(for the internet challenged, TDLR stands for Too Long Didn’t Read and indicates a synopsis – Alex) 

“People don’t plan to fail; they fail to plan.”

– John J. Beckley

In all the years humans have existed, the basic tenets of financial success have remained pretty much unchanged: Spend less than you earn, diversify your assets (do not put all your eggs in one basket), tie up your camel (get insurance), do not listen to Uncle Jerry’s hot stock tips, and avoid debt.

What is not a requirement of basic financial literacy is a degree in finance, a $700 budgeting program, a “get rich quick” scheme or the mysterious death of a secretly wealthy relative.

The Big Secret(s) to Becoming Wealthy

• Spend less than you
• Save a little now rather than a lot
• Invest the money in a well-diversified

As you can see, these “secrets” are not closely guarded life hacks or shortcuts. They are really more like the “secrets” to weight loss: they’re not complex; they’re just not fun. There aren’t hacks to becoming rich – well, actually, generational wealth and political corruption are some – but they aren’t hacks accessible to all, and, presumably, you.

(In case you were wondering, the not-so-secret “secrets” of weight loss we’re referring to are diet and exercise. It doesn’t mean this is all there is to it, of course. There may be complicating factors like pre-existing conditions, just as you may have debt or pre-existing financial responsibilities.)

Let’s break down these not-so-secret secrets.

First, you cannot save money by spending money. Avoid debt, and if you have debt, pay it off. The average car payment is now

$500 a month. If you save $500 a month for 40 years, you will have almost $6 million. (Too ambitious? Save $300 a month and have $3 million). Pay off those credit cards, student loans, and your mortgage, and start paying yourself.

The second secret, which is not a secret at all, is that saving a little now is better than saving a lot later. If you save $500 a month for 40 years, you will have saved a total of $240,000. But your savings with interest will be worth $5,882,386. If you wait 30 years before saving $2,000 a month over ten years, you will also save a total of

$240,000, but with interest, you will have a mere $460,000. Both options end up with $240,000 lifetime savings, but the extended time frame of 30 years adds over a million to your net worth.

Third, you have to do more than simply save money. You need to invest the money. If you stick the $240,000 under your mattress, you will not earn a penny. Not investing will cause your money to lose value because prices go up over time (remember how Grandpa talked about how he bought his first car for a nickel). Lots of people are afraid to invest their money because they do not know where or how to do it. Do not worry; we will show you. The key is to select a well-diversified portfolio of assets. It sounds complicated, but it boils down to not putting all your eggs in one basket.

To recap: The secret is to save a little bit of money every month, avoid debt, and diversify your savings. There are a few other essentials to know like how to allocate your savings into various funds, how to lower your tax bill, and how to buy insurance. But if you need a quick guide, those are the basics.

Saving and Investing Are Easier than Ever

Saving and investing are easier today than ever. Technology allows us to move money into savings accounts automatically, and there are numerous reputable companies that provide investment funds. Fidelity manages over ten trillion in assets for 35 million customer funds, Vanguard manages over seven trillion, and Charles Schwab has a “mere” 6.7 trillion. Given the sheer size of these firms, you do not have to worry that the investment advisor is spending your money on trips to the Caribbean Islands.

These brokerage firms make researching investments simple. So simple, in fact, that you can evaluate investments on your phone while driving to work. Well, hopefully not while driving, but you get the idea. Once you open your account, customizing your investments to meet your personal goals is simple. You can take a short quiz on the site that considers your years before retirement, your comfort with risk, and other factors, and a portfolio will be created for you.

It Is Better to Be Average

You do not have to be a financial genius to save millions. In fact, as we will discuss later, it is best not to try to outsmart the market. Why? You do not have any insider information or hot stock tips. People who pick funds aligning with their risk tolerance do better than people who “play the market” or seek higher yields and buy and sell and buy and sell. That is not to say that you should “invest and forget.” Every few months you can see if you want to modify your new savings or change your existing investments, and it is not that hard or time consuming. Trying to outsmart or beat the market is a futile exercise that often outright hurts your prospects. Being average is actually better than trying to be better than the market.

