The Millionaire Mind by Thomas J Stanley - Book Report/Review Example

Book review: “The Millionaire Mind” by Thomas J. Stanley (2001) - Chapter The book The Millionaire Mind by Thomas Stanley (2001) attempts to explain how the millionaires come to be, the way they think about, spend and invest money, how they use their time, and more significantly, why the millionaires are successful. Thomas begins with a catchy description of millionaires which appears surprising to the reader just how easy the millionaires come to be. He says it is simple; ordinary people become millionaires because they have the millionaire mind. But the ‘millionaire mind’ concept is still a mystery, so Thomas focuses on explaining what it is and what it entails. Chapter 1 An Introduction to the Millionaire Mind contains a series of advice by Thomas, in this context, to the common people who do not believe in the simple truth that they too can become millionaires in one generation provided they have the millionaire mind. So what is the millionaire mind? Thomas gives the first hint into becoming a millionaire: reducing obsession of consuming and borrowing. This is after he (Thomas) conducted a research on some billionaires in Oklahoma. He was supposed to ask them about the secrets of becoming a millionaire, he found out that all of them had become millionaires in one generation – a surprising gesture – and they gave the same answer; that is, the people in with a constant habit of spending and borrowing do not enjoy their lives. In a way, the millionaires depict that for a completely joyful life, they have to be completely free of habits that could lead to financial constrains and thus unsustainable lives. Although some of the millionaires acknowledge having depended on borrowing at some time in their lifetime, they quickly overcame the desire of consistent borrowing and started nurturing the little they had. And they at least have little or no debts remaining to clear. However, they all insist that people should refrain from the desire to borrow whether for investment or consumption. There is an indication that borrowing for consumption makes the situation the worst while borrowing for investment only poses potential problems: some of the sampled millionaires had been used to borrowing too. This is a tricky subject, I suppose: it is more or less granted that most aspiring and potential entrepreneurs of today claim they lack capital resources. They are then prone to borrowing, and, in the meantime, spending becomes an inherent necessity. One would rightfully argue that such people must start from somewhere. In the business context, there has to be a substrate on which to lay the first foundation stone. So relying on credits may be a viable option so far provided one does not get trapped into the credit and consumption addiction. There is a good reasoning – those who borrow become puppets of some other people or institutions, the money lenders. One millionaire Thomas interviewed was indeed briefed by a rich financial lender company officer that the money borrowers ran their (money lending institutions’) businesses and he (the officer) was apparently boasting how much such wealth they (the institutions) own. This message was to last in the millionaire’s mind and it later turned him into hating the habit of incessant borrowing habits. My own perception in this reasoning is that it makes a lot of sense. For instance, we always borrow money from banks, shylocks and other money lenders at some rate of interest tagged with a specific deadline; however, we utilize the money at the speed that corresponds the conditions imposed thereof. In other words, borrowers are controlled from a particular epicenter defined by the corresponding money lenders: the activities of the borrowers do not originate in their hearts, they are forced into work. They therefore work only to fulfill the agreements set between them and the money lenders which is their main goal in the long run. Once that goal is achieved, hard work reduces and so on. Their ventures and hopes dwindle and they borrow again – borrowing is so convenient but it is addictive. The cycle continues but the borrowers keep bouncing back to their starting level. This is an enough gesture that unless there is no other viable avenue, unreasoned habit of borrowing and spending can be chaotic – it is not the best option to solve financial difficulties. Thomas says that the ten people he sampled were indeed multimillionaires, some even deca-millionaires (owning more that to million US Dollars) and more. Contrary to what any person may think, such multimillionaires are neither overworking themselves (working more than those who have not became millionaires in the same time period) nor do they lead gloomy lifestyles. As a matter of fact, these people enjoy life to the fullest, most likely more than the other members of the society. According to Thomas, the millionaires he sampled – all of them – claim to have spent a lot of time with their respective families and socializing with friends. They all avoided debts and still became wealthy. They however claim that the respect the different works they are involved in: when it comes to work, they work hard. Some claim to even wake up as early as 3.00 in the morning and work really hard. Such habit, I suppose, is difficult and rare – it requires considerable amounts of self discipline and self driven labor fulfillment. It is unique to the people with the millionaire mindset. The argument outcropping here is that working extra hours