5 Secrets Of Self-Made Millionaires

I’m a voracious reader of anything that purports to teach you how to be rich … when I needed to learn, I read everything hoping to find ‘the answer’ … and, after I made it, I continued reading (but, I must admit that I am more discerning now) mostly out of curiosity (to see what others are saying).

In both cases, I was almost invariably disappointed … hence this blog.

But, I was pleasantly surprised to read an article with a [groan] headline: 5 Secrets of Self-Made Millionaires

… it’s actually not that bad. Not rocket-science, but not anywhere near as bad as most similar articles and books are.

Here are the 5 ‘secrets’ and my take on each:

1. Set your sights on where you’re going

T. Harv Eker, author of Secrets of the Millionaire Mind [another groan] says:

The biggest obstacle to wealth is fear. People are afraid to think big, but if you think small, you’ll only achieve small things.

Wanting to be wealthy is a crucial first step.

I obviously agree; if you don’t understand why, you must be a new reader [Hint: It’s to do with discovering your Life’s Purpose and Your Number / Date]

2. Educate yourself

You’re reading this blog post … and, I wrote it, didn’t I? ‘Nuff said 🙂

3. Passion pays off

See 1. above … ZZZZZzzzzzzzzzz

4. Grow your money

Well, d’uh!

But, Loral Langemeier, author of The Millionaire Maker, adds something sensible:

The fastest way to get out of that pattern [the never-ending cycle of living paycheck to paycheck] is to make extra money for the specific purpose of reinvesting in yourself.

[AJC: I would delete the last two words, which are hokum; it doesn’t cost much to “reinvest in yourself” except time … for example, this blog is FREE].

I like this part [AJC: I bolded the part that I like the best … I like it, because I did it, too; that’s how I raised the capital to expand to the USA i.e. from profits left in the business]:

A little moonlighting cash really can grow into a million. Twenty-five years ago, Rick Sikorski dreamed of owning a personal training business. “I rented a tiny studio where I charged $15 an hour,” he says. When money started trickling in, he squirreled it away instead of spending it, putting it all back into the business. Rick’s 400-square-foot studio is now Fitness Together, a franchise based in Highlands Ranch, Colorado, with more than 360 locations worldwide. And he’s worth over $40 million.

I also like:

If you want to get rich, you need to pay yourself first, by putting money where it will work hard for you—whether that’s in your retirement fund, a side business or investments like real estate.

5. No guts, no glory

If there’s any one secret in all of this, it’s this one:

Iif you are a timid mouse (like me), you either have to learn to roar (like I had to) or learn to live with a Small Number / Never Date.

Getting the Life’s Purpose ‘religion’ is one way to put the fire in your belly … it worked for me.

Oh, and they leave the best secret to last (at least the author feels it’s the best), which is funny because this would then be Secret # 6:

The Biggest Secret? Stop spending.

I agree with everything AFTER the ‘?’ above 😉

If you don’t have the money to invest, don’t spend … it’s simple!

But, I don’t agree with this:

Every millionaire we spoke to has one thing in common: Not a single one spends needlessly. Real estate investor Dave Lindahl drives a Ford Explorer and says his middle-class neighbors would be shocked to learn how much he’s worth. Fitness mogul Rick Sikorski can’t fathom why anyone would buy bottled water. Steve Maxwell, the finance teacher, looked at a $1.5 million home but decided to buy one for half the price because “a house with double the cost wouldn’t give me double the enjoyment.”

Don’t believe that Millionaire Next Door cr*p; some multi-millionaires are frugal – even some Billionaires (most notably Warren Buffett) – but, don’t be fooled into believing that’s the majority of multi-millionaires:

I have a friend who works for a 35 year old Russian immigrant who is now a hugely successful hedge fund manager (yes, he’s survived the GFC as far as I know. I’ll check when I’m on Safari in South Africa with my friend later on this year); my friend overheard him explaining to his daughter that he was going to take the family jet to a business meeting, so she would need to fly on a commercial airliner with her mother to get home from their vacation.

This is what he said to his daughter: “You know that there will be people you don’t know on that plane” … at 8 years old, she had never flown other than by private jet!

Another friend works in MLM and had breakfast with that company’s # 1 distributor – a nice, young lady. She receives a $600,000 check every month. She just bought a mountain in Colorado and a special tractor, so that she could grade her own private ski run.

I hope she puts a lot aside for a rainy day; gives overly generously (money and time) to charity and those in need; and, joyfully spends the rest!

I have a simple rule: spend freely, when it doesn’t make sense not to.

Think about that, and let me know what you think it means …

What difference does 1/10th of 1% make?

Brian Tracey makes an interesting observation of making tiny, incremental changes which accumulate over time to make huge differences.

