Quit Like a Millionaire by Kristy Shen is a no-nonsense guide to growing your wealth and managing your money. Kristy Shen’s mathematically proven approach to savings, investing, and spending will not only free you from debt, but will also put you on the path to financial independence.
The best part? To get there, you don’t have to become an entrepreneur or a real estate baron. The only thing you need is a spreadsheet and some careful planning.
You may still be wondering if you should read the book. This book summary will tell you everything about this book so you can decide if it is worth your time.
At the end of this book summary, I’ll also tell you the best way to get rich by reading and writing.
Without further ado, let’s get started.
Table of Contents
Quit Like a Millionaire Book Summary
Lesson 1: Chinese culture has instilled in Kristy the belief that debt is a dangerous and unavoidable trap.
It is common for Chinese people to save a significant portion of their income, with the average person saving 38%. In contrast, the average American saves 3.9% and the average Japanese person saves 2.8%.
This difference in savings behavior may be due to various cultural factors, including a history of corruption in China and a favor-based economy that lacks formal credit channels like bank loans.
In the past, making a major purchase often required either taking on a large amount of debt or saving enough money to pay for it outright. This has led to a cultural view of debt as more than just an “IOU,” but rather as something that can put one in a position of being controlled by the lender.
As a result, it is not uncommon for Chinese people to be cautious about taking on debt. While these cultural differences are important to recognize, the value of saving and avoiding debt is universal.
Take the Rule of 72, a mathematical concept developed by an Italian mathematician named Luca Pacioli in the fifteenth century.
The concept helps you calculate how long it will take for your investment to double. To use it, divide 72 by the expected return on your investment. For example, if you have a $1,000 investment that yields a 6% return, it will take 12 years (72 divided by 6) for it to double due to compound interest.
However, for borrowers, the Rule of 72 can be a hindrance as it shows how quickly debt can accumulate. For instance, if you borrow $1,000 at a 20% interest rate, it will take just 3.6 years for the debt to quadruple if you pay it back over 72 months. It’s important to be mindful of debt and consider paying it off before the start of the new year, as per Chinese tradition.
Lesson 2: The current financial problem caused by consumer debt must be addressed quickly.
A vampire that feeds on debt. He wears down your resources to nothing. Worse, he scares you out of nature and keeps you in a never-ending rat race of debt payments and work. You must drive a stake through his heart if you are ever to achieve financial freedom.
If you want to get out of debt quickly, focus on consumer debt first because of the high-interest rates. As a first step, reduce your spending to the bare minimum. It hurts, but it has to be done. You should expect your debt to increase at an alarming rate thanks to the Rule of 72. With interest rates at 10% or 20%, there’s no point in saving or investing money, and there’s no way to leave debt behind. Find a way to earn extra money, whether it’s by working a part-time job, renting out a room in your house, or cutting back on restaurant visits.
Next, rank your debt from highest to lowest interest rate to determine which you need to pay off first. If you are dealing with a group of vampires, it is best to kill the one with the biggest appetite first. To avoid falling behind on your credit card payments, make at least the minimum payment each month and leave everything else to the lowest creditor. While it’s true that eliminating even the smallest debt can give you a sense of accomplishment, you should keep in mind that you are not doing this for an ego boost, you are fighting for your independence.
The last thing to do is refinance your credit. Many credit card issuers now offer periods of 0% interest where you can transfer your debt from one card to another without incurring finance charges. As a rule of thumb, this lasts for a full calendar year. Use this option if you are sure that you can repay a debt in full during the grace period. Remember, however, that these companies are betting that you will not, and therefore can increase your interest rate and take advantage of you.
Remember, trying to achieve financial freedom while carrying a significant amount of debt is akin to trying to run a marathon while carrying a load of bricks. Take out the financial vampire if you want your wealth to thrive.
Spend your money on activities rather than material possessions if you want to increase your level of satisfaction.
The connection between cocaine and retail therapy lies in the pleasure chemical dopamine and its effects on the brain. When a person experiences something positive, their brain releases dopamine to the nucleus accumbens, which processes this chemical and leads to a feeling of pleasure. This can be triggered by both luxury purchases and addictive substances like cocaine.
The nucleus accumbens also responds to the anticipation of rewards, leading to a constant raising of expectations in cocaine addicts and compulsive buyers.
As a result, they may need increasing amounts of the substance or money to achieve the same level of pleasure. It’s important to note that while money can bring happiness, it depends on how it is used.
Kristy found that people who invested in experiences rather than material possessions reported higher levels of happiness. This is because the excitement and enjoyment of experiences tend to last longer than the initial rush of pleasure that comes with acquiring a new object.
The nucleus accumbens, a part of the brain involved in processing pleasure, becomes accustomed to new objects over time, leading to a decrease in the pleasure they provide. On the other hand, the skills and memories gained from experiences can provide lasting enjoyment.
For example, learning to play the piano or visiting Rome on vacation can provide long-term enjoyment through the skills and memories gained from these experiences.
Lesson 4: Contrary to popular belief, real estate investments are not risk-free.
While many people may avoid borrowing money, mortgages are often seen as an exception. Buying a home is often viewed as a significant milestone in one’s life and a smart financial decision. It is believed that buying real estate can lead to profit through its potential increase in value.
However, this is not always the case. The true costs of owning real estate can be numerous and varied. The average length of home ownership in the United States is nine years, according to the U.S. Census Bureau.
