The Amateur Financier

Psychology is always a tricky matter. Everyone’s mind is different, and trying to make sweeping generalizations about how people think is tough, to say the least. Trying to figure out common thought trends for any group is tricky, particularly if you are looking at such a broad and varied group as the wealthy in our country.

The Psychology of Wealth attempts to do just that, looking at the perspectives that the wealthy take on money and success. The author, in between his work as a clinical psychologist, claims to help you ‘understand your relationship with money and achieve prosperity’. Does he succeed in his work, or does the book still leave you confused and not at all prosperous? Let’s read on and find out!

Summary

The Psychology of Wealth opens with comment from how the author about how he wanted to investigate what personality traits and mental aspects lead some people to have a ‘wealth psychology’, a mental outlook that enables them to build up their financial standing and achieve monetary success. The first chapter looks at how we define wealth, examining both successful people and those who have had trouble managing money (the example given is a man who won the lottery and ended up losing it all). It encourages the reader to take a closer look at their own relationship with money.

Chapter two covers the evolution of wealth, discussing how the standards of what was considered monetary success have changed through American history. In particular, it notes that even a modest lifestyle in today’s society would be considered extraordinarily extravagant by the standards set just half a century ago. Chapter three looks at methods of finding your dream, looking at what you seek in life and how you can move toward that goal.

The fourth chapter looks at self-esteem and its link to wealth. It stresses the fact that money cannot solve your personal problems, and ends with a table listing traits of high and low self-esteem. Chapter five stresses the fact that for every situation, there are a number of ways in which we can choose to react, and looks at how the role of credit has changed over the years, particularly recently.

Chapter six covers the concept of value, describing some of the different ways to borrow money that exist, and stressing the importance of paying such loans back. Chapter seven looks at the different types of debts that people take on, both conscious debt that they enter into to meet their goals and unconscious debt that people take on without thinking it through. The need to be conscious of your debt (and your financial situation in general) is heavily stressed.

Chapter eight looks at giving to others, discussing the importance of being willing to give to others with no thought of getting anything in return. Numerous stories are included of how giving without expecting to get anything back can end up benefiting you anyway, and a few stories of non-generous people and the problems they experience are also shared. The ninth chapter looks at the phases we go through in life. It also discusses the importance of doing something you enjoy doing with your life if you hope to be successful.

Chapter ten shares the importance of finding your own path to prosperity. A major portion of the chapter shares the story of Dennis Gardin, who suffered serious burns as a teenager and used that experience to help and encourage other burn victims. It encourages people to find what will bring them fulfillment in life, and pursue that path. The final chapter of the book, chapter eleven, talks about where to plant your feet, stressing the importance of getting started towards meeting your goals even if it takes a while to get there. The book ends with a final note to step back and try to see the bigger picture when it comes to wealth.

Pros

The Psychology of Wealth has lots of interesting stories of various people who have managed to achieve success. It provides a rather interesting perspective on how to view wealth, mainly from a psychological stand point. There are quite a interesting facts that are included throughout the book, from historic points to current financial standings in the wake of the recent financial downturn.

Cons

The book is a bit sparse on helpful information for the reader to apply to their own lives. It also jumps around quite a bit, going from one area to another without much discernible flow. The descriptions of some of the people mentioned in the book seem overly complimentary, particularly with regards to wealthy individuals like Donald Trump. (That several of the people referenced also provided complimentary comments quoted by the book, including Mr. Trump, doesn’t help matters much.)

Overall

The Psychology of Wealth is a thought-provoking read, providing an interesting psychological perspective on how we view wealth (both now and in the past) than most books. It is not be the easiest book to apply to your own life, focusing as it does on those people who have already achieved wealth. It does provide some definite food for thought, though, as you work towards building up wealth for yourself in life.

There are a lot of reasons we choose one book over another. The genre the book is in, the author’s name, even the appearance of the cover. Sometimes, it’s the title of the book alone that manages to draw us in; occasionally a title will be so compelling, we just have to read.

Eat That Frog!was one such title for me. Rather than covering the finer points of fine amphibian dining, it’s actually about time managing your time and avoiding procrastination (which, I’ll confess, is one of my biggest bad habits). Does it actually help you to get motivated, or is the snappy title all it has going for it? Let’s find out!

Summary

Eat That Frog! starts with a Preface, introducing the author, sharing his success story, and stresses the importance of getting things done. The Introduction explains the general principles behind the book, as well as just how the name ‘Eat That Frog’ came to be. (It’s a reference to an old saying that if the first thing you do each day is eat a live frog, you can go through the day knowing that that will the worst thing to happen to you, just in case you were curious.)

