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The Single Most Important Secret to Building Lasting Wealth

March 29, 2013 | About:
taipanpublishing

taipanpublishing

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Lewis Schiff of Inc. magazine has a new book out called "Business Brilliant: Surprising Lessons From the Greatest Self-Made Business Icons."

After a dozen years of work, he has distilled seven core behaviors that explain how self-made millionaires became wealthy.

What's struck me most about the book is the stark difference between what wealthy people think and what "middle class" people think.

For example, Schiff reports 80% of wealthy people have equity in the businesses they are involved in.

In my wealth-building advisory service, Unconventional Wealth, I call this the principal of ownership. And I believe it's the single most important secret to building lasting wealth. When you own a stake in what you do, you benefit more than your 9-to-5 neighbor.

That's why it's the mission of Unconventional Wealth to show you how to build ownership in income-producing assets.

According to Schiff, just 10% of "middle class" people have equity in what they do. And 70% said they're not even trying to build any equity.

Eighty percent of millionaires own what they do. Seventy percent of middle class people aren't even trying to own what they do. Think about that.

Schiff also found that 71% of wealthy people have no problem walking away from business deals that look suspect. But only 22% of middle class people said the same thing. The middle class seems to think there's a point of no return after which you must follow through.

This shouldn't come as a surprise. Another quality of the wealthy is that they cultivate and protect capital. They don't toss it away on bad deals.

Don't fall into that trap. Capital is precious. The most important step to accumulating lasting wealth is ownership. You can't own something unless you first have enough capital to acquire it.

I don't care what you own. Own a car wash. Own a liquor store. Own a tractor you rent out to people in your area who want to plant a garden. Own real estate and rent it out.

As I tell my Unconventional Wealth readers, you build wealth by owning something tangible that returns capital to you.

Put another way, the big difference between the truly wealthy and the middle class is that wealthy people produce, and the middle class consume.

I don't mean that as a reverse class-warfare claim. This is not a political statement. I simply mean that wealthy people find a way to break the cycle of working for a paycheck and that they find themselves in a very different financial situation than those you might call "working stiffs."

So how do you follow the path laid out by the truly wealthy? You break the model of debt reliance by finding a way to "work for yourself."

The rich aren't brilliant. They put their pants on just like you. The difference between the rich and everyone else is that they own what delivers them their capital. Everything else flows from that point.

One way to own what delivers you capital is to buy a second home and rent it out. As I've written many times, 30-year fixed-rate mortgages are cheap right now. Bankrate.com reports the nationwide average is still just 3.75%. Historically speaking, this is a steal.

Visit www.trulia.com or visit www.zillow.com and search for existing homes in your area that are in your price range. Then contact a real estate agent and go tour them.

Schiff's book might be called "Business Brilliant," but you don't have to be brilliant to become wealthy. Simply commit yourself to ownership and you control your future.

Best regards,

Aaron

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Rating: 2.1/5 (7 votes)

Comments

LwC
LwC - 1 year ago
I'm not buying this book, or the premise of the marketing of this book. IMO this ground has been covered more objectively by the author of the book The Millionaire Next Door, which was published years ago and has been frequently updated as the authors augment their research.

IMO the book reviewed in this article is just another in a series of self-help books that purport to give the secret of making millions; just follow the simple seven point plan and voila, financial independence. In fact, a quick search reveals that this is just one title among several that this author has produced along the same lines. Clearly one way to wealth is to sell hope by writing books like this.

While The Millionaire Next Door was not intended by the authors to be a self-help book, there are a few very interesting points that jump out: most actual millionaires spend less than they earn, buy traditional investments but also invest in real estate and private business, defer income to avoid taxes, and drive cars that do not reflect the kind of car they can actually afford. BTW I find it very curious that the authors found that so many of the "millionaires next door" whom they studied used relatively inexpensive cars.

According to the authors of The Millionaire Next Door, owning a business is just one of the ways that people accumulate wealth, and not necessarily the most important one, although their research shows that many of the millionaires next door do own businesses. (Which goes to show that Schiff is not covering any new ground, but in my cynical opinion he is trying to profit by covering old ground as if he just discovered it himself.)

IMO the most important element is to spend less than one earns. That is, save early, save much and save often. A simple arithmetic exercise will reveal that starting out and for many years to come, most of one's building wealth comes from savings, not return on savings until a certain critical mass is achieved through compounding . Granted in many cases those savings take the form of investment in one's business, but IMO that certainly isn't the definitive element that Schiff and the author of this article promotes.

FWIW IMO one of the best "self-help" books on achieving financial independence is The Richest Man in Babylon by George Clason. It was first published in 1926, which goes to show that there is hardly ever something new under the sun when it comes to the giving and getting of financial advice. Of course I am compelled to add that another great self-help financial book is The Intelligent Investor, which presumably most GuruFocus readers are familiar with.

Good Luck.

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