You could apply this principle to anything: for example, if you want to save 26% of your income (not a bad goal if you want to get rich slowly, with inflation chasing your tail), just start by saving 1/10th of 1% of your income today, and increase that amount by 1/1th of 1% each day until you reach your goal.

Use your ‘golden hour’ to read the personal finance headlines at http://personal-finance.alltop.com/ looking for money saving tips and you’ll find plenty of fuel for your daily 1/10th of 1% increased savings goal.

How much is in your emergency fund?

How many months do you have in your emergency fund?

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I think this is a good time to take another look at your emergency fund; I’ll explain next week …

In the meantime, answer the survey to let us know how much you have saved specifically as an emergency fund, and leave a comment (if you like) to tell us why!

The problem with Henry …

Actually, it’s not the problem with Henry, it’s the problem with HENRY: High Earner Not Rich Yet.

Included in this group, a group that most workers mistakenly aspire to, are those doctors and ceo’s (at least those not in the Fortune 500) that I mentioned in yesterday’s post.

Now, this is only interesting because I can now answer the question posed on Twitter [AJC: you can glance across to the right to conveniently find a link to my Twitter account].

Dianne Kennedy (CPA), I think erroneously, links HENRY’s to taxes then lifestyle, but (as my article some time back about doctors also said), I think it boils down to three non-tax (even though taxes hurt!) issues:

1. As your income grows so does your spending … then some!

2. Keeping up with YOUR Jones (i.e. other high-flying corporate executives and professionals) is VERY expensive

3. You can’t sell a salary package (like I can sell a business, some shares, or a property or two) when you decide to retire

[AJC: You need both a big 401(k) – see reasons 1. and 2. why this doesn’t happen – and a huge golden parachute, which may / may not happen to compensate for reason 3.]

If HENRY’s want to become rich, they have only two choices:

– Get lucky, or

– Invest a very large % of their annual earnings

Let’s assume that a HENRY – conveniently named Henry who happens to be ceo of a medium-sized business – is earning $290,000 and has already managed to save $1 million – our consummate Frugal Investor – and has arranged things so that he can continue to save a very hefty 35% of his salary (this is all pre-tax).

After 22 years, Henry will have saved just enough (in Rule of 20 terms) to replace his $290,000 ceo’s salary … by then, inflation adjusted to $661k per year, assuming that he wants to maintain his lifestyle [AJC: more importantly, assuming that he can – and wants to – ‘ceo’ for 22 more years … if he ‘only’ starts with $500k in savings, he’ll need to work for at least 26 more years].

Seems easy, but human nature [read: urge to spend it up] is what it is …

I should know: I was ceo of my own business, employing over a hundred people across 3 countries (USA, Australia, and New Zealand).

I paid myself $250k per year, and had cars, cell phones, laptops, and health insurance all paid for by my company – I reinvested all the remaining profits in these businesses.

I had a $1.65 million house in the ‘burbs, paid for by cash (s0, no mortage), and two children in school (one private, one public). We traveled domestically and/or internationally once or twice a year as a family, ate at ‘normal’ restaurants (and, the occasional top-tier eatery).

I can’t see how I could have saved 1/3 of my salary … I couldn’t even save 10% 🙁

Of course, I could have saved 10% if I really tried, but my point is that it’s very hard to save 30% of even a high salary, unless you gear yourself up to do it from the very beginning.

[AJC: Look, it’s not my job to tell what should happen as you get richer, but the reality of what will happen and how to do better … when you get to $250k you will bring with you exactly the same spending and saving habits as you have today, if not worse. Moral: start MM101 today!]

In other words, don’t divert all of your creative energy into playing Corporate Lotto (i.e. chasing a higher salary) if you want to get rich – or, even to reach a more humble goal, such as becoming debt free (a dumb goal, IMHO).

First – and, as soon as possible – learn how to get rich (or debt free, or …) by taking action right now, with whatever you can bring to the table.

If your salary happens to improve along the way, all the better … but, don’t rely on it!

How much home should I buy?

A reader who works with RE, Whittier Homes, says:

I’m in the camp that you don’t leave too much equity tied up in the walls of a house. That being said there is a risk factor or a comfort zone that every investor has to know. The bottom line is you don’t want to get over leverage and get caught on the short end of a declining market.

Home equity is simply what your home is valued at (today) less what you still owe on it (today).

This leads me to think that I’ve never said … and, nobody’s ever asked: How much equity should I have in my own home?

Well, there’s a reason:

I have NOTHING to say about how much equity – as a % of your house value – and, EVERYTHING to say about how much equity – as a % of your Net Worth – you should have tied up in your own home.