The rest of the book consists of twenty-one methods of accomplishing more in your life. The first few chapters cover methods of planning your day so you can focus on the most important tasks, bringing up issues like the power of writing down your goals and applying the Pareto Principle (that 20% of your tasks will have as much (or more) value than the other 80%). Each of the chapters, here and throughout the book, ends with an ‘Eat That Frog!’ box that shows how to apply the lesson.

The next set of chapters start to cover the issue of prioritizing your tasks in more depth, providing suggestions on how to determine the most important tasks and separate them from those that are less important. There are also a few chapters that look into issues of focusing on the areas with the biggest impact on your life, and making sure that the most important tasks get done.

In the next two chapters (beginning with chapter 8, if you are keeping track), the focus is on getting yourself ready to succeed in your tasks, by preparing thoroughly for your tasks and making sure you’ve done your homework in your field. The next two chapters cover your special abilities, and unique restraints, that will affect your ability to make any progress, and tells how to handle both.

The next several chapters look at how to handle the tasks you are faced with, from taking large, seemingly impossible tasks one step at a time to maximizing your personal energy by modifying your sleep and work habits. There are also chapters on motivating yourself into action and putting pressure on yourself to succeed.

The pieces of advice the book are all about time management, from cutting down on the tasks that take up your time to doing your most difficult task first to breaking large tasks down into smaller portions. There are also suggestions on how to find large blocks of time in which you can get important work done, and how to keep focused on those important tasks. The book finishes with a review of the listed principles.

Pros

Eat That Frog! is quite interesting and very enthusiastic with its contents. The tips listed seem quite applicable, and the advice on applying them is sound. The writing overall is quite succinct, and the book makes for a fairly quick read.

Cons

The limited length of the book (I read it in under two hours, while typing the summary above) puts a cap on how much useful information can be contained. Many of the suggestions are things you’ve heard before. Also, let’s face it, the imagery of eating a frog, which is used throughout the book, isn’t terribly appealing.

Overall

Eat That Frog!provides a fairly decent amount of decent suggestions to keep yourself motivated and productive. More than a few are likely to be things you’ve heard before (take things one step at a time, prioritize your goals, take on the most important tasks first), but there are also going to some that you haven’t heard before. Overall, it’s a pretty solid guide to getting more done.

There’s much to be said about working for yourself. Being self-employed has plenty of advantages, from having more control over your time and efforts to potentially earning much more than possible if you work for someone else. It’s certainly a nice thought, but how do you get started working for yourself?

Weekend Entrepreneurseeks to help you in that respect. Coming from the publishers of Entrepreneurmagazine, it attempts to help give you plenty of ideas of how to get started as an entrepreneur yourself, working in your spare time to build up your wealth and possibly create a whole new job. Does it meet its goals and help you create an entrepreneurial lifestyle of your own? Let’s read on and find out!

Summary

The books starts with a Foreword by Dr. Laura Schlessinger, who shares her own experiences working part-time knitting and working on the radio when she first had her son. The Preface shares the authors’ desire to encourage entrepreneurs and help more of them to succeed as they start their own business.

The book proper opens with Part I, on getting started with your own business. Chapter one shares the concept of becoming a weekend entrepreneur and provides a few reasons why the reader should consider that route, from the need for extra money to having time on your hands and nothing to do. The second chapter covers the need to test your market, finding out whether your idea has potential and figuring out if it is possible to sell your product or service efficiently.

After the relatively short first part, Part II, the bulk of the book, shares numerous ideas for potential weekend entrepreneurs. The third chapter, called ‘Pick It Up’, covers physically intensive options, giving a total of thirty-one ideas that range from car detailing and custom gardening to manure salesmen and dog doo scoopers (which the authors do have some, uh, ‘fresh’ comments about).  Chapter four, ‘Make It Up’, continues the list of ideas, this time featuring thirty suggestions of ways to sell products you (or someone else) has made. The list includes such varied ideas as homemade beeswax candles, decorative car magnets, and women’s loungewear.

The fifth chapter gets into familiar territory, covering twenty-five online businesses, from virtual assistant to publishing eBooks to affiliate marketing to eBay auctioneer. Chapter six, entitled ‘Sign ‘Em Up’, provides examples of ways to profit by sharing your knowledge. From household repair skills to sewing to etiquette to cooking, if you know more than most people about a subject and can find a means to share that information, you should be able to profit from it. Chapter seven finishes off this part of the book by encouraging readers to stay fast and flexible while they run their businesses, sharing several stories to encourage such behavior.

Part III, the final portion of the book, ‘Success Strategies’, attempts to provide advice on how to get a business running and keep it running successfully. Chapter eight shares some strategies on building successful businesses, from using blogs to share information about your business to protecting your ideas with patents and licenses. The ninth and last chapter of the book provides advice on how to spread the word about your business, discussing television publicity, and coupons, and how to put each one (or all three) into practice. The end of the book includes an appendix with dozens of resources (mostly online) to aid in your entrepreneurial endeavor.

