I had a come to Jesus with Michael Port a couple of years ago. If you aren’t familiar, Michael is an incredibly gifted professional speaker who successfully shifted his career from actor to speaker trainer. He and his amazing wife and partner, Amy, started Heroic Public Speaking together.
Michael and I had spoken at a conference and things were winding down for the day. A handful of fellow speakers had gathered to chat. We got to talking about personal finance and a few of us (myself included) admitted to not fully understanding this. We had chosen to ignore personal finance instead of trying to understand and invest in it. We literally had decided not to invest in our futures.
There are plenty of charlatans out there sharing misinformation to bilk you for your money. I have always been pessimistic about investing. The closest I had ever been to investing was within a violent grasp of my former step-mother, a psychotic stockbroker. I suppose the other side of it was being sickened by Gordon Gecko in the movie, Wall Street. What a dick!
Michael had no stake in sharing his investment advice with us. He gave us plenty to run with. He also followed up and kindly sent us an email recapping his valuable advice. He began his email suggesting we speak with our accountants about retirement. I didn’t have an accountant (I still don’t). Gulp.
Personal Finance Books You Must Read
He suggested we begin by reading Allan Roth’s book, How a Second Grader Beats Wall Street: Golden Rules Any Investor Can Learn. I’m going to share everything I learned from it here with you. Michael also suggested a few other books, but I realized I still needed to get my head around some of the simpler points on personal finance. So I read, I Will Teach You To Be Rich by Ramit Sethi. He simplifies things for novices like me to understand, the book is geared more towards college-aged readers. I’m going to share what I learned from it in this post. I also read, Rich Dad Poor Dad: What The Rich Teach Their Kids About Money - That The Poor And Middle Class Do Not! by Robert T. Kiyosaki, because I had heard multiple people talking about it recently.
Finally, I just finished You Are a Badass at Making Money: Master the Mindset of Wealth by Jen Sincero. This book came recommended by my friend and fellow mastermind group rock star, Pamela Wilson. It’s more of a mindset book than a finance book, but it all comes down to making money, right? Afterall, like Wu-Tang say, "Cash rules, still don't nothing move but the money."
The following are quotes and excerpts from each of these personal finance books beginning with Sincero’s book because you will need money to invest, right?
Step 1: Mindset. You Are a Badass at Making Money
We can literally create the reality we desire by making ourselves think and believe what we desire to think and believe. You cannot give what you do not have, so if you want to help others you have to take care of yourself first.
What comes out of your mouth comes into your life. We need to master our mindsets and understand Universal Intelligence.
When you don’t investigate what’s going on with your words, thoughts, and beliefs, you risk stumbling through life on autopilot. Once resistance is gone, you’re back into your natural state of flow, there’s no doubt and fear cluttering up your energy, and the Universe can deliver you the riches you desire. Your thoughts also trigger your emotions, which get you off yer ass to take action, and your reality begins to shift.
Practice saying thank-you every time you receive money, think to yourself, “See, money loves me, it just can’t stay away.”
Take five or ten minutes to imagine yourself living out one of the specifics of your desire for riches. Write a letter to it as if it were a person. Spend at least five minutes every day sitting in silence connecting with the energy of money. Imagine money flowing all around you, filling you up, moving into and out of your heart. Note: See Jim Carrey's story about writing a check to himself for ten million dollars as proof this works.
Vague aspirations lead to vague results; specific aspirations lead to kicking ass. Write down five action steps you will take right now to move yourself in that direction. If you wait to have the money first, it may never happen. There’s a fine line between perfectionism and procrastination.
Get clear on how much money you desire to make and by when (be specific about what the money is for and don’t forget to include your monthly nut of bare-necessity costs). Make sure this number is real and connected to specific things that bring up specific emotions. Then chunk it back – if your goal is five years away, chunk it back to how much you will make in four years, how much you will make in two years, how much you need to make this year, in six months, etc. all the way back to this month. Then put a definite plan in place with clear action steps that go toward your goal. Always stay attached to your WHY so when things get tough you keep going. Always pay attention to your numbers. If you don’t make your financial goal one week, add it on to the next. Your numbers MUST be nonnegotiable or else you’ll never get rich.
Step 2: The Basics. I Will Teach You To Be Rich
Credit is one of the most vital factors in getting rich. Once a year, by law, you’re allowed to obtain your credit report for free at www.annualcreditreport.com. The best thing to do to improve your credit score is to pay your bills on time.
On average, millionaires invest 20% of their household income each year.
Open a Roth IRA and set up automatic payments. Combine a classic low-cost investing strategy with automation. Note: Almost everything I have read recommended a Vanguard account, so I rolled my 401Ks from previous employers into a new account.
Use Google Calendar to set twelve savings goals throughout the year, with an email reminder for each one. Add a savings goal of three months of bare-bones income before you do any investing.
Spend Sunday nights reviewing receipts versus your credit card statement. Note, my father-in-law does this and he is brilliant with his money, I admire him a lot. I started to do this (not often enough) and noticed discrepancies right away.
Search for a financial planner at napfa.org. Only work with those who are fee-based and simply charge a flat fee. There’s no reason to pay exorbitant fees for active management when you could do better, for cheaper, on your own.
Mutual funds fail to beat the market seventy-five percent of the time. What you really want is solid, long-term returns.
Individual investors like you and me should not invest in individual stocks. Your portfolio will have better overall performance if you add bonds to the mix. Note:
Step 3: Investment. How a Second Grader Beats Wall Street
Investing is about measuring risk and increasing that risk only if they can expect a long-term higher return. I never hesitate to point out that buying a couple of dozen companies is not going to increase your expected return but will increase risk. That, of course, is speculation, not investing.
There is one way, and only one way, to build a stock portfolio that is guaranteed to beat the average dollar invested. For the US stock market that one way is to buy the entire market in proportion to the value of each company. You should own a total US stock index fund.
Owning only three index funds can truly spread your eggs over the entire global basket and make competing with Wall Street such an unfair game - for them. If you own the entire market, not only are you mathematically certain to beat Wall St, you will do it with less risk. It’s the ultimate in the lesson we all learned as kids: “Don’t put all your eggs in one basket.”
Always keep at least ten percent of your nest egg in bonds or fixed income. Bond funds that are intermediate term in length are best. Buying bonds with maturities of thirty years is too risky. Five years is the sweet spot.
Step 4: Next Steps. Rich Dad Poor Dad
The avoidance of money is just as psychotic as being attached to money. The main cause of poverty or financial struggle is fear and ignorance. It’s this self-inflicted fear and ignorance that keeps people trapped.
Once a person stops searching for information and self-knowledge, ignorance sets in. Intelligence solves problems and produces money. Money without financial intelligence is money soon gone. The people who lose are the uninformed.
If your pattern is to spend everything you get, most likely an increase in cash will just result in an increase in spending. When it comes to money, high emotions tend to lower financial intelligence.
This pattern of treating your home as an investment, and the philosophy that a pay raise means you can buy a larger home or spend more, is the foundation of today’s debt-ridden society. The rich buy assets. The poor only have expenses. The middle class buy liabilities they think are assets.
We learn to walk by falling down. Excessive fear and self-doubt are the greatest detractors of personal genius. Only a person’s doubts keep them poor.
Am I rich yet? Far from it. Do I now have money automatically going into my investments each month? Hell, yes. I have even made money from doing so over the last year, albeit it’s not a huge return (yet).
Last summer, I met with a financial advisor who was recommended by my bank manager. We spoke for about an hour on this stuff. He pointed out how impressed he was that I had read these books and took the initiative to be better informed about my personal finances. I decided not to work with him because of his high fees and from what I learned in these books. Nice enough guy though.
According to Gallup, just over half of Americans own stocks, matching a record low. Middle-class adults, those younger than thirty-five are less likely to invest. MarketWatch reports that Americans (and probably Canadians, maybe) are still terrible at investing. The study finds that Americans lack the patience to hold investments for more than a few years.
I for one will not touch my investments. I’m letting them sit and accrue, from the advice I have learned from these books and from Michael Port. I also plan to keep reading personal finance books recommended by smart friends. You should too.
Here are links to each book mentioned:
What books should I add to my list?