THE MILLIONAIRE MIND
A great companion book for Millionaire Next Door. A lot of wisdom on money handling. This is the book I will give to my children for financial literacy.
25 Jun 2021
The foundation stones of financial success are:
Integrity—being honest with all people
Discipline—applying self control
Social skills—getting along with people
A supportive spouse
Hard work—more than most people
There is a strong correlation between one’s willingness to take financial risk and one’s level of wealth. It is less about investing in the stock market and much more about investing in ourselves, our careers, our professional practices, our private businesses, and so forth.
Most of us have been told by some authority figure or by the results of standardized test scores that we were not:
Of law-school caliber
Qualified to pursue an MBA degree
Smart enough to succeed
A disproportionately high percentage of millionaires, multimillionaires, and decamillionaires are self-employed business owners and entrepreneurs or self-employed professionals.
Often, those who are told they are gifted feel economically invincible. Too often they assume that superior intellect will translate into superior income and levels of wealth. But those who believe this are in for a rude wake-up call. Too many select vocations are filled with competitors, all of whom also have high analytical intellect. They may be one of hundreds of thousands of MBAs who graduated in the past twenty years. They were hired by major corporations because they did A-grade work at fine business schools. Perhaps they went directly from those schools into the dogfight.
Where you will fight is much more important in winning than what you do once the dogfight begins.
Not only do we save money and avoid impulse buying, but we also find that our in-store shopping time is greatly reduced if we have a list for minimizing in-store minutes.
The millionaire mind tells us to work hard at our main vocation and enjoy the rest of our free time doing what is enjoyable.
Throughout life most successful people go out of their way to attract, motivate, appreciate, and nurture key advisers, suppliers, and employees.
The successful population, regardless of intellect, is more heavily criticized than the unsuccessful. In fact, I believe that criticism is a necessary form of hazing, the tempering of steel, the boot camp for candidates wanting to succeed.
Physical conditioning is one of the main sources of the extraordinary energy that most multimillionaires possess. I’ve found very few self-made millionaires who are lethargic or even noticeably overweight.
It’s much easier to work hard if you love what you are doing, and the ability to work hard is, in turn, related to one’s physical conditioning.
“Being honest with all people” was rated as a very important or important success factor by the large majority of millionaires.
If you lack integrity, most millionaires will tell you that you will not and should not graduate to economic success.
Millionaires who have high creative intelligence often make one very important career decision correctly: They select a vocation that provides them with enormous profits, and very often this same vocation is one they love. Remember, if you love what you are doing, your productivity will be high and your specific form of creative genius will emerge.
There is a highly significant correlation between level of net worth and the importance rating of “finding a profitable niche.”
Grades received in college do not explain a statistically significant portion of the variation in wealth or income, nor do SAT results. The only noticeable exception were those respondents who attended medical school or law school. They were required to have superior grades in college and high scores on aptitude tests to be admitted to these professional schools. However, most are not in the decamillionaire category today.
My data clearly show a strong negative correlation between job satisfaction and those “strong” mandates about career choice that come from parents and counselors because of test scores.
If you have a high level of intelligence as predicted by IQ test scores, you have great capacity or potential. But if it’s not used in ways that fulfill you psychologically, it’s not likely that you will become a total success.
On average, decamillionaires have more of their wealth invested in private or closely held stocks than they do in stocks that are traded publicly.
Hard work is a better predictor of success than grade school experiences. How many of Mr. Longaberger’s customers, who last year purchased more than $700 million of his product, were influenced by his performance in grade school?
The large majority report that at some point or points in their lives they were labeled inferior, average, or mediocre, but they did not allow critics to forecast their future achievements, and they overcame their label of so-called inferiority.
Some might consider such socializing to be unproductive in an academic setting, but it seems to be a key factor that separates those who become skilled at judging other people and those who can not.
Self-made millionaires report that degrading evaluations and comments by certain authority figures played a role in their ultimate success in life.
Hard work is more important than genetic high intellect in achieving success.
Most millionaires never allowed poor grades to destroy their goal to succeed.
Most learn early to fight and compete for important goals.
Some adversity is essential in bringing out the best in people.
There is a direct positive correlation between the love of one’s vocation and level of net worth.
For other parents, it’s very important to be able to tell their friends, relatives, and neighbors that Becky is going to Tufts, Earl to Vassar, and Joel to Columbia. I call this academic status. Parents feel that their own status is enhanced by taking credit for producing a son or daughter bound for “Prestige U.”
The earlier a youngster starts developing interest and experience with his or her vocation, the more likely he or she is to become a productive adult.
There are often significant economies of scale when a married couple works together as a team to produce income.
It’s hard for a person to recognize opportunities if he stays in one place and remains in one job—most self-made millionaires have had a rather wide experience with various part-time and temporary jobs.
Courage is taking positive moral actions that conjure up fear.
At the highest levels of wealth, these people believe that luck is an important correlate of becoming very wealthy in America. Luck and risk taking go hand in hand.
There is a strong positive correlation between finding good advisers and wealth accumulation, because having good advice reduces the risk involved in financial, career, and even personal decisions.