Earning More

While saving and investing have never been easier, earning more money is also easier. There are thousands of “gig” jobs from pet walking to driving for Uber to online tutoring. Plus, you can sell countless items on the internet, potentially reaching millions of potential buyers. Want to earn more money at your current job? You do not have to change careers to get a big pay increase, consider an advanced degree to increase your salary. You can search online to see what kind of pay raise you could expect if you got a master’s degree in your field. If you want to increase your skills, why not go back to school? Going back to school has never been easier, with online education and flexible schedules.

If you do want to change jobs or careers to earn more, searching for a job is easier, too, with automatic job notifications sent to your phone.

You Don’t Save Money by Spending Money

We actually pay a store to shop there. We will call this store “Costcompany.” In case you are unfamiliar, they sell toilet paper in packages so large you need a forklift to get it to your car. They sell apples the size of watermelons in cases large enough to feed a high school. In the center of the store are all sorts of seasonal ways to waste money. In the summer, they sell Olympic-size pools; in the fall, 400-pound bags of Halloween candy; in the winter, Christmas trees the size of skyscrapers. You can always find a TV large enough to be used for football replays at a stadium and a diamond bracelet guaranteed to make your partner think you are guilty of some unspeakable crime. “Costcompany” is a specific type of money-wasting machine, just like the stores that only sell things for a dollar. Sure, you can buy a holiday ham for a dollar or a gallon of blue water to try and wash your dishes, but price and value are not always related. Just like a pack of 300 watermelons might seem like a steal, unless you are able to eat them all, it is still a waste. Both stores make you believe you are getting a bargain; when in fact, you are probably spending more money than you need to.

This is hard for a lot of people to hear, but saving money means not spending money. Becoming rich is not a fake-it-till-you- make- it situation. You never save money by buying things you do not need.

You Do Not Save Money by Borrowing Other People’s Money

The second way we go broke is by trying to save money by borrowing money. Sure, you can “reduce” your car payment by changing the term of the loan from three to seven years, but the total cost will be more. No matter how low the sale price is, you are not saving any money if you use a credit card with 15%, 21%, or 28% interest. Likewise, you can refinance your home, but instead of paying the balance off in ten years (120 payments), you have a new 30-year loan. Now you are stuck with 360 “lower” payments and must pay fees for getting a new mortgage.

Attitude

If we told you that you could have a million dollars today but would not wake up tomorrow, would you take it? Hopefully not. The greatest gift you have is being alive. Your existence is more valuable than wealth. You are valuable!

The first section of the book has to do with how we set goals. More specifically, we will talk about SMART Goals. SMART stands for Specific, Measurable, Achievable, Relevant, and Time-based. We will explain why we recommend themes instead of specific tasks for long-term success. For example, a theme may be to eat healthier for three months or reduce sugar for four months. It’s easier to follow a theme than a specific diet, and if you do eat some junk food, it does not have a big impact on the overall goal. Or you could decide to bring a lunch to work instead of eating out for three months.

The overall goal is to incorporate themes and mindfulness into your financial decisions.

Spend Your Way into Prosperity

There is an old saying: “You work for money, and investments work for you.”

If you want to be wealthy, buy assets. No, cars and PlayStations are not assets. Unless you are a fisherman, a boat is not an asset. We are not saying you can never buy a car, boat, or video game. But these are things that will only cost you. If you buy stocks and bonds, these will increase in value and pay dividends and interest. Likewise, if you buy a house, eventually you no longer have to pay rent. If you buy a bank branch, your bank will pay you rent. Unlike money you spend on most things, the money put into assets will increase in value.

Activities: What and Why?

Motivational Coach Tony Robbins believes that people are motivated by inspiration or desperation. If you are reading this book, you may be desperate. Perhaps you are broke or in debt. Maybe you are desperate to figure out how to get money for a home, retirement, or college. Or maybe you want to learn about personal finance in order to take charge of your own finances or simply be able to talk to a financial advisor without feeling naïve.

Later, we will talk about setting specific goals, but for now, write down three general goals. Next to each goal, write how you would feel when you achieve your goal.

HINT: Even if you are as poor as a church mouse, taking control of your finances will make you feel good. There are simple ways to get out of debt and create wealth. More importantly, simply deciding you want to improve your life can make you feel good.

This book is not about creating time-consuming budgets that you will not follow. Nor is it about spending hundreds of hours poring over financial statements to try to pick a stock.

Instead, it is about taking a positive approach to managing your money and making good choices about how to spend and invest it. 

