Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School – Andrew Hallam

Here are my comments on the book:

How do you become a millionaire by age 30 through investing? To Andrew Hallam, a high school English teacher who by age 30 independently amassed over a million dollars through saving and investing, he states that it’s all about living well below your needs and using that extra money to invest in a select few low cost index funds. In addition, he states that timing the market, buying low and selling high, isn’t the trick but rather the amount of time that you invest for. The earlier you start investing, the more you allow your investments to grow through the power of compounding. Here are some of the points to the book:

 

1. Don’t be a slave to consumerism, rather learn to utilise your money to make even more money. This is one of the reasons, I believe, why the rich get richer and the poor get poorer. The rich understand how to use money to make them even more money and so they don’t spend it on frivolous things whereas the poor lack that education and blow an excessive amount of their money away on things they don’t need and don’t yield them a return. Invest in your own brain and learn how to use money to make even more. According to The Wall Street Journal, the average U.S. household in 2010 was strapped with $7,490 in credit-card debt. A Huffington Post business article reported in 2011 that 23 percent of Americans owed more money on their mortgages than their homes were actually worth. In Nevada, 66 percent of homeowners could sell their houses and still not have enough money to pay off their mortgages. Now here’s where things get interesting. You might assume it’s mostly low-salaried workers who overextend themselves. But consider this: According to U.S. author and wealth researcher, Thomas Stanley, who has been surveying America’s affluent since 1973, most U.S. homes valued at a million dollars or more (as of 2009) were not owned by millionaires. Instead, the majority of million-dollar homes were owned by nonmillionaires with large mortgages and very expensive tastes. In sharp contrast, 90 percent of those who met the defined criterion to be a millionaire-having a net worth of more than $1 million-lived in homes valued at less than a million dollars. If there were such a thing as a financial Hippocratic oath, many people would be committing malpractice on themselves. It’s fine to spend extravagantly if you’re truly wealthy. But regardless of how high people’s salaries are if they can’t live well without their job, then they aren’t truly rich.” He later states, The surest way to grow rich over time is to start by spending a lot less than you make. If you can alter your perspective to be satisfied with what you have, then you won’t be as tempted to blow your earnings. You’ll be able to invest money over long periods of time, and thanks to the compounding miracles of the stock market, even middle-class wage earners eventually can amass sizeable investment accounts. 

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2. Thinking of buying some real estate and not sure if you’re able to afford it? Do this quick calculation to check to see if you can by doubling the interest rate on your mortgage and see if you’re still able to pay it off. If you’re you’re able to pay for it, then you can afford it, if you can’t pay for it then you probably shouldn’t buy it. It reminds me of a lesson my mom taught me when I took out my first mortgage on a piece of oceanfront land. She asked me: ‘If the interest rate doubled, could you still afford to make the payment?’ According to the terms of the mortgage, I was being charged seven percent in interest a year. She knew at the time, that a seven percent mortgage was historically cheap, especially compared with mortgage rates in the late 1970s and 1980s. As far as she was concerned, if I couldn’t afford to pay double, or 14 percent interest, then rising interest rates could expose me. I would be one of those unfortunate guys caught swimming naked when the tide goes out. Her advice is a good rule of thumb if you don’t want to be stripped of your real estate. If you’re considering purchasing a home, double the interest rate and figure out if you could still afford the payments. If you can, then you can afford the home.

 

3. Time and time again do I read and hear from other smart investors that all you need to do these days to get your foot in the investing door is to buy low cost index funds; even investing guru Warren Buffett has stated the same thing. In the book The Little Book of Common Sense Investing by founder of American investment management company Vanguard, John Bogle, it states the same thing about buying low cost index funds. In the world of investing, if you buy a U.S. total stock market index fund, you’re buying a single product that has thousands of stocks within it. It represents the entire U.S. stock market. With just three index funds, your money can be spread over nearly every available global money basket:
1. A home country stock market index (for Americans, this would be a U.S. index; for Canadians, a Canadian stock index) 2. An international stock market index (holding the widest array of international stocks from around the world) 3. A government bold market index (money you would lend to a government for a guaranteed stable rate of interest).

 

4. Don’t let fund managers fool you into believing when they can “time the market” to maximize your profits. Statistically speaking, it’s very difficult to outperform the market on a consistent basis. If Warren Buffett can’t time the market, what makes you think these fund managers can? They’re only saying these things to get you to invest with them as they take a cut off of the amount that you give them to invest. “There are smart people (and people who aren’t so smart) who mistakenly think they can jump in and out of the stock market at opportune moments. It seems simple. Get in before the market rises and get out before the market drops. This is referred to as ‘market timing.’ But most financial advisers have a better chance beating Roger Federer in a tennis match than effectively timing the market for your account. Vanguard’s Bogle, who was named by Fortune magazine as one of the four investment giants of the twentieth century has this to say about market timing: After nearly 50 years in this business, I do not know of anybody who has done it successfully and consistently. I don’t even know anybody who knows anybody who has done it successfully and consistently. 

 

My rating:
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Check out the book here:

Amazon US
Amazon Canada
Amazon UK

 

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By Ryan Lee

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1 Comment

  1. […] the best way for expatriates to invest? Andrew Hallam, author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School, international school teacher, and millionaire by age 30 through saving and investing, states that […]

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