does not necessarily translate to success as thus indicated by the men in Thomas’ sample millionaires. If anything, working for longer hours can even be self destructive – people who thus work are not at all guaranteed joy of life. Their efforts perhaps are counterproductive and they live in untraceable self denial. There are many hardworking individuals who have died poor, or at least have died without becoming millionaires. It does no good to believe in being workaholic so as to become successful in life. Similarly, too much obsession for money, which Thomas terms as ‘greed for money’, does no one any good in this context. Instead, people of such kind are controlled and consumed in such greed for money. Thomas quotes a millionaire who gave advice, the millionaire mind, to his children telling them that money was not supposed to be worshipped, money was not their God. They have to control the money and not the other way round. The message insinuated here is that letting money to control one makes one greedy, working for money. Obsessed, such a person becomes workaholic even without substantiating the reasons thereof. The end result is destruction and frustration as they mistakenly expect constant yields from their effort excesses. The message Thomas communicates here is thus simple – we should control our emotions towards money, we should control money, and we should not at all let the money control us (our emotions). That is another bit of the millionaire mind. Those with these bits are ones who manage their outputs versus inputs, expenditure versus income and credit liabilities versus assets using facts and establish practical and equally sustainable spending formulae. On the other hand, there is a class of people that Thomas describes as the Income Statement Affluent who rely only series and cycles of loans – they rely on the income statement to apply for the loans which they live to pay. Such people apparently live in debt in everything they do and own including cars, car accessories, homes, luxuries and so on; expectedly, however, they live in financial agony trying to pay multilateral debts on their very income. Literally, such people continue to work to clear debts (obviously with interest), they work for ‘non-existent’ salaries and they thus do not actually enjoy life. And still there is more in describing the people with the millionaire mind-set. Thomas bases his book on a national survey conducted on randomly selected millionaire-like neighborhoods; that is, the people living in bungalows and the like. Thomas is astonished by the results in that out of the 1001 effective respondents, in this context, 733 turned out to be millionaires. They had net worth more than one million US dollars, exclusive of liabilities. Most of the millionaires were found to be living in old homes built in more than five decades ago, had no flashy assets and amenities. Theirs were not the five-Jacuzzi modern types, that is, they balance their lives by selectively opting for viably sustainable alternatives. In other words, the people with the millionaire mind apparently are not trendy, they are not in a frantic race to showcase how affluent and competitive they are in modernizing lifestyles. This does not necessarily mean that people with the millionaire mind-set are oldies and lagging behind in terms of modernizing their lifestyles: they rather choose a sustainable life. Theirs is a balanced lifestyle as opposed to the people who spend more than they earn. It all reverts to the earlier mentioned sense that millionaires find no joy in addiction of consuming and borrowing. Addictive consuming bears the habit of borrowing for sustenance reasons. So Thomas highlights two or three important cues of the millionaire mind-set so far. Living within practical means and maintaining the trends are the most shouting cues. It is about discipline in spending money and enjoying life altogether, and above avoiding the habit of borrowing. One may borrow once or twice in the beginning but then focus on fitting within the average net income of the household. Thomas provides a demographic sketch and a brief explanation of an average life of millionaires. Initially, Thomas highlights that the purpose of this kind of information is to teach average income earners and average people that, even though it is not guaranteed that one has to be a millionaire in a given timeframe, there is need to contract the millionaire mind and above all understand the essence of a balanced life. And the millionaire mind strategy is actually meant for starters – the young entrepreneurs and so on – because the already built-up millionaires have adapted and clung to the strategy in a more or less permanent way. Thomas refers to the millionaires and ‘the Balance Sheet people’ meaning that they are able to do accounting between their expenses and their sustainability. Such people have been later described as people living in old ‘odd’ looking neighborhoods to the astonishment of the author: they appear as though they are not moving with times – they do not spend on flashy luxuries, they lead quietly balanced lifestyles. The demographic sketch is more or less an averaging overview of the responses given in the questionnaires used in the aforementioned research on which Thomas’ book is based. The sketch creates a picture of a complete lifestyle profiling of a typical millionaire – as the sample result indicated. So what is the millionaire lifestyle? In the demographic sketch, millionaires are shown to lead more or less a traditional