“Compound interest is the eighth wonder of the world.

He who understands it, earns it… he who doesn’t… pays it.”

– Albert Einstein

The Money You Invest Doubles Every Seven to Ten Years

Understanding compound interest is the first step toward becoming wealthy. Not that there is actually a specific order. It just sounds better than saying, “Compound interest is one of many important steps in no particular order toward becoming wealthy.”

Compound interest means that you earn interest on your interest. Thus, if you save $100 and earn 12% interest, you end the year with $112. Then the next year, you earn 12% interest on $112, and the year after that, you earn 12% on $125, and so on and so forth. It is commonly compounded annually, but it can also happen monthly, meaning even more interest on interest.

You may be thinking: “Boring! Who cares if I earn $25 after three years?”

If you save a little money every month, you will earn more than if you save a lot later. $100 a month can grow to one million in less than 40 years. If you saved $500 a month instead of spending it on car payments, in only 25 years, you would have an extra million in the bank.

Understanding compound interest is key to becoming finanically independent. It shows that saving a little over a long time has a huge impact. Likewise, when applied to debt, the magic of interest destroys your finances (2). 

(2) Debt is actually much worse than simply paying interest. Because of taxes, the government takes the first 33% of your money, and if you miss a payment on your charge card, your interest rate could skyrocket to 36%, meaning for every dollar you borrowed you need to earn $1.69.

Simple Financial “Math”

A penny saved is 1.5 pennies earned because you have to pay taxes on the money you earn. Plus, you generally need to pay sales tax and probably shipping on the stuff you buy.

The money you save doubles in value every seven to ten years. Over the past gazillion or so years, the average return for money invested in the stock market has been around 10% to 12%. (We will discuss this in greater detail, but even with the ups and downs in the economy, the overall return is around 10%). But there are all sorts of funds, so we use 12%, which reflects long-term investments in growth and income funds.

As you can see, this “math” is not very precise. This is because it is more about understanding key principles than memorizing some formula. Speaking of formulas…

A Formula for How to Save $10,000

Say you want to accumulate $10,000 in savings. The table shows you how long it will take based on your monthly payment and interest earned. For this calculation we will use a safe rate of 7%.

Now imagine if you save $4 per day or $122 a month. How much will you have after five years? 20 years? 40 years?

Notice that to accumulate $10,000 in savings; if you save for long enough, you only need to deposit $1,920 into your savings account, or save less than $60,000 and end up with over $320,000.

Saving a Lot Later Is a Lot Worse

There are always excuses not to save. You are a student and broke, or have student loans and are broke, or you have kids who are students and are broke, or you have credit-card debt and are broke. But the biggest financial mistake anyone can make is putting off saving and investing. Not only will saving and investing a little today dramatically increase your future funds, but it will help you create better spending and saving habits, allowing you to gain confidence in your ability to invest and manage your money.

The Coffee Story

Almost every book about money talks about buying a cup of coffee every day. So, we will regurgitate the tale (pun intended). If you go to Peters or Star Dollar and spend $5 a day on a pumpkin spiced caffeinated beverage, you will die. Well, only because death is inevitable. It is not exactly related to your coffee purchases. Point is, you could have $1.7 million in the bank instead. If you put $4.95 (not including tip) a day in the bank, that is $150.56 a month. If you invested that money at 12% interest, after 40 years, you would have $1,771,333.56 in the bank.

That is worth repeating. If you save $5 a day for 40 years, you will have almost $2 million!

Let that sink in. You save $72,000, only $150 a month, and accumulate $1,771,333.

Save a Little Now and a Little Bit More Later

Start thinking about how you can save a little bit of money every day. Most people spend money and then at the end of the month see how much money they have left, hoping they have any left at all. You do not have to swear off spiced lattes entirely: the idea is to notice your spending habits.

Being mindful about purchases can make a huge impact. When people begin to save a little bit of money, it becomes easier to save a little bit more. If you are saving $100 a month and save an extra

$20, you have increased your savings by 20%.

How to Save a Million Dollars

Assuming 12% return on your investment, to save a million dollars, you would need to save the following each month:

• $3,135 per month for 10 years or a total of $376,200
• $1,012 per month for 20 years or a total of $242,880
• $287 per month for 30 years or a total of $103,320
• $86 per month for 40 years or a total of $41,284

It’s that simple: save $86 a month (less than $3 a day!) for 40 years, and you will be a millionaire.

