Thomas J. Stanley’s The Millionaire Next Door is one of the most well-known financial books that’s ever been written. It’s sold millions of copies and is on every list when you Google “best personal finance books.” Despite its acclaim, I had a deeper reaction the first time I read it.
The whole idea is that if you save, scrimp, and avoid spending during your life, you can die a millionaire. That didn’t set well with me. The thought of handing the money I’d worked my entire life to earn over to my children or grandchildren—who’d likely blow it because they didn’t work hard to earn it—sounded like a recipe for a life of misery. Much of my philosophy for life and finances came from wanting to do the opposite of what I read in Stanley’s book.
But here’s the thing: some people love The Millionaire Next Door. They love saving money, putting it into the bank, and watching it grow.
It all has to do with the type of person you are. I have clients with net worths in the 10's of Millions who still drive $3000 Honda Accords to work every day. They choose to be like that.
I believe the financial advice you seek out depends on who you are. If you’re poor, you listen to Suze Orman. If you’re middle class, you listen to Dave Ramsey. But the rich think differently. They don’t take advice from Suze or Dave. They also take one key action that sets them apart. Let’s dig deeper into both these differences.
How the Rich View Money
Here are two examples to illustrate how the rich think. Dave Ramsey’s advice is to “live debt-free.” Debt, in his world, is a bad thing. It means owing anything on any loan. Robert views this word differently and doesn’t hate debt. He refers to debt as getting a loan to acquire an asset and actually loves it because he uses it to his advantage.
In 2015, he refinanced $300 million in loans from 5% down to 2.5%. He didn’t say how much cash flow improved due to that refinance, but I can tell you: it’s a lot.
If you have ever read Rich Dad Poor Dad. You w may remember that in 1973, Robert’s father told him to take a real estate class. The reasoning had less to do with learning about real estate, and more to do with learning about debt and taxes. Now, Robert buys real estate using loans. You might think that’s a recipe for lower ROI and more taxes, but for the right investor, it’s the opposite: he pays less in taxes and makes more money when he buys with borrowing.
Be careful. Borrowing isn’t the secret, creating cash flow is. If you know nothing or little about real estate, borrowing can create negative cash flow by leveraging without proper knowledge.
All the time I hear people say: “I can’t invest because I don’t have any money.” That’s a poor and middle-class mindset. You don't always have to have money to invest. The banks will give you the money you want for investing. It just takes the right approach and understanding.
The rich act the way they do—and achieve massive results—in large part because they think differently than those who aren’t rich. Here’s a great test of your mindset:
- If I’m willing to lend you money at 0% interest, how much would you take?
- If I’m not charging interest, how quickly would you pay me back?
If you don’t answer those questions with “as much as I can” and “as slowly as I can” then there’s a good chance you’re trapped in poor or middle-class thinking.
The rich want as much money as they can get and want to pay back low-interest loans as slowly as possible.
Why?
Because they don’t see money as something dangerous.
The Rich Build Teams
In addition to thinking differently about money, the rich build all-star teams around themselves. This was a game-changing piece of my financial journey. It took me a little over a decade to assemble my team because I didn’t just want a financial planner. I wanted people who were wealthy and spent all their time around other people who were wealthy.
Here’s what stops many people from assembling a team: growing up, if you worked with other people in school, it was called cheating. Part of the American ethos is pulling yourself up by your bootstraps and there’s certainly merit to that, but individual grit shouldn’t stop people from surrounding themselves with others who are smarter than them.
That’s another obstacle to team building: people are intimidated by others who are smarter than them. The rich know they’re in the wrong room if they’re the smartest person there. A member of my team understands liability insurance better than anyone I’ve ever met. He can scan a contract and tell you off the top of his head how it works and how to better transfer risk.
Also on my team is an estate planning and corporate structuring attorney who looks after my asset protection trust, a registered investment advisor that helps me research and analyze deals, and a cash flow specialist who makes sure I look great to banks.
Dangerous people to be around are the ones who think they’re smart.
I realize I’m not as smart as the members of my team in their specific domain. Could I invest the time to learn what my team members know? Sure. But that’s not how I want to invest my time. I’d rather bring them onto my team and leverage the unique strengths they possess.
Why the Rich Stay Rich
What makes the rich richer is that they don’t fear money, or set it and forget it by investing early, often and always. They learn to be better investors and have a team so they can do what they do best. The poor and middle class follow the herd and trust the “sacred cows” of financial advice: cut back, save money, trust the stock market, and try to live debt free.
There’s nothing wrong with this mindset. But if you want to be rich, it means abandoning that old way of thinking and doing things differently. It means shifting your focus to assets and cash flow and not waiting thirty years to enjoy your life in retirement.
Personally, I don’t want to be the millionaire next door. I want to transform my thoughts in profit and build a life that I love—a life that I never want to retire from. If you feel the same way, it starts with your thinking. You can’t become rich unless you think like the rich do.