family. They uphold a setting of father, mother and children. In other words, the millionaires do not lead erratic family lives we see today. They are disciplined. They are cautious. They respect marriage integrity, maintenance and sustenance. For example, it is illustrated that most people live with one spouse, of course in marriage, for more that two decades and at least 25 percent of the millionaires have retained their spouses for more than 38 years and counting. Most are married and have children. They are not afraid to set up families. In fact, they view family as a complement in the processes of creating their wealth and not as competitors or challenges in the same context. The clearest impression one automatically creates is that millionaires have special level of discipline, self control, high sense of responsibility and resilience in what they decide on. Maintaining marriage with one spouse for more several decades, arguably, is not something so popular among the current generation (the 21st century generation) which is rather marked with a series of divorces in the name of liberalizations of gender. But the truth is that the current trend lacks responsibility, is erratic in spending and has little tolerance in each of their various endeavors. Millionaires are married and have children, an average of three children. In the business context, the virtues that one can derive in such a description are self control, responsibility, accountability, sustainable management and resilience. While virtually everything in life is almost financially driven, these virtues are essential in terms of educating people on how to handle and control money. Each of the studied households described an average net worth 4.3 million and net annual income 749000 US dollars. In other words, they have enough money to spend. Nevertheless, Thomas’ listing of their spending behavior is the direct opposite of expectations. The millionaires, despite their great wealth, they are not extravagant in any way, not even for marriage purposes. For example, they claim that no one typical millionaire has ever spent more than 41000 US dollars on a personal vehicle and so on. They too opt for traditional lifestyles that are costly, are fashionable and sustainable. Another example is the fact that these millionaires spend less than 38 US dollars for a haircut, something the middle incomer earners flamboyantly overspend on. It is not that these millionaires are mean to themselves; instead, they spend on selected important things in their lives. According to Thomas, those who are mean to themselves are the misers, they are the ones led by greed for money. That is breathtaking, at least for rational modern spenders. Millionaires never got large portions of their wealth and property from inheritance either. The largest portion of millionaires sampled, as a matter of fact, never inherited anything worth mentioning. Their respective wealth has been self crafted and earned, and it has to be maintained or eve developed further. That is where the self made personal discipline about spending and income comes in. As aforementioned, the demographic sketch also re-expands the looks, costs, and the nature of homes in which the millionaire minded live. They live in neighborhoods with old homes net worth about an average of $750000, built more than five decades ago ( as early as 1936). Most homes are located in the older neighborhoods beside major cities and in selected states in the US. Most of the millionaires bought their homes as early as 1987 and/or before – it was a major and fortunate investment, as most homes are currently several times as costly as they were in the purchase times. They fully own the homes except for rather a few but even the few who do not fully own their homes, they have very little mortgage debts remaining to pay. Most of millionaires are educated; in fact almost all of them are graduates with degrees. Apparently, the millionaires tend to build a firm foundation (in terms of businesses, entrepreneurship, education (for competitiveness)) on which their lives are to be built and are determined to sustain their lifestyles (by accounting for their spending versus net income, establishing a balanced joyful lifestyles, and inherently having spending ceiling or rather discipline). They seize the opportunities as they avail themselves and, provided they do not harm anybody in the process, theirs is a clearly won battle between themselves and their lives. Whenever the lifestyle demands have pressed for flashy amenities, the millionaires look for more fulfilling alternatives such as playing golf, visiting and cheering their children’s best academic and extra-curricular events and conducting vocational tours. For a rational mind, arguably, the information above is very useful not as a guarantee that one will become a millionaire, but a guide towards living a joyful life. To me, the information is more than a business and lifestyles thing; it is a potential psychosocial and economic guide. The greatest advice I can bet on is how to lead a balanced lifestyle. The opening statement that one cannot enjoy life if addicted to overspending and borrowing habits was in the first time controversial, apparently. However, behind it lies control cues that, realizably, are necessary for a happy lifestyle. All virtues including accountability, responsibility, self control, focus, discipline and resilience are highlighted for the best of the people. The information above is not a story about the rich, the millionaires nor