The best way to become a Millionaire by 30 is to watch my Live Show this Thursday @ 8pm CST (9pm EST / 6pm PST) at http://ajcfeed.com ….
Recently I wrote a post that I consider to be one of the critical “you either get it or you don’t” pieces that will determine whether you will ‘make it’ or not …. if you haven’t seen it yet, fully understood it, or hotly debated it (with me, yourself, or your mother) then I highly recommend that you go and get to it!
Anyhow, Jim wrote a comment:
I watched the video … and, set it aside presuming that because it was so short, the one or two glaring errors (did you spot them?) would have been addressed in the full video (or a Douglas Andrews seminar) …
… then I saw an article on My Money Blog:
The overall moral of this book review is that even though a book finds a publisher, it doesn’t mean the advice is accurate or applicable to you. The book Millionaire by Thirty: The Quickest Path to Early Financial Independence by Doug Andrews & Company appears to be very similar to the other Missed Fortune books by the same author. In fact, from reading the reviews all of these books seem to contain the exact same material.
Housing Prices Always Go Up, Take Out Largest Mortgage Possible!
“Do you rent? Rent is like throwing money down a black hole. It doesn’t matter how much money you have saved or how long you plan on staying in the same place, you should always try to buy a home. If you aren’t going to stay very long you can simply get an adjustable-rate loan with no down payment. Housing prices always go up, so you can enjoy the low interest for a couple of years, and then sell and make a nice profit.
If you are really smart and disciplined, you can even get an interest-only or negative-amortization loan because then you won’t build up any equity at all. Accumulating home equity is bad. Anytime you have any, you should take out a loan on it and invest it somewhere else, like a second home.”
The above are all the dangerous generalizations about real estate contained in this book. Newsflash… Renting can be the best option for many people. Housing prices do not always go up. Thousands of people who bought a home and now have to sell after a few years will have lost tens of thousands of dollars compared to if they had rented.
Many of the books I read may not be brilliant, but they contain generally good ideas and target a specific type of reader. However, this book is one that could actually hurt more people than it helps. This book is just plain misleading. It would be wonderful if home prices always went up and there was an investment where I could never pay taxes, have no downside risk, and get stock-like returns, but unfortunately both are too good to be true. I’ve tried to lay out my arguments for this briefly, but if you want a better description read the detailed reviews here and here. Clever Dude also shared his thoughts here.
Short version: Don’t read it, don’t buy it, don’t even borrow it from the library
Firstly, I agree with My Money Blog on the home ownership issue to a degree … owning your own home is not always the smartest FINANCIAL option.
However, here is where I differ: for MOST people, it’s the only way that they will get financially free for lots of psychological/emotional reasons, more than strictly financial. Also, I do agree with the ‘forced saving’ and ‘forced appreciation’ that it can give you (provided that you do something with the appreciation … you don’t want to die ‘house rich / cash poor’!).
The ONLY time you shouldn’t invest in your own home, is to invest in income-producing property instead*.
And, while it’s true that real-estate doesn’t always go up, if you have a 20 – 30 year outlook and can lock in circa 6% interest for up to 30 years (another reason why your own home can be a good idea) … I think the future is exceedingly bright.
So, it is with a little surprise that I find myself actually siding with Doug – warts and all (!) – on this one …
But, I don’t agree with Doug that you shouldn’t have ANY equity in your own home (again, strictly financially speaking, he is probably correct), but I have proposed the 20% Rule that says that you should have no more than 20% of your Net Worth invested in your own home at any one time.
This rule, when understood and applied properly, accomplishes two key things:
1. Let’s you get/stay invested in your own home, but
2. Ensures that you maintain enough of your Net Worth in outside investments.
… without the screaming holes in the get-rich-quick schemes promoted by the ‘nothing down’ brigade!
So, go back and read all the posts that I have linked to … as I said at the very beginning, this could be the key to your wealth …
* or to invest in some other high-reward activity (e.g. buying/starting a business; leveraged investments; etc.) ... although, I would still prefer that you ALSO buy you own home 'just in case'