Saturday, April 16, 2011

Millionaire Manual

The Millionaire Manual is a book that teaches you how to build wealth step-by-step. I decided to purchase it last year because I'd grown tired of reading books about building wealth that were mostly pep talks. At only 147 pages, it's a very short book. The book outlines 106 steps that one should take to start accumulating wealth. At first, this seemed a little daunting but upon closer inspection, I realized that some of the ideas were quick and simple to execute and others were simply substeps. So, completing the substeps is inevitable as I work through the main step. Since the author does not go into much detail, the book would work well as a companion to a more comphresensive financial guide. There were a few sections where I felt that he should have expounded more. He writes a lot about investments, but each investment topic is about a page. Half of the page is dedicated to questions for the reader to answer. Of course, if you don't know enough about the topic you can't answer the questions. That's really my only complaint with the book. Otherwise, I think it's a very comprehensive guide and I was relieved to see that a some of the steps are things that we're already doing.

Step 1: Assess your financial condition to determine your assets and liabilities. We did this with the help of this spreadsheet. Unfortunately, our two mortgages, with one house that is underwater, made our net worth lower than we'd like. The good thing is that we have room to grow our net worth in other areas like our savings and investments.

Step 2: Familiarize yourself with the tax code. I do our taxes every year so I'm pretty familiar with the rules and deductions that apply to us. With the help of this book, I've realized that we need to focus more on decreasing our adjusted gross income since we don't qualify for most of the tax credits.

Step 63 and 64. Enroll in and contribute to a 401K and IRA. We've been doing this for several years now. We plan to start contributing to our Roth IRA more.

Step 72. Use financial planning software to help you manage your money and investments. Unfortunately, he doesn't recommend any in the book but we've been using one for a couple years. I've researched this thoroughly and unfortunately there is not one program that offers a complete solution. We just picked the one that came closest to meeting our needs.

Step 74. Keep track of your financial investments using free online resources. My personal favorite is MSN Moneycentral. I also like to use because I can view our investments along with news, weather, and other topics that interest me on one page.

Step 76. Pay bills by the due date. This is a no-brainer. Some people's situations may prevent this but the penalties that come with paying late only put you further in the hole.

Step 78. Review your credit report each year. I am fortunate to live in a state where credit bureaus are required to offer one free credit report per year. Even if you have to pay to get a fee to get a copy of your credit report each year, it's important to know what's on there.

Step 79. You only need two or three credit cards. We only have two and neither of them are store credit cards that charge such ridiculous interest rates.

Step 87. Donate to charity. We don't do it enough but we do make a few donations every year. This is another area where we can step it up a little.

Step 92. Know your FICO score. This is one step that I disagree with. Although we do know what our score is, we know it because our mortgage broker told us. I don't think this is something anyone should pay for. If you're tracking your credit history, you should have a good idea of what your FICO score is. If you apply for credit on a car or mortgage, just ask what your score is. We've found that they're happy to tell us.

I'm commiting to tackle step 5- invest in yourself, step 6 and 93- complete a written and photgraphic asset inventory, and step 13- complete a wealth planning cycle, in the next 30 days.


Kerry said...

Excellent information! Thanks for sharing.

Daria said...

Anything that makes you feel more secure and confident can only be good for you... :)

pbquig said...

Well, lots of advice for your buck with that book. I don't know about knowing the tax code, I took two courses in income tax law in law school and my efile just got rejected, lol. I might not be meant to be a millionaire.

Pirate Knitting

Poddys said...

I find it really helpful when I am told how much I ought to be putting away for my retirement, and how much I could be saving tax free, when the amount I earn barely covers our living costs as it is.

Just how are we supposed to save for retirement when there isn't any money spare.

As always, money makes money...

Tara Tyler said...

very interesting!
will you remember us if it works?
way back when you did the A-Z blog...
Happy M Day! (on O day)