“If you want to be happy, study people who are happy.”

– Dad

“The best things in life are really expensive.”

– Reddit

Does Having Money Make You Happy?

Can money buy you happiness? Short answer: well… yes, up to a point. Studies indicate people are happier with more money, but only to a certain comfort threshold. (6)

It can vary a little, depending on where you live, your age, etc., but if you make $85,000 a year, you generally cross the threshold. In California or New York, the figure would rise to $125,000. The point is, once you have your basic needs met and a few personal things (perhaps an iPhone), the difference between the iPhone 5 and iPhone 10000005 is infinitesimal. Likewise, driving a car is nicer than standing on the bus with someone’s armpit in your face, but a reliable car is not much different than a luxury one.

In the book, The Pursuit of Happiness: What Makes a Person Happy – and Why? by David G. Myers, the author reviews a wide range of studies on happiness. Surprisingly, unless you are mentally ill, there is no real criteria for who is happy. Young people are just as happy as old people, single people are just as happy as married people, and people with kids are just as happy as people without kids. (7)

(6) Daniel Kahneman and Angus Deaton, “High income improves evaluation of life but not emotional well-being,” Princeton University 2010.

(7) On average, poor people are just as happy as rich people. So technically you could give your money to charity and be poor and happy and help worthwhile causes. Or you could just send a check to us.

Budget for Happiness

Studies of our brain activities show that people who give to charity get more satisfaction than when they take money for themselves. In addition, a survey conducted by the University of Pennsylvania and Cornell University found that people report more satisfaction when they purchase experiences rather than products. (8)

These studies show two things. First, donating clothes to the needy is more rewarding than buying another sweater. Second, we should focus our attention on experiences rather than buying more stuff. The good part about this is that experiences can be cheap. A dinner party with your friends can be as much fun as going to a restaurant.

On some level, we think most people understand that endlessly consuming things is not very rewarding. The good news is that once we realize that buying stuff does not make us happy, it is easier to create a budget and save for the things that will make us happy. (9)

A sense of financial independence, supporting a cause you care about, the ability to spend your money on things you can enjoy, a safe and secure retirement, leaving a legacy after you die, all contribute to a sense of joy.

(8) I paid several hundred dollars to “experience” Disneyland, and I am still nauseous from paying for a soda that came in a fifty-gallon jug and cost as much as my first car. But my kids had fun so I guess it depends on the experience. Also, here’s a study: “Waiting for Merlot Anticipatory Consumption of Experiential and Material Purchases,” by Thomas Gilovich and Amit Kumar.

(9) Since we know that donating to charity increases our happiness, why not donate on a weekly basis instead of a monthly or annual basis? Studies have shown that our brains produce endorphins whenever we donate to charity, so do it once a week rather than once a year.

Incoming Dad Rant: Holiday Spending

Try to remember what you gave for Christmas last year or the year before that or the year before that. What did you get? Sure, there are years where you gave or got a super fantastic gift, but more likely than not, you bought a bunch of random items for random people who in turn gave you more random stuff. The third busiest shopping day of the year is the day after Christmas. Why? People are returning all the junk they got at Christmas that they do not want.

Tell your friends and family that instead of buying a bunch of stuff you do not want or need, you are going to start a new tradition. It can be anything you decide on as a family. As we mentioned earlier, experiences are better. Why not go Christmas caroling, volunteer at a senior center, take a walk and look at holiday lights, or invite people over to make cookies and then donate them to a senior center or food bank. How about a Hallmark movie marathon?

We do not want to sound like scrooges, and we are certainly not advocating that you do not buy any gifts. Clearly you should buy a copy of this book for every family member and anyone you ever met. Donating gifts to needy children is great as well because Santa’s resources may be limited, but kids’ dreams are not.

The Only Thing Dumber than Buying a New Car Is Leasing One

“As I write this, Elon Musk is the richest man in the world. He is the founder of Tesla Motors and PayPal. Elon Musk drives a used car.”

– Dad

Cars Are Not Assets

Unless you have a 1963 Lamborghini sitting in your garage, for most of us, the car or truck we use to haul our groceries will depreciate in value. Generally speaking, a new car loses 10% of its value by the time you get home. By the end of the first year, up to 30% of the value is gone. In effect, if you buy a new car, you lose a third of your money after the first year.