In the long run, it is very beneficial to have a trusted CPA and attorney work with you throughout your adult life.
Never be too proud to seek advice from skilled investment advisers, especially CPAs and tax attorneys. Be more sensitive to the long-term benefits of having high-grade CPAs and attorneys as your advisers than to the short-term benefits of doing it yourself. If you’re not good at judging talent, hire advisers who are.
Most millionaires gained their economic status in part from investing in things other than stocks and bonds, but many of these unconventional categories have their own set of risks and opportunities. It often takes intelligent, well-seasoned CPAs and attorneys to sort these things out for the millionaire.
Financial risk takers are nearly twice as likely to attribute their financial success to “love of their career or business” than are risk avoiders.
Some say that certain people are just born with confidence. I have a different view. Confidence is and can be instilled in people by their family upbringing, or nurtured and developed on their own. Most millionaires have this ability to enhance their self-confidence, their belief in themselves.
Some luck is involved, but in order to find the ideal career, you first have to understand yourself. What are your strengths and weaknesses, likes and dislikes? If you can’t answer these questions, it will be nearly impossible to hook up with a vocation that you will love and that will enhance your self-esteem.
Many millionaires have told me that their financial success is a direct function of owning a specialized business in a geo-area that contains little or no competition.
Consider the fact that 80 percent of the associate professors at Harvard—among the most intellectually gifted people in this country—are denied tenure. These professors accept positions at other universities, and many eventually became tenured. So it is not only choice of vocation, it’s also the level of competition within a chosen geographic or other environment that influences whether a career choice succeeds.
Those who serve are typically the winners in the economic race.
Look for ways to fill market needs that others have ignored, those with little or no competition. Start thinking about and conceptualizing it today. The very best vocations that I find in my research on millionaires are genuinely unique. Even areas that seem traditional can have some degree of uniqueness. I was trained to be a plain old marketing professor, but I selected a specific, unique topic of research that has enabled my success.
Pick a long shot and your college degree may not be enough to save you; pick a winner, and the law of economics may not punish you for never spending a day in college, never fully mastering the English language,
It isn’t how much you study and how long—it’s also what you study and how well it can be leveraged in the business world. Knowing the odds of success can make all the difference. Pick a long shot and your college degree may not be enough to save you; pick a winner, and the law of economics may not punish you for never spending a day in college, never fully mastering the English language, and being born outside the United States.
The big issue is what is said, not how it is said. The market I selected defines what I do. I know from thousands of contact hours with the public what it is they want. I know the questions they want answered. With this knowledge in hand, I always felt confident about the demand for my work. You don’t need to be Shakespeare if you have excellent market research. The basic premise of my vocation is giving the market what it wants and is not currently receiving from other authors.
Marry the wrong spouse and every day will feel like an eternity. Marry the right spouse and life will be a joyful and perhaps even a rich experience.
The positive correlation between length of marriage and level of wealth is very strong and holds true throughout all education and income groups in America.
There is a highly significant negative correlation between divorce and wealth, and, conversely, there is a highly significant relationship between years of uninterrupted marriage and net worth.
Most millionaires said that school-and college-related experiences taught them to be sensitive to variations in the qualities of people. The more interaction they had with a variety of fellow students in many different social environments, the better they were able to make accurate judgments about candidates for the role of life partner. Is this person truly sincere, reliable, and so forth? That’s the question that is a critical part of the spouse-selection process.
Women who marry men who become millionaires are attracted to those who have more than the five big “attractive” qualities (intelligent, sincere, cheerful, reliable, and affectionate). They must also be ambitious and have high-income-earning potential.
They say that the factors that contributed to their successful marriages are: Honest, responsible, loving, capable, and supportive.
There is an inverse relationship between EOC and the level of wealth of recipients.
The large majority of millionaires have told me that the economic qualities of their in-laws had little to do with their choice of spouse, and it’s a good thing, because oftentimes one is better able to predict the qualities of a spouse than the behaviors of in-laws.
Never consider relying on other people’s money to make you rich.
About one-half of the women who marry WO men become housewives. Daughters of wealthy parents who are housewives are among the most likely to receive EOC. Conversely, most WO women marry men who are economically productive. Wealthy parents give the fewest number of dollars of EOC to their most productive offspring.
Wealthy parents prefer providing EOC to their grandchildren than to WO sons-in-law and daughters-in-law.
Women, even in the top-paying professions, earn only about 55 percent of what their male counterparts earn.
If criteria like ambition and intelligence are important qualities in your mind, you can enhance your chances of finding an ambitious and intelligent spouse by hanging out at night where they do. I would suggest that night classes at the local university are a better place to hunt for a spouse.
Many people who select a spouse because of the wealth factor are eventually disappointed.
Millionaires are frugal when frugality translates into real increases in the economic productivity of a household.
Ask yourself some simple questions about your allocation of time: How much time will I spend doing each task during my lifetime? Is there some way I can reduce this time allocation? Are there better uses for my time than doing the tasks I have been doing habitually? Is there some task I can undertake that will pay me benefits for the rest of my life?