In other words, your equity is a function of:

– How much your house costs to buy

– How much it increases in value over time

– How much deposit you have available now

– How much you choose to put in / take out of the value of your house over time

I have no advice as to how much you should spend on your house in the first place, that’s your business not mine 🙂

But, I do have some guidelines that pretty much help to answer the “how much home should I buy?” question (other than for your first home), albeit obliquely:

1. The 20% Rule ensures that you are always investing at least 75% of your entire Net Worth (after allowing for another 5% to be spent on ‘stuff’),

2. The 25% Income Rule ensures that if you do decide to borrow money to buy a home, that you do not overcommit your cashflow,

3. The Cash Cascade makes sure that if you do have a mortgage, that you don’t pay it off too quickly if better investing opportunities abound.

Put these ‘rules’ into practice and you won’t go too far wrong, when it comes to your own home …

10 Paths To Wealth?

Ken Fisher is a well-known money manager – I know, because I’ve had to endure phone call after phone call when I stupidly signed up for one of his ‘free’ reports!

However, watching this video (and, maybe even buying his book) seems like a fairly non-threatening way to learn some of his wisdom.

Personally, I think you need to mix’n’match some of these methods to have a bats-chance-in-hades of making your Large Number / Soon Date.

On the other hand, I’m all for marrying into wealth, but who’d have me? 🙂

April Fish!

It’s that time of year again, when work (ex) friends, school buddies, corporate marketing departments, and bloggers everywhere bring out their best ‘April Fools Day’ pranks.

Oh, what fun!

But, the French call it “poisson d’Avril”, the Dutch call it “Aprilvis”, and the Italians call it “Pesce d’Aprile” all which refers to the very funny prank (!?) of sticking a little fish to somebody’s back and everybody calling out “April Fish!”

Oh, the French have such a good sense of humor 🙁

All of which brings me to the April Fool’s day joke that we play on ourselves … the ‘joke’ is on us when we read important information – or, come acrosss a good idea – and, fail to act on it.

The joke is on us when, by failing to act, we delay (perhaps, fataly so) our Number and are eventually forced to compromise our Life’s Purpose.

So, what ideas you have picked up from this blog – and, tried out for yourself (for better or worse) – in the 2+ years that I have been writing it?

What has worked for you (and, why)? What has not worked for you (and, why not)?

Share yourexperiences here, in the comments, and let’s have a good chuckle together 🙂

Is your home an asset?

I spend a LOT of time on this blog talking about your home, and rightly so; your home is often regarded as your single largest asset.

Or, is it?

TraineeInvestor reopens the debate with what I think is a really interesting – seemingly ‘throwaway’ – line in his comment to this post:

The overwhelming consensus of opinion on internet forums and blogs is that your home is not an investment. (There are even people who think it is a liability rather than an asset!!!).

The “overwhelming consesus” hasn’t made $7 million in 7 years, and probably never will 😛

But there is grounding to the home-not-an-asset way of thinking; for example, in this post I quoted Robert Kiyosaki who first told me that a home is NOT an asset [AJC: Unlike many others, I am not a Robert Kiyosaki detractor … Rich Dad Poor Dad was the first book that I ever read on personal finance and, at the time, it really opened my eyes to the value of financial education].

Here’s what RK said: 

  My Poor Dad Says   My Rich Dad Says
  “My house is an asset.”   “My house is a liability.”
  Rich dad says, “If you stop working today, an asset puts money in your pocket and a liability takes money from your pocket. Too often people call liabilities assets. It’s important to know the difference between the two.

Yet, paradoxically, TraineeInvestor also pointed to the exact opposite: study after study has shown that the wealthy own their own homes and the ‘poor’ do not!

So, what do I think?

Well – and, this may also SEEM paradoxical – I actually agree that a home is not  an asset in the sense that it doesn’t earn an income.

Of course, you could rent to yourself.

Tell me then, though, when do you – could you – ever realize the value in that ‘asset’?

Only if you sell (you never will); or, pass it on (it’s not an asset for YOU).

Yet, there is one way to realize at least part of the value of your asset (while you still need a place to live), and that is to release some equity by refinancing.

So, technically, I agree with the ‘non-asset’ thinking, which is why I ask you to at least minimize the equity in your own home to a mere (by Dave Ramsey standards) 20% or less of your current Net Worth (and, review annually).

I also advocate buying your first home – more for some ‘human nature’ reasons rather than strict financial reasons – but, nowhere in this blog have I ever said: “… then, upgrade it”! 😉

Why bother keeping up an esoteric “is your home an asset or a liability?” debate at all, when the only real question that you need ask yourself is:

Can I reach my Number if I buy my own home, then keep [insert ‘% of current home value’ of choice: 0%; 10%; 20%; 50%; 100%; other] tied up as home equity?

