.900 | can understand their own situation

01:06:26.100 | and can rationally look through and think

01:06:28.180 | through what's right for them and understand.

01:06:34.820 | That's what I put down for you.

01:06:36.100 | That's my tribute to Dr. Stanley.

01:06:39.260 | I'm sad that he's gone.

01:06:40.940 | And I wish his family well.

01:06:43.660 | I think from the cursory news articles that I saw published,

01:06:46.580 | his daughter said that she was going to continue his works.

01:06:49.000 | And I hope she does.

01:06:50.500 | I hope she does.

01:06:51.220 | That would be fantastic for someone

01:06:52.720 | to continue and build on the body of research.

01:06:54.940 | And so I recommend to you, if you haven't read his books,

01:06:57.840 | check them all out.

01:06:58.640 | Every one that I've read has been really great.

01:07:02.360 | And I'm sure that you can learn a large number of lessons

01:07:07.160 | from that.

01:07:08.280 | And I think his funeral is on Thursday, if I saw.

01:07:10.760 | And I wonder if he published-- maybe he

01:07:12.560 | had a manuscript or something.

01:07:13.800 | And we can get one more book from him posthumously.

01:07:17.680 | That'd be great.

01:07:18.760 | So I hope you enjoyed and benefited from this content.

01:07:21.040 | I may do some more shows in coming days with-- again,

01:07:23.760 | it's always-- I could pick up any one of his chapters

01:07:26.880 | from his book and create a lesson on it,

01:07:29.800 | just from having read it before, and just teach it through.

01:07:32.800 | And I think he's probably had more impact on me

01:07:34.920 | than many personal finance authors,

01:07:37.200 | and probably many more people.

01:07:39.440 | So I wanted to create this tribute show to him.

01:07:41.480 | Thank you so much for listening.

01:07:42.820 | If you have benefited from this, consider

01:07:45.040 | checking out the Patreon page.

01:07:46.480 | Go to radicalpersonalfinance.com/patron.

01:07:48.880 | I'm working hard to share additional content as an example.

01:07:52.880 | Just recently shared the new website with the patrons.

01:07:56.640 | I'm in the process of designing a new website.

01:07:58.560 | Hopefully it'll be launched as soon as possible,

01:08:01.120 | targeting two or three weeks.

01:08:03.000 | But that website, it was just the very first draft of it.

01:08:06.720 | But I released it to the patrons and allowed

01:08:08.480 | them to get to see.

01:08:10.200 | And that's just one of many benefits

01:08:12.720 | that I've set up for you guys.

01:08:14.480 | Just last week, we did the first Q&A call,

01:08:16.280 | which was really fun, doing the first Q&A call this week

01:08:20.400 | with the mastermind group at the $200 a month level.

01:08:25.160 | So go by the Patreon page.

01:08:26.320 | Check out all the benefits that I have for you.

01:08:28.280 | Benefits as little as $1 a month, $3 a month, et cetera.

01:08:33.360 | We're doing well at growing.

01:08:34.760 | If we get to $6,000 a month is the goal.

01:08:36.560 | We're trying to get to $2,000 is the first thing.

01:08:38.920 | And at $2,000, I'm going to replace the intro music.

01:08:42.560 | And the goal is to get $6,000 by June 1.

01:08:44.440 | So I'd appreciate very much your help.

01:08:46.320 | Thank you for listening.

01:08:47.000 | Be back with you tomorrow.

01:08:48.120 | [MUSIC PLAYING]

01:08:53.640 | Thank you for listening to today's show.

01:08:55.880 | If you'd like to contact me personally,

01:08:57.960 | my email address is joshua@radicalpersonalfinance.com.

01:09:03.160 | You can also connect with the show on Twitter, @radicalpf,

01:09:06.600 | and at facebook.com/radicalpersonalfinance.

01:09:10.400 | This show is intended to provide entertainment, education,

01:09:14.760 | and financial enlightenment.

01:09:17.360 | But your situation is unique, and I cannot deliver

01:09:20.760 | any actionable advice without knowing anything about you.

01:09:25.080 | Please, develop a team of professional advisors

01:09:29.560 | who you find to be caring, competent, and trustworthy,

01:09:33.960 | and consult them, because they are

01:09:36.560 | the ones who can understand your specific needs,

01:09:40.000 | your specific goals, and provide specific answers

01:09:44.280 | to your questions.

01:09:46.080 | I've done my absolute best to be clear and accurate

01:09:48.920 | in today's show, but I'm one person, and I make mistakes.

01:09:52.880 | If you spot a mistake in something I've said,

01:09:55.120 | please help me by coming to the show page

01:09:57.560 | and commenting, so we can all learn together.

01:10:00.720 | Until tomorrow, thanks for being here.

01:10:03.080 | Hey, parents, join the LA Kings on Saturday, November 25th,

01:10:06.400 | for an unforgettable Kids Day, presented by Pear Deck.

01:10:09.440 | Family fun, giveaways, and exciting Kings hockey awaits.

01:10:12.680 | Get your tickets now at lakings.com/promotions,

01:10:15.480 | and create lasting memories with your little ones.

RPF0161-Tom_Stanley_Tribute