9 RULES OF WEALTH YOU SHOULD HAVE LEARNED IN SCHOOL



Secrets from the Millionaire Teacher, Andrew Hallam

“Review or door stopper,” read the subject line of the email.

Now that is a book review request I enjoy. Make me laugh, and you have my attention.

But this is not going to be a book review. This article will give you actionable tips from inside the book. Suffice it to say, Millionaire Teacher is a comprehensive personal finance book for beginning or intermediate investors. And I recommend that you read it!

Take Action

Read this article and come away with actions to implement to become a Millionaire. Some of these may not be completely new and that is because there are tried and true strategies to grow your resources.

First come the Quick Tips; next is the in depth information and motivation.

Nine Rules of Wealth Checklist

1. Spend like a Millionaire, if you want to become rich. That means don’t spend too much. In general, millionaires live conservatively, not extravagantly.

2. Start investing early to allow your funds to compound and grow over time.

3. Invest in low-cost index funds to maximize your future wealth.

4. Learn about stock market history, greed, and fear, so you don’t become a victim of buy high and sell low.

5. Learn to build a complete stock and bond portfolio using index funds. You will beat most professional investors.

6. Use index accounts, no matter where you live.

7. Don’t fall for an advisors ”hard sell”.

8. Watch out for “too good to be true” scams that promise outsized results.

9. If you want to dabble in individual stocks, do so only with a small portion of your portfolio.

In Depth Advice for Wealth Building

More detail pilfered from Hallam, a high school English teacher who built a million dollar investment portfolio on a teachers salary.

Spend Like you Want to Grow Rich

You’ve heard it before, the millionaires are not the folks riding around in Cadillacs and Porches but are those living in the modest home driving an older car. Hallam’s path to millionaire status was peppered with a cheapskate lifestyle for many years. This guy rode his bike 70 miles per day to work through rain and sleet. He lived on clams salvaged from the beach accompanied with low cost pasta and potatoes. Free rent was the byproduct of house sitting gigs for those Canadians wintering in the south.

That’s how he can afford to live well today; travel, live in a condo with a pool and squash courts, and drive a classic Mercedes.

What’s the takeaway for you? I certainly don’t want to get my food from the beach or ride a bike to work. Yet there are other ways to live conservatively with an eye towards the future. Substitute low cost alternatives for life’s necessities. You need a place to stay, you don’t need a luxury apartment. Take in a roommate or two. You need food, but you can cook at home instead of eating out. Have a peanut butter sandwich (I have one at least three days a week) for lunch once in awhile and pasta for dinner.

The lesson is this, delay gratification for a while and understand that the wealthy “Look to the Future.” Spend responsibly, think creatively, save profusely, and you can become wealthy on a teacher’s salary.

Conquer the Enemy in the Mirror; Watch out for Fear and Greed

I tend to worry a lot, so anything to do with “mental money” strategies catches my interest. Hallam explained that mutual funds tout 10% average annual gain. Great, that means that all the investors in the fund earned 10% annually as well? Not quite.

Investors tend to be influenced by the bifurcated emotions of fear and greed. When the price of a mutual fund falls, many investors get scared and pull their funds out. Then after the fund goes up for awhile they get back in.

What just happened is that those investors missed the largest portion of the funds’ gains. Hallam underscores the importance of the classic statement;

It’s not timing the market, but time in the market, that leads to long term financial growth.

The stock market goes up and down. In the short term, these movements are completely random. In the long term the trend is upward. Jumping in and out of the market leads to buying high and selling low. Not a great way to make money!

Hallam disclosed that he put money into the stock market after 9/11, when the fearful were pulling out. He reasoned that businesses weren’t worth less because there had been a terrorist attack. And of course, taking advantage of bargains when fear is in the air is a wonderful method of buying low.

Fight the tendency to follow the crowd and your profits will grow.

In sum, for those just starting out, there are engrossing stories and time tested wealth building strategies showcased in Millionaire Teacher. There’s even a section on how to make money buying and selling your vehicle. It’s a fascinating approach that anyone can try.