My standard advice is, YES … if:

a) I buy my first home (with whatever starting equity that my bank and I can agree on), then

b) [as soon as reasonably possible, start to] maintain no more than 20% of my net worth in that – or, any future – home as equity

c) and, reassess b) annually (against both my home’s and my own net worth’s current value)

Ultimately, the equity that you choose to keep in your home either helps you to reach your Number, or it doesn’t.

For most people, “reaching their Number” means amasssing ‘real’ assets in the range of millions of dollars. Logically, tying up valuable equity in something that can’t possible reach ‘millions of dollars’ in value is wrong, so why do it?

What does this all mean for you?

My ‘rules’ of home ownership are designed to give you the best chance to reach your Number by your Date.

Depending on how YOU choose to look at it, your home is either your single largest asset or single largest liability …

… the real point of this blog is to make sure that it doesn’t stay that way 🙂

The One Minute Business Checkup!

My blogging friend, Andee Sellman has unveiled a corker … but, I have a STRICT no advertising, no product placement or promotion policy …

[AJC: it’s the only way that I could think of to convince people that I’m genuine, after all, do I want to say to people “I made $7 million in 7 years, plus an extra $4 a week from my blog” 😉 ]

.. so, I’ll just gently lead in with a story instead:

Many years ago, in a very short-lived experiment, my parents bought my sister a flower shop [AJC: mistake # 1].

However, because they knew that she wouldn’t take any of their advice (just the shop sans advice) they asked me to take the other 50%, which I agreed to [AJC: mistake # 2].

Unfortunately, I had no business experience in those days, so it was like ‘the blind leading the blind’ … however, I did go looking for help.

One of the first things that I tried to do was get some help on the NUMBERS that the shop should run according to; things like:

– What % of our sales should the flowers and other materials that we bought account for?

– What staff and other administrative costs should we allow?

– What salary should my sister draw?

Unfortunately, my accountant wasn’t much help [AJC: he basically told me to come back when I had a tax problem … when the problem was, we weren’t making any money, so there was no tax!], and I did find a benchmarking report on florist shops, but it didn’t really tell me what the numbers meant or, much more importantly, what to do with them.

That’s why I was really interested when Andee sent me a link to his new tool – I’ve checked and it is totally free – called the One Minute Business Checkup … I think it would have been of great benefit – even though it is fairly simple, and works on just three (that I could see) critical benchmarks:


This measure looks at how much of the customer value you are retaining in your business by looking at the value the customer pays you and deducting the cost you incur to make those sales.

From experience we know that if the customer value measure falls below 20% a business will struggle and may fail completely so that is why the benchmark is set at 20%. i.e. retaining 20% of the customer value as a return to the business owner.

Example of Measure

Sales   $500,000
Product $250,000  
Business Owner $50,000  
People $50,000  
Marketing Costs $20,000  
Distribution Costs $30,000  
Total Costs   $400,000
Customer Value Retained   $100,000
Percentage to Sales   20%


The transaction flow measure is about determining the volume of sales that is running through your business. A business may have very high customer value (margin) but only a trickle of sales to take advantage of that value.

Our quick way of measuring transaction flow is to look at administrative cost compared to the sales in a business.

We have found that to be sustainable a business needs to spend no more than 12% of sales on its administrative costs. Often small businesses need to INCREASE SALES rather than decrease administrative costs to achieve this percentage.

Example of Measure

Sales $500,000
Administrative Wages $30,000
Administrative Expenses $20,000
Total Costs $50,000
Percentage to Sales 10%


The money flow measure is designed to find where the money is hiding in your business. Does money flow easily or are there places in your business where it gets ‘stuck’ and takes time to flow through to you.

A very significant place that money hides in your business is called working capital. There are three significant items:

  1. Inventory – this can be raw materials, work in progress or finished goods
  2. Accounts Receivable – this is money owed to you from customers
  3. Accounts Payable – this is money you owe your suppliers

Money can get stuck in inventory and accounts receivable. It can also be lost from the business by undisciplined payments to suppliers.

The activity in your business can be measured by sales and this needs to be compared to the working capital invested in your business. We have found that to be sustainable and to give your business the best chance to grow, working capital should be no more than 12% of sales. Beyond this, too much of your money gets tied up in the business and is not available to fund growth.

Unlike the other two measures the money flow measure can be negative.

Negative working capital is a very dangerous situation needing urgent attention.

Example of Measure – Positive Working Capital

Inventory $30,000
Accounts Receivable $55,000
Accounts Payable -$35,000
Working Capital $50,000
Sales $500,000
Percentage to Sales 10%

Example of Measure – Negative Working Capital


Inventory $30,000
Accounts Receivable $55,000
Accounts Payable -$95,000
Working Capital -$10,000
Sales $500,000
Percentage to Sales -2%

If you have a small business, I recommend that you give this a try [ http://oneminutebusinesscheckup.com/ ] and let me know what you think?