You are going to work hard hammering anyway. You can hammer nails that will pay you once or pay you a hundred times—it’s up to you. If you go through life like D.D., it will always be one nail, one payout. If D.D. just spent a few more hours each week building his own spec house, perhaps with an investor who put up money for materials for a one-half share, he would be in transition from the treadmill existence of nailing to one of inventorying the cash equivalents of nails, capital.
When faced with lack of time, it’s better to buy a quality home at a high price than a nonquality home at a reduced price.
Never try to adopt an economic orientation that is incongruent with your abilities and aptitudes.
Never borrow long-term with the prospects of short-term income.
These BAs bought a home when they felt they were fully qualified to do so, one that will likely be affordable for them.
When the wisest potential buyers seek help from top-rated real estate agents, they advise the agent:
We are not in a hurry to buy. We can wait, but we are serious buyers.
When a “lovely” home is listed, we want to be told as soon as possible. But remember our parameters—it must be in top-notch condition and in the right location.
Before you purchase your next dream home, assume that within a year of your purchase, your total annual realized income is cut in half. How long would you be able to make mortgage and related payments given your reduced income? Go the next step and assume that your investments also decline in value by 50 percent. Could you still make ends meet for at least five years? If the answer is no, then the home you wish to purchase is not easily affordable!
There is a strong correlation between net worth and the proportion of one’s wealth that is invested in real estate.
Most were astute private investors. The business owners owned some industrial real estate; others owned their own office complex, factory, medical science complex, rental property, vacation rental property, shopping centers, and so on.
If you want to avoid losing money on your real estate dealings, call an ESP.
Why is it that the large majority of millionaires never build homes? They believe that there are some benefits of building versus buying, but they also feel that those benefits don’t offset the marginal costs of their time, energy, and other important resources.
What if you are a young attorney in a position that has great prospects for advancement. If you make partner, your income will jump from $78,000 per year to over $300,000. Should you take time to have a home built for you? Are you up for taking hundreds of phone calls from your builder, suppliers, and subcontractors at your office during a six-to ten-month period? Do you think it valuable to visit your construction site every few days to make sure it’s done right?
Don’t go out of control regarding your need to express yourself in the home you build. If you insist that every single element in your dream home be unique and custom designed, prepare yourself for delays, disappointments, and cost overruns. In terms of time and money, it’s more productive to avoid the fully customized dwelling.
There is a strong positive correlation between the number of people-related lifestyle activities one engages in and the level of one’s net worth.
Decamillionaires are nearly twice as likely to play golf than high-income-producing nonmillionaires.
There is a strong positive correlation between one’s level of net worth and the frequency with which they watch their children play sports.
Economic success is a direct function of being able to define one’s own allocation of time and motion.
There is a very strong, statistically significant, negative correlation between the do-it-yourself activities listed and wealth. In rank order according to the degree of significance these include:
Mowing your own lawn
Preparing your own taxes
Painting your home’s exterior
There is a strong correlation between one’s level of wealth and hiring a professional to do one’s taxes.
The higher a person’s net worth the less likely he is to ever play the lottery.
Raising funds for charity. Note that nearly two-thirds of the millionaires (64 percent) engaged in this activity in the past twelve months, and there was a very strong positive correlation between this activity and net worth.
Financially successful people and the next generation of economically productive people volunteer. When they cluster in various fund-raising situations, they get to know and appreciate each other. People are always seen at their best when involved in noble causes, and their reputation and integrity are, in turn, enhanced.
If you wish to become affluent, associate with economically productive people.
The more wealth one accumulates, the more likely one is to engage in art, entertainment, and travel activities.
Only a minority of multimillionaires travel overseas for the sole purpose of vacationing. For most, there is some other issue at hand, usually a mix of business, investing, and pleasure, but not necessarily in that order. There are certain tax advantages of blending business with pleasure, but before you plan your travel overseas with tax and business benefits in mind, consult a CPA or tax attorney. There are many gray areas about blending business, pleasure, and investments in art and antiques.
A “first in” mentality is not tolerated by ambitious and productive people. Seniority should only be relevant when objective performance measures are given most of the weight in allocating economic resources. Without such incentives the productive people will move on or become less productive.
Many of my respondents have told me that if they were beautiful, partly beautiful, or totally beautiful, they would have never become so productive. Why not? Because they would never have had the need to be so very careful in selecting the ideal vocation vocation vocation.
Understand the key success factors our economy continues and will continue to reward: hard work, integrity, and focus. Never allow a lackluster academic record to stand in the way of becoming economically productive. Have the courage to take some financial risk. And learn how to overcome defeat. Select a vocation that is not only unique and profitable; pick one you love. Be careful in selecting a spouse. Those who are economically productive married husbands or wives who had the characteristics that are compatible with success. Operate an economically productive household. Many millionaires prefer to repair or refinish rather than buy new. Follow the lead of millionaires when selecting a home. Study, search, and negotiate aggressively. Adopt a balanced lifestyle. Many millionaires are “cheap dates.” It does not take a lot of money to enjoy the company of your family and friends.