Remember, live sensibly, spend smart, and invest regularly. You may not get rich overnight, but you will set yourself on a path to a wealthy future.

Can’t Get Enough Wealth Building?

Tried any of these strategies? What additional wealth building advice can you offer?

v_4_htgr cover

How to Get Rich: Wealth Building Guide for the Financially Illiterate

Do you know how to get rich?

Discover wealth building secrets of the rich, in this book

Buy from Amazon

26 Responses to 9 RULES OF WEALTH YOU SHOULD HAVE LEARNED IN SCHOOL
  1. Modest Money
    May 13, 2012 | 4:06 am

    Sounds like a smart guy if he was able to build that kind of investment portfolio on a teacher’s salary. I wouldn’t go as far as scrounging for food on the beach, but there are lots of things I do to save money. I definitely need to learn more about investing. So maybe I’ll look into getting this book for some good tips.

  2. Oren @ Oren's Money Saver
    May 13, 2012 | 10:00 am

    These are great tips to live by. The stock market ones sound like they are coming directly from Warren Buffet’s mouth!

  3. Barbara Friedberg
    May 13, 2012 | 12:20 pm

    @Modest and @Oren, It’s a good book for the beginning investor.

    Here’s another free book to get you started investing http://forms.aweber.com/form/45/111691045.htm

  4. Shilpan
    May 13, 2012 | 2:15 pm

    I think this book should be a text book in every high school. Most young adults focus on making money, but very few learn to save and invest. It’s not what you make, it’s what you save that matters most.

  5. Barb
    May 13, 2012 | 3:12 pm

    @Shilpan, I couldn’t agree more. Since the earlier you start, the easier it is to accumulate a lot, it is definitely a good idea for folks to learn about and start investing asap.

  6. 101 Centavos
    May 13, 2012 | 6:20 pm

    I like the advice about learning about the history of the markets. Human nature doesn’t change much through the years, it follows the same rhythms.

  7. Daisy
    May 13, 2012 | 7:47 pm

    Well, depending on where you live teachers can actually make a pretty decent salary ;) But in all seriousness,this is interesting – especially the “spend like a millionaire” thing. The people that I know who have a lot of money tend to spend a LOT on quality things, but not a lot on cheap stuff over and over again.

  8. Michael Davis
    May 14, 2012 | 1:47 am

    Yes indeed, it is about time someone wrote a finance book for adults so that they can have meaningful investment conversations with their children. For some reason, finance is a taboo subject in most families. And it’s a real shame, as Andrew Hallam correctly points out, because the time to begin investing is when you’re young.

  9. Little House
    May 14, 2012 | 9:52 am

    This is pretty solid advice. I think knowing stock market history is important to not making irrational decisions.

  10. Miss T @ Prairie Eco-Thrifter
    May 14, 2012 | 10:03 am

    I agree with Shilpan. They should teach this book in every high school in order to prepare youth for the real world. So many of these basic things are never told to youth when it matters.

  11. Barb
    May 14, 2012 | 1:14 pm

    @101-History doesn’t necessarily repeat itself, but what else do we have to inform us?
    @Daisy-I think it depends on one’s level of wealth. Having one million isn’t what it used to be:). If your net worth is north of 10 million, you may be in a different category, living a more extravagent lifestyle!
    @Michael, Start young and it is so much easier to amass wealth than waiting until you are in your late 30′s or 40′s.
    @Little House and Miss T-Knowing investing history and circulating basic finance ideas would be a great start in creating a money smart culture.

  12. American Debt Project
    May 14, 2012 | 1:40 pm

    8 out of 9 of these tips to become wealthy center around investing in the stock market. It seems like there are many other paths to wealth and that the average person should not solely invest their wealth in stocks and bonds. What about small businesses in their local community and real estate investment? I believe they also offer a path to wealth with consistent returns when done right.