are the millionaires the target audiences. The Millionaire Mind is a blending to advice young people seeking to become rich but using poor means. It is, arguably, translatable to ‘advice towards your financial freedom’ or so. We cannot live to merely admire other successful people’s lifestyles; we can modify ours through by applying important information as above. Needless to mention, the information in this chapter is the truth, or at least it is applicable. Just as the information highlights at some stage, most rich people lead tranquil and apparently very comfortable, happy life. Most millionaires as highlighted in the chapter fall in the category of the passing generation, the older generation. The information is strategically positioned and used to challenge modern indulgencies either in extravagant wasteful but unsustainable lives, borrowing addiction, or dangerous greed for money. It is commonsense that sometimes the young generation is rightly sentimental about lack of financial capital. However, I am almost sure most of those in this category do not have clear ideas of what to do with money if they had. In a sense, we often engage in frantic moments of greed for wealth but we use the wrong means to reach there. The information in the chapter is very useful as it guides the young generation on how to handle financial life. The information is holistic; it provides all round tenets of a person’s life. It is a guide for personal life, social life, psychology, economics and management. It slowly engages the reader into understanding essential criteria for attaining a successful joyful life, a balanced life, using an attractive broad criterion: The Millionaire Mind. In summary, it is not until one has the millionaire mindset that one may lead a happy life. The millionaire mindset means upholding and maintaining the virtues described above. The message provides utilities for self assessing: if one does not want to perform some accounting in terms of spending versus income, for instance, such a person lives in denial. To cut it short, such people have no millionaire mind and will certainly lead a gloomy lifestyle. From the information above, one main thing one learns is the cautious perception and handling of money. As a young person, it is to any one’s discretion that money can be abused just like drugs. According to the information above, discipline comes first. Most of young people in the current generation are lured into flamboyant extravagant lifestyles often blended with the culture of borrowing huge amounts of money for spending. But millionaires know how to balance their lives. They choose what is sustainable. Admittedly, however, I too have grasped some essential information after reading this chapter. Now that I am informed, I hope my future life will be guided by some or all of the principles of the people with the millionaire mindset. First is balancing the consumption and the income. I have heard of people who draft a budget at the payday but never follow what it says. But Thomas insists that the millionaire mind never changes, it is a thought formula. It remains intact. If anything, it grows stronger and conscious. It is therefore conceivable that people will shift ways, act contrary to the millionaire mind but they are the losers, they lose the millionaire mindset. My hope is that I can retain and apply it throughout my lifetime. Its benefits are enormous. For example, refraining from the habit of borrowing complements discipline in spending. In other words, if I stop unnecessarily borrowing, I will try to remain within the limits my earnings set and at the same time I will try to increase my earnings. The sense of happiness in Thomas’ millionaire mind’s arguments is real. There is no greater happiness than having standing debts. Borrowing can be so much convenient but it is a predisposing factor for bankruptcy. Another important point taken is the role of social responsibility alongside pursuance of wealth. Thomas indicates that the most successful millionaires, in fact, all the millionaires have retained their marriage or spouse for long time. Social stability is an essential spice for strong financial growth. In return, financial stability is necessary for sustaining family needs. So they are two mutually benefiting factors for happiness in life. It is not debatable that I will struggle to uphold stable relationship. The sampled millionaires say that to have a family is equivalent to complementing the processes involved in gathering wealth as opposed to competitors to the processes of gathering wealth. The millionaires do not overwork themselves just to get rich – that is being obsessed with wealth and money. Summarizing, the people with the millionaire mindset play it simple: they account for what they spend with income, audit their expenditure, avoid borrowing (and thus they are stress-free), avoid overspending, avoid erratic relationships, they spend good deal of time socializing with their family members and friends but work hard during work time, sustaining or even increasing their earning, and above all they really enjoy life. The knowledge learnt is not an illusion – what millionaire mind claims is all practical. I have strongly believed in the cues provided for in the information, and as discussed above. In other words, the information will have great impacts in my future financial life, as a young entrepreneur, in the discussed manner. It is all practical: I can actually start evaluating my spending and borrowing habits as early as now. Read More