These homeowners often invest in real estate with the hope that it will appreciate in value, but this value can fluctuate with inflation. Even if we assume that prices always rise by 6% per year, there are still additional costs to consider, such as title searches, registration fees, and legal fees.
Let us say the Smiths are our friends, and we offer them $500,000 to buy their house. That sum would increase to $844,739 if we applied the inflation rate of 6% per year for a full nine years. That’s a profit of $344,739, which is not bad at all.
But wait, before the Smiths can buy the property, they must perform a title search at the Registry of Deeds. It costs $1,000. There is a $150 fee to register the title. The lawyer who handles the paperwork costs another thousand dollars.
And what about the insurance? In the United States, a rate of 0.5% of the value of the home is very common. This equates to $22,500 over the course of 9 years if paid annually. Because of the annual property tax of one percent, another $45,000 must be paid each year. At the same time, the Smiths follow the standard recommendation of real estate agents and set aside one percent of the annual value of their home each year for maintenance. The additional amount is $45,000.
It’s not a cheap deal. A realtor’s commission of 6 percent of the sale price is $50,684. The real estate transfer tax is not insignificant at 1.2 percent or $10,137. Yes, there is another legal professional who charges $1,000 per hour.
That amounts to $175,571 or 51% of the Smiths’ total income. However, the issue of interest remains to be discussed. The Smiths, like many buyers today, put down 10% in cash and borrowed the other 90% from the bank. Over the last nine years, a total of $162,033 in interest has been paid.
In dollar terms, that’s an amazing 98% of the final sale price. Keep in mind that we originally factored in 6% annual appreciation for the Smiths’ home. That’s much higher than the actual inflation rate in the United States, which is about 2%. In the real world, the Smiths would have lost money.
Lesson 5: The risk of losing money is lower when investing in an index than when investing in individual stocks.
Robert Kiyosaki, a well-known American economic expert, once stated that “poor people buy items, middle-class people buy houses and the rich buy assets.” By this, he meant that wealthy individuals invest in things that increase their wealth. However, you do not need to be a multimillionaire to follow in their footsteps.
There are two main types of investments: stocks and bonds. One option is to follow the lead of Wall Street experts and invest heavily in research and complex algorithms to choose the best companies to invest in. The other option is simpler, less expensive, and safer than the first.
Index investing describes this method. You are basically betting on the casino itself and not on specific horses. The casino receives money regardless of the outcome of the race. Let us look at what this means.
Companies on the market are ranked in an index based on their market capitalization. Any money invested in an index fund is a bet on the future success of each company included in the index. Investing in the index reduces the impact of poor performance by any one company because it contains shares of many successful companies. If all the companies in the index go bankrupt at the same time, you go bankrupt too.
This is not likely at all. And why? The good news is that index investing comes with a sophisticated internal thermometer. The index will pick up more shares of a company when it goes up in value, and vice versa. The index will increase its holdings in a company whose stock price rises dramatically after the company announces the launch of a breakthrough smartphone. If the share price of a major car manufacturer suddenly falls, the index will sell its holdings. And if a company’s value drops from 500 to 501, it will be removed from the index altogether.
That’s why major indexes like the S&P 500 (a ranking of the 500 largest U.S. companies) are constructed the way they are because they are such a simple measure of the health of the stock market.
Investing in an index is also helpful for your finances. The low complexity of the concept eliminates the need for a human fund manager. Typical index funds in the United States charge only 0.04% in fees, which is 25 times less than actively managed funds. On every sale, no dollars are deducted. If you want to make the bank manager sweat, invest in index funds.
Quit Like a Millionaire Book Review
Quit Like a Millionaire is a great book I’d like to recommend to anyone who is interested in business and finance. If you spend some time digesting the ideas, it might make a positive impact on your life.
A simple rule can help you gain control of your finances: Do the math. This means that you should not listen to well-meaning people who advise you to follow your passions, but to those who advise you to study something that will help you pay the bills. It also means going against popular opinion if you think it is right to do so.
If you do the math, you may find that investing in the stock market is a better long-term investment than buying a house and taking out a mortgage. And why? The key to financial security is to build up your money while protecting it from interest rates that could completely eat it up. That’s good news because it brings you one step closer to your ultimate goal: early retirement.
Despite consumer culture’s claims to the contrary, the joy it promises rarely lasts. However, it also produces garbage. Quite a lot of garbage. Dress. The Guardian estimates that Americans throw away 11 million tons of clothing each year. And so you can do the same with your own closet: Make it clutter-free. You can easily create more closet space by putting all your clothes on the left side and taping off an empty hanger in the middle of your closet.
From now on, place all your clean clothes on the right side on the hook provided. You can see how often you use the different garments over time. On the pile on the far right you will find the eye-catching pieces of your closet, in the middle the pieces that you wear but rarely, and on the left the useless pieces that you never wear.
Both Kristy Shen and Bryce Leung trained as engineers in Canada before opting to retire early.
The two are now millionaires, and they spend their time giving talks and writing articles for their self-help platform, Millennial Revolution.
Media outlets around the world have featured their inspiring true-life story, including The New York Times, The Independent, Handelsblatt in Germany, and Women’s Health Magazine in Australia.
If you like the book Quit Like a Millionaire, you may also like reading the following book summaries:
- The 7 Habits of Highly Effective People
- Rich Dad Poor Dad
- How to Win Friends & Influence People
Buy The Book: Quit Like a Millionaire
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How To Get Rich By Reading and Writing?
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