Pros

Weekend Entrepreneur provides plenty of good ideas for possible side jobs. The tone is encouraging and there is discussion of a few issues that might not occur to many would-be entrepreneurs. The list of resources at the end of the book, in particular, provides numerous sources for further information.

Cons

With so many potential jobs being covered (over 101), there’s not much detail provided about any given one. There’s also not much in the way of advice on how to actually get a business started, once you’ve settled on an idea for what you want to do. Advice on things like patents and other business issues is quite limited, and squeezed into the last few  short chapters.

Overall

Weekend Entrepreneurmakes a pretty good source of ideas for potential side work. You’ll need to rely on other sources (such as those in the long list of websites at the end of the book) to turn such ideas into an actual business, though, as there’s not much here besides a list of ideas. Still, if you’d like to start a side business and need some thoughts on what sort of business to choose, this book serves a pretty decent spark for that train of thought.

There aren’t too many books in the personal finance sphere that are near universally touted and respected. For every Robert Kiyosaki devotee, you’ll find someone who feels that Dave Ramsey is the top personal finance guru. It’s the rare book that manages to come up on nearly every personal finance blogger’s recommended reading list.

The Millionaire Next Door is one such book. It’s probably harder to find a PF blogger who doesn’t consider this a must read than to find a dozen who do. What is in these pages that draws so much attention and sparks so many recommendations? As always, let’s read on to find out!

Summary

The Millionaire Next Door opens with an introduction, telling how the authors set out to study how people become wealthy, and how discovering the disconnect between wealth and a high end life style (wealthy people tend to live modestly, while those who live in mansions and drive fancy cars tend to actually have modest amounts of wealth) led them to look into the real factors that lead to wealth. The introductions then covers seven factors that the truly wealthy have in common, from living below their means to choosing the right profession.

Chapter one starts to profile the typical millionaire in America, setting up a profile of typically self-made person, usually male and married, frequently business owners, with moderate incomes and generally no inheritance. The chapter also introduces the concept of expected wealth at various ages (pretax income times age divided by ten, excluding any inheritance) as well as the prodigious accumulators of wealth (PAWs) in the top quartile for their age bracket, and under accumulators of wealth (UAWs),in the bottom quartile. The chapter finishes with some discussion of the ancestry of the wealthy being studied.

The second chapter is about the frugality of the typical PAW, discussing how tending to spend relatively small portions of their income enables them to save more, and how spending so little is incongruous with our typical images of millionaires. There is also quite a bit of discussion on how the wealthy minimize their realized income, and thus, minimize the proportion of their wealth that they pay in taxes.

Chapter three covers how the PAWs spend a sizable portion of their time planning their financial investments and seeking out qualified advisers. There’s also discussion of how the PAWs tend to spend much less time than UAWs worrying about future events that could adversely affect their net worth that are beyond their control (government raising taxes, for example). Chapter four looks at the spending habits of PAWs, particularly when it comes to cars. Given their focus on building their net worth, most tend to buy used and don’t worry about getting a car that displays their wealth.

The fifth chapter looks at economic outpatient care, the financial help that is provided by parents to adult children well past the point that such children have moved out and started living on their own, and comes to one conclusion: the parents of the wealthy didn’t provide it, as it tends to make the recipients less productive and more inclined to spend, spend, spend. It also discusses how not providing such help, partents can encourage their children to succeed on their own. Which is a good lead in for chapter six, where it notes that most of millionaires in the US ensure that their adult children become financially self-sufficient. After discussing various ways different families treat their adult children (and the effect it has on their net worth), there are a number of rules laid out for affluent parents who want their children to be productive, from not letting the children know you are wealthy to teaching them the value of things other than money.

The seventh chapter is about finding your niche, finding jobs that target the affluent, from tax and legal services to educational opportunities (particularly at tuition-based institutions) to fund-raising counselors. The eighth chapter finishes off the book by looking at some of the professions chosen by millionaires, particularly business ownership, as well as the jobs they recommend to their children (mostly self-employed professions, such as doctors and lawyers).

Pros

There is a reason The Millionaire Next Door comes so highly recommended: it does shift your perspective on what the typical millionaire is like. There is also lots of good advice on how to become a millionaire yourself, as well as spurring your children to do the same. It’s all backed up by the most comprehensive set of data I’ve seen on the subject, which definitely helps support the book’s case.

Cons

The book is a bit dry at times, making it occasionally a bit more difficult to read through. If you (or someone you love) happens to be a UAW, it can also prove a bit painful to read through (although, it’s a bit like pulling off a bandage; you’ll be thankful when it’s done).

Overall

The Millionaire Next Door makes a fine read, and an excellent introduction to how one can become wealthier. It’s not the most exciting book at times, but it does make a good guide to how to organize your life in order to generate wealth. Overall, highly recommended.