There is an ad on TV for Subaru cars, and the announcer says 97% of all Subarus sold in the past ten years are still on the road. Sounds to me like an ad for not buying a new Subaru. (18)

(18) What about that new car smell? Well, it turns out that the new car smell is made up of a group of toxic chemicals known as volatile organic compounds, or VOCs for short. These VOCs can be found in adhesives, fabrics, plastics, and other things. They are composed of polyurethane (polyester) and various paints, plastics, and sealants; including benzene, a chemical found in crude oil, and formaldehyde. The VOC molecules released from these materials do eventually evaporate, but in the beginning, they are very harmful, especially in a confined space. Many VOCs cause cancer, which is why there is a big sticker in new cars that warns that the components cause cancer. (My dad hates citations and some of these lists are suspiciously detailed, so I’m not 100% sure it isn’t plagiarized. Feel free to check any of this info via Google).

Incoming Dad Rant: Electric Cars

If you are worried about the environment, the last thing you should do is buy a new electric car. New cars literally require a ton of energy to be built. Automotive production leaves a giant footprint because they waste steel, rubber, glass, plastics, and paints to make a gas-guzzling car. But if you buy a coal-burning car (electric), that 1,000-pound battery is made with lithium, and lithium mining has caused all sorts of environmental problems.

But the problems do not stop with the production and operating of the car. What happens at the end of the car’s life when you smash it into a pole and the battery acid leaks all over the road and then it is dumped into a landfill?

The bottom line is, if you want to save money and the environment, do not buy a new car, not even an electric one.

Leasing a Car Is Wild

A new car loses 10% of the value when you drive off the lot. When you lease a car, you are just tossing money out the window. At the end of the three-year lease, you have nothing – if you are lucky. If you drove that car 15,000 miles a year and stipulated that you could pay $0.20 over 10,000 miles, you would owe $3,000 (45,000 miles minus 30,000 allowed miles times $0.20). Do not have $3,000 laying around? Do not worry, the creditor knows where you live and will contact you. And is that a ding on the bumper?

Financing a Car Is Wild-er

Let us do some very basic math. The average new car payment is around $700 a month. The average used car payment is around

$500 a month (19). Put $700 a month in the bank, and at the end of 30 years, you will have over $2.5 ($2,470,939.64) million saved (at 12% interest).

(19) Bankrate.com “Average auto loan payments: What to expect in 2022.” When we started writing the book, the average payment was only $500, so that number might come up a few times elsewhere.

Now that is not totally true – you won’t save 2.5 million because you need to buy a car. But instead of spending $50,000 on a new car, you can buy three $25,000 cars (one every ten years). You will spend a total of $75,000 or on average $210 a month. Rather than borrowing $500 a month, save $290 a month and never have another car payment and pay cash for your next car. Take the difference and stick it in an investment account at a 12% rate of return and you will still have an extra $1,013,579.

Let It Sink In

Rather than buying a new car, you put the money in the bank. Adjust the amount up occasionally, and you will have over one million dollars saved. If you are married, you and your spouse could save two million dollars for retirement just by purchasing less expensive cars and paying cash. And that’s just a conservative estimate of what you can save by not buying a new car assuming you never increase the amounts you’re saving in other accounts.

How to Spend $40,000 for a $25,000 Car

A few years ago, I purchased a used car for $25,000. Based on the Kelly Blue Book and some other sources, a “great price” was

$30,000. So far, so good. Then the sales manager came out and showed me the invoice. Total price $32,412. What? There was a “PermaPlate” for $300, which means if someone were to steal my license plates, they would send me a new one. There was a “used gap” fee of $995, which is car insurance until I get my own. Never mind that if you have car insurance, often your old policy will cover your new car for a few days. Plus, you can get insurance on your new car while you’re still at the dealership by calling your insurance agent on your phone. Keep in mind, this “used gap” insurance is unnecessary and only covers you for a week. Next on the list was an extended warranty that covers nothing, but costs

$2,995.

The nice sales guy told me that if I put $5,000 down, my monthly payment would be less than $450 a month ($448 to be exact). With this seven-year loan, the $25,000 car would cost ($5,000 + 84) for a monthly payment of $448 or a total cost of $42,632.