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January 16, 2009

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I like these posts, FMF, and I think I'll have to pick up this book. It reminds me of The Millionaire Next Door, in the idea that becoming a millionaire is less about "get rich quick" and more about common sense and patience.

Spivey - I wrote The Frugal Millionaires and re-read The Millionaire Next Door before writing TFM. Some people have asked me: Is this book like The Millionaire Next Door? The answer is: No, not really.

TMND is a fantastic book that is now over 12 years old, but the philosophies are timeless. It is research and commentary heavy (the authors analyzed the cost per pound of cars that millionaires drive…uh, OK.) and dealt with a very narrowly defined target audience (mostly small business owners who were older and wealthy). The 7 success factors they identify are very different from the 6 ways frugal millionaires think differently about money and the 15 best practices uncovered in The Frugal Millionaires. (Not to mention the 800+ practical tips offered by TFM - directly out of the mouths of the frugal millionaires.) TFM is more "tell it like it is" than a research report.

Others have asked: Is this book like Rich Dad, Poor Dad? The answer is: No, not at all.

The highly popular RDPD is written like a story or fable and communicates finance concepts simply. It is basic finance education material (in a very understandable format), but it’s also a platform to sell a lot of other products. TFM is less “story” and more on “how it’s actually done.” And TFM isn’t selling anything other than the ideas in the book. We also donate a portion of the profits to charities designated by the frugal millionaires.

It is unclear what other personal finance books The Frugal Millionaires could be compared to. It might loosely be a crossover between Dave Ramsey’s and Larry Winget’s hard edged styles, but targeted at more sophisticated audiences who appreciate learning from people who haven’t failed in their personal finances. It’s more like the way Warren Buffett or John Bogle think…practically and with humor.

I hope you enjoy the book,

Jeff

It's good to hear advice on buying a home that is right for you and not one that will impress your friends. Too often do we see people bragging about how big their home is, when in reality they took out a mortgage that they will be paying off for the rest of their lives.

"the authors analyzed the cost per pound of cars that millionaires drive…uh, OK."

LOL. I'm still trying to figure out how to make money off that information. :)

Jim

I have mixed feelings about rule #1. You had better know a company's business prior to investing in it.


However, speculation can be a valid strategy, the thing is, speculation is an active investment strategy requiring active monitoring of the investment. I have done well speculating and going long term. The only time I have done bad is when acting on "watercooler" tips. If you want to invest and not actively monitor the investment then DO NOT speculate, if you have the time, inclination, and ability to closely monitor your investment then speculation may work.

Back in the heyday of the day trader this popular image of buying in the morning, lounging during the day, and selling at the end of the day to make money only worked because of the hyper-bull state of the market. Everyone knew which direction things were going and were able to profit on it, at least until the bears came to town. Of course, a lot of those "day traders" only knew buy low/sell high strategies.

A friend of mine tells me she has a friend who makes a handsome living off of day trading - but it is regular 9to5 job in doing it.

I fully agree with the mortgage aspect. My wife and I just bought a new house. Are limit was $350,000 (with a good down payment), that is were we felt comfortable and we were not going to be extended. However, the lender was trying to give us around $500,000 with little down. In my opinion we could not afford that much. Correction, we could not afford that much and save for anything else. It amazes me that lenders can be so short sighted. I would rather have people in homes they could afford even barring unforseen circumstances, then to have people overly extended and higher foreclosures.Even in todays economic climate lenders still do this. The only difference is they won't do it for low credit scores.

On a side note I ordered the book yesterday. All the posts got me interested.

For some reason, I don't find anything in these millionaire books that could make a millionaire out of a hamburger flipper.

Live like a lender not a borrower is the thumb rule in frugal investing and mortgages. In investing, buy substantial quantities of stocks if the par values are low and buy small quantities when their par values are high, since it is largely the time to dispose your stocks. The golden rule in investing in stocks is buying it in a going concern basis or for a longer periods of time, let us say two decades will be wise enough. As far as mortgages are concerned, see to it that you pay all your amortizations as soon as possible to avoid surcharges, penalties and fines. If possible pay all transactions on a cash basis. The best way to invest is first to save and to follow the adage that it is human to spend but it is divine to save which will afford us the leeway to invest in the future. As they always say the best way to predict your future is to create it. You create your future by saving frugally then when it becomes material or substantial then it will afford you to invest in stocks, bonds, TDs and money markets. Do not trust money but put your money in trust is the Midas Touch to wealth and becoming a millionaire.

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