The 5 Lessons A Millionaire Taught Me

I once watched a YouTube video of business man who said if you want to learn how to get wealthy, read any and all books that have Millionaire in the title.  I can easily say that I have gotten worse advice.  A book that I did enjoy and learn a lot from was “The 5 Lessons a Millionaire Taught Me: About Life and Wealth” (2006) by New York Times Bestselling Author Richard Paul Evans. Evans is also a sought after motivational and inspirational speaker. Evans is respected amongst his peers, and I would certainly recommend his book.  

The thing I admired most about his journey to financial success, is that he did things the right way in becoming wealthy.  He shares the knowledge that was passed to him from a millionaire on five lessons in acquiring wealth.  Currently, I have not reach millionaire status, but as Evans states in the first lesson, is that you have to “Decide to be Wealthy”! Here are the lessons that are explained in his book.

1.       Decide to be Wealthy

In regards to being wealthy, Evans quotes, “It’s a mindset… It’s all or nothing!! (p.13) So before you can become wealthy, you must first decide that you do indeed want to accumulate wealth!  I think its important to understand that being wealthy is not all about having a lot of money.  Evans says, “Life isn’t about money.  It’s about God.  It’s about love.  It’s about family and relationships.  It’s about personal evolution, learning and growth.”  He also stated that “Money is a powerful ally.”  (p.15) I would certainly have to agree.  Unfortunately, most people will never become wealthy and the main factor, is that they never believe or decide that they want to be wealthy.  

Related: 35 Lessons from Rich People

2.       Take Responsibility for Your Money.

This is a very important lesson because before you can accumulate wealth, you need to first take responsibility of the money that you have now.  People (myself included) always say that if they were rich then that would solve most of their financial problems.  However, if you are unable to manage a small amount of money, how could you expect to manage large amounts of money.  A prime example, is professional athletes who come into millions of dollars at a very young age, with little, if any education on finances, and eventually loses much or all of the money that they had accumulated. 

Evans gives us 4 steps for taking responsibility for your money.

-          Know how much money you have. (p.23-24)

Evans first says to assess your current situation, and define your net worth. Your net worth is typically all of your assets, minus any liabilities. (In some cases, your primary residence is excluded from your asset column).  

-          Know where your money comes from. (p. 24-25)

Secondly, you must know what money you having coming in.  You should know how much income you having coming in each month.  Most income comes from your job, but can also having money coming in through dividends, rental income, bonus from work, child support payments, or any other source or income.

-          Know where your money is going. (p. 25-26)

The next thing you must do, is identify all of your expenses. There are expenses that are fixed, which are the same every month; and there are variable expenses that change each month.  There are many free resources, that will help create a budget and monitor your expenses.  One exercise that we often do in our financial classes, is to keep all your receipts and payment confirmations for an entire week, and each time we reviewed those receipts, we found different items that we could have done with out.  That exercise helps you find the spending holes, so that you plug them.

-          Know what your money is doing. (p.28)

The opening of this chapter starts with a quote from a French Proverb, that states “Money makes a good servant, but a bad master”.  All wealthy people have their dollars work for them, and not the other way around.  However, in order to have your dollars work diligently for you, you must monitor your funds and understand exactly what they are doing. 

3.       Keep a Portion of Everything You Earn

“It’s not what you earn, its what you keep that makes you rich”.  (p.32) The most important rule, is “To Pay Yourself First”.  Evans says you should aim to save “a minimum of 10% of your ongoing salary, and 90 to 100% of your side earnings.” Also a rule from one of our previous blogs, The 5 Lawsof Gold.

• The Power of Compound Interest

Compound interest is calculated on the interest added to the principal of a deposit or loan, so that the added interest also earns interest from then on. (p. 33)

• Starting your nest egg

Evans defines a Nest Egg as “a sum of money put aside for future expenses”; although he prefers the actual example of hen laying an actual egg. Also, don’t kill the goose that lays the golden eggs.  Meaning as you accumulate wealth, try to avoid dipping into your earnings for material possessions.  (p.36)

4.       Win in the Margins

“The Millionaire Mentality watches cost and tries to reduce them- and strives to increase production and sales thus profits.” (p. 42)

-          Winning in Margins with Extra Income

There are several ways to increase your Income.  See our previous Blog on Ways to CreateAdditional Income

-          Winning in the Margins with Savings

The average American has been brainwashed to consume and spend.  Successful wealth builders understand the importance of watching all of their expenses, and do their best to reduce cost and increase earnings.

-     Mindset One- Carefully Consider Each Expenditure

-     Evans suggest asking yourself prior to a purchase, “Is this expenditure really necessary? (Or is it possible to get the same personal effect without using money or using less of it.” (p. 55) Is this expenditure contributing to my wealth or taking away from it?  Is this an impulse purchase or a planned purchase? Am I being pressured to make an expenditure I’m not certain about?

-      Mindset Two- Freedom & Power are better than momentary pleasure

 The successful wealth builder is disciplined, and able to delay gratification for the sake of future success.   “They clearly see the dander of credit and knows that freedom and power are infinitely better than short lived pleasure.” (p.67)

-          Mindset Three- Does not equate spending with happiness

“The successful nest egger fosters gratitude as a strategy against materialism and unhappiness.”  (p.73) Meaning you truly do not need money to be happy, if you are truly grateful for everything that you have, then you can find happiness whether you have money or not.

-          Mindset Four- Protects the Nest Egg

Once wealth builders have accumulated their fortune, they takin certain steps to protect their wealth.  The do not risk, what they can’t lose, avoid gambling in most situations, and purchase proper insurance to protect their wealth.  They also seek proper council, in those who are skilled in handling money. 

Related: Video Conversation with Warrant Buffett

5.       Give Back!

I personally think that this is one of, if not the most important lesson of the Five.  I am firm believer, that you get what you give.  It has been proven time after time, that many successful wealth builders are big philanthropist.  You show me a person, who gives a great deal, whether money, resources, or a time, and I will show you a person who is in need of nothing.  “The sin of the desert is knowing where the water is and not telling anyone.” (p. 81)

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