Lessons I Learned From Everyday Millionaire by Chris Hogan
A book that I don’t see a lot of people talk about, but one that’s important. How does one learn to gain wealth? You have to study who has done it.
I read this book through my Kindle. The one book I purchased, and I don’t purchase many books. Every year, I’ll go back to this book and re-read sections.
The book in three sentences:
Hogan studied and surveyed 10,000 millionaires (majority of them did not know Chris Hogan or Dave Ramsey) and started to understood how they got to where they are. He realized very common things that majority of millionaires did. He also realized they didn’t have extravagant jobs either.
About Chris Hogan:
- Had a show on finances called the Chris Hogan Show (the show is now canceled as Hogan is not apart of Ramsey Solutions anymore)
- New York Times Bestseller
- Studied 10,000 millionaires
- Was close friends with Dave Ramsey who produced the book, Total Money Makeover
To learn more about Chris Hogan:
Click here.
Three lessons from the book:
Lesson 1:
Roth IRA (individual retirement account) and 401k are important:
I stress this idea in many of my reviews on financial books. These are important investment options that Chris Hogan found out that 71% (7,100 people) used these accounts.
401k:
The 401k is a conbination of stocks and bonds. This makes it secure, and the amount you invest will compound. This option is offered by an employer and is free money if the employer matches you. If the company matches up to 5%, then they put 5% into your 401k. Many people don’t take that free opportunity, and the millionaires do.
Roth IRA:
This account grows tax free. There is a contribution to this, but this is a useful tool that millionaires use. They put any extra money from their monthly income in the account.
This option is used more for the millionaires who had their own business, but Hogan found out that many people had both: a 401k and Roth IRA. My plan is to use both once my debt is paid. At the moment, I’m contributing 7% of my paycheck into a 401k.
What about stocks?
Chris Hogan mentions that the millionaires he interviewed rarely invested in stocks. I would argue that investing in dividend stocks are good because you are getting your money back. You are then able to use that money to reinvest in more of the company’s stock. Hence, you are growing your investment portfolio.
There is risk to this investment like investing in real estate. The company you invested so much money in might go bankrupt, so you lose all that money. The same applies to real estate where you might lose all your money because the bank stated you had to pay this loan off in only 90 days. This is what happened to Dave Ramsey. Dave Ramsey became a millionaire, but he soon had to declare bankruptcy. He went into $4,000,000 into debt because of real estate.
The importance:
The point is that millionaires have two retirement investment options to help them get the nest egg they need when they are older. They use compounded interest as their friend. Over time, the interest builds more. This is the reason why investing young is a great option. When you invest in a Roth IRA and/or 401k at age 20, you are almost having 40 years of compound interest building. If the person keeps putting money on this nest egg each month, the person will have a large nest egg (above a million) when their older. People can increase their monthly contribution when they have no more debt and when their income increases. The more contribution you put in both accounts when you are younger; the more money you are going to have for retirement.
Also, you have to think of inflation. A million dollars in 40 years might be like getting a $1,000 right now. The cost of health care, rent, groceries, and gas are going to be significantly higher in the next 40 years. This means you have to put more money in those two accounts at a younger age.
However, if one invests later at age 40, they will only have 25 years of compound interest that will build. This is a difference of 15 years, which is big when we talking about compound interest. If you’re in this boat, you have to put in more money each month than the 20 year old to retire comfortably.
Lesson 2:
Millionaires don’t get rich quickly:
Because investing takes a long time to build, millionaires don’t get rich over night. Many people think so, but this is not true.
The average millionaire age is 49 years old, so they had at least 25-29 years of investing to get where they are now.
When Chris Hogan interviewed people, the most popular jobs to become millionaires were engineer, accountant, and teacher. Many people with normal jobs like teachers became millionaires from saving in investment accounts.
There was one story that I will always remember. There was a person that worked as a custodian his whole life. He did not spend his money. Rather, he invested it. He actually invested in stocks that grew over time like General Electric. He researched great companies to put his money, and he did that. When he died, he had $8 million in investments. This story shows that he didn’t become a millionaire quickly. He achieved that over time in a normal job where he did not have to build the new electric car or build a company like Amazon.
Lesson 3:
Do they inherit money or get lucky to achieve this status?
Only 21% (2,100 people) had an inheritance while only 16% (1,600 people) had an inheritance over $100,000.
The answer to the question is no. Majority of them (8,400 people) worked hard with parents that were poor. Their parents money never went to them.
The people were not lucky either. They managed their money carefully over time with a budget and lowering costs as needed. They lived well below their means. Because of that, they invested their extra cash into a Roth IRA and a 401k.
What about loans?
Majority of the millionaires he interviewed came out of college with no debt. They usually went to a public university for far less (around $30,000 less) for about the same degree.
This way they can start building their wealth right when they get their first job. Again, they started investing in the accounts mentioned in Lesson 1. I would argue to invest in the Roth IRA while in college. This way you already have a start toward retirement. You have already built the habit in college to invest. The habit will continue when you get more money with a full time job after you are done with college.
Final thoughts:
This book is similar to the Millionaire Next Door by Thomas J. Stanley where the millionaire is actually the person who has a medium sized house and uses a used car. One would not expect he, she, or they have a lot of money, but they do. This is an insane book to read and opened my eyes again that the millionaire is not always the person with a f*cking Lamborghini in their driveway.
What do you think of the book?
I would love to read your comments about the book. What did you like? What did you not like? How did it help you?
Reference:
Hogan, C. (2019). Everyday Millionaires: How Ordinary People Built Extraordinary Wealth–and How You Can Too. Brentwood, TN: Ramsey Press.
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