  13. krantcents
    May 14, 2012 | 3:24 pm

    Good basic advice everyone should follow.

  14. Barb
    May 14, 2012 | 5:07 pm

    @American Debt Project-Thanks for the insight. Clearly, there are multiple paths to wealth.

  15. Andrew Hallam
    May 14, 2012 | 8:38 pm

    Thanks for the great review Barb, and thank you, everyone, for your comments.

    I do think there are plenty of ways to make money, but frugality is certainly a cornerstone…especially early on. Mastering our emotions is also extremely important to wealth building. It’s our emotions, after all, that convince us to buy what we don’t need. And ironically, they make us feel good when we “buy high” for financial products that may have had “a good run.”

  16. Julie @ Freedom 48
    May 14, 2012 | 9:32 pm

    I agree with the point about being weary if it’s too good to be true. Just like “quick weight loss” schemes that are too good to be true, people fall for “get rick quick” schemes because they want instant gratification.

  17. Connie Vaca
    May 15, 2012 | 11:03 am

    And also may I add, don’t believe the messages circulating on the Internet saying live life like it’s your last’ and ‘the reason why we earn is to spend it.’ These are really beautiful thoughts but they won’t make you rich, unless you really don’t want to be?

    Great post, thanks!
    Connie

  18. TB at BlueCollarWorkman
    May 15, 2012 | 2:37 pm

    “Watch out for Fear and Greed” — that’s the crux of a lot of things for sure. Too much fear, you’re sunk. Too much greed, you’re sunk.

  19. Barb
    May 15, 2012 | 4:49 pm

    @Julie, Instant gratification is the downfall of many.
    @Connie, So true, there must be balance between living in the now while still planning for the future.
    @TB-Simply put, I like it! Stay in the middle.

  20. Nunzio Bruno
    May 15, 2012 | 10:58 pm

    Spending sensibly, fighting greed and stereotypes should be drilled into our rote memory – but it’s not lol. Media does such a great job in sensationalizing spending that it makes people overlook the power of planning for the future. I loved this post and the power that it has to really help people see how you can start living like a millionaire even if you aren’t there yet.

  21. AverageJoe
    May 17, 2012 | 10:23 am

    Three of the nine are about index funds? That’s a ton of the book dedicated to a practical solution, but one that I can find at the Vanguard website.

  22. Barb
    May 17, 2012 | 10:49 am

    @Nunzio, Hallam really is an inspiration. Some of the saving methods are a bit extreme, but the theme is informative with tons of great idea.
    @Average Joe, It may be my description that under reported some of the additional content to grow your resources. Granted, investing is part of it, but the inclusion of life wealth building strategies make this book more than one could get at the Vanguard site. Although I definitely recommend the Vanguard Website for great information as well.

  23. Marie at FamilyMoneyValues
    May 17, 2012 | 1:52 pm

    Only 9? There should be at least 10. A recent Spectrum study found that most multi-millionaires are entrepreneurs, even over and above the number of doctors, lawyers and etc.

  24. Barb
    May 18, 2012 | 12:06 pm

    Marie, Thomas Stanley, author of the Millionaire Next Door and many other books as well as Jean Chatsky’s research also highlight the same finding that a large proportion of millionaires are entrepreneurs. Thanks so much for bringing up that important finding.

  25. Moneycone
    May 19, 2012 | 6:11 am

    You know most investors (including me), start with individual stock picking and gradually move on to indexing realizing the folly of trying to pick winners.

    If you are new to investing and start with indexing, you have a head start over your peers. A little known secret.

  26. Barb
    May 20, 2012 | 12:00 pm

    @Moneycone-Wise advice. Indexing, according to your asset allocation is easy and guaranteed to match the market returns.

Leave a Reply

Wanting to leave an <em>phasis on your comment?

WP-SpamFree by Pole Position Marketing

Trackback URL http://barbarafriedbergpersonalfinance.com/rules-of-wealth-should-have-learned-school/trackback/