[Hey guys! Welcome Benjamin Davis from FromCentsToRetirement.com to the blog today. He’s been on an interesting journey lately hanging out with millionaires, and stops by to share some insight :) What a great way to soak up some knowledge, eh? Only costs you a cup of coffee!]
While doing my PhD in Germany, I developed CFS/adrenal fatigue and I feared I could not work for much longer. I didn’t know much about finances or investing at the time – I had only invested in the stock market for a few years using very simple strategies.
Therefore, I decided to educate myself financially, reading over 100 books on personal finance and investing in general. I did a few projections and I set the goal to retire by the age of 33 in Portugal (I literally live where people vacation!), and today I am well on track to do so, primarily through real estate.
As I educated myself, I decided that I needed a mentor. And I figured I would look for one in the area I wanted to retire in – mid-east Portugal, Europe.
If you’ve ever tried to get a mentor yourself, you know how difficult it can be at times. I asked many people whether they wanted to teach me how to get rich doing the same thing they did, but the answer came back negative over and over again. Until one person said:
Well I don’t have time for that, but I can tell you my story, maybe you’ll learn from it?
To this day I still remember how my brain started connecting the dots right then and there! I quickly shot back, “you’ve got time today?” and that was the beginning of something remarkable.
I went on to interview 19 self-made millionaires and multi-millionaires who taught me more than they’d ever know. I would invite them for a coffee, take out my notebook, and then ask them to tell me their stories. I would take notes like a professional reporter.
Finding them was a nightmare, however. At times I felt like I was wasting my time, and at others I felt like I had won the lottery and was learning things I would never have learned if I hadn’t talked to them.
I had all sorts of people interviewed. From cocky to humble, bankers to farmers. You’d expect to find a pattern in how they looked, but I didn’t. Some were dressed up, others looked close to homeless. Only a few told me their actual net-worth, but all of them, probably unconsciously, told me things that were instrumental for my own journey to wealth.
In this article, I will summarize 6 lessons I learned from them. I hope you can relate to them, and even more importantly I hope you apply some of them to your own life.
Lesson #1: Life Is About Way More Than Money
Antonio wanted to get rich desperately. He wanted to show his father how capable he was. He never told me what his father said that hurt him so much, but I could sense some revenge in the way he talked. He wanted to prove a point.
He told me his biggest mistake in life was barely living at all: “I barely had a life until today. I could never enjoy a dinner with my family or my wife’s cake. I could never stop thinking about improving my business and making more money. Even today, it seems that I don’t have enough – and that leaves me nervous.”
Antonio has a medium-sized retail business, which sells farming machinery. Back in the day, he used to run from small village to small village in order to find local farmers who would buy his equipment. Today, he stays at the business and sends his workforce to work. He looks like a concertmaster coordinating an orchestra.
He pays attention to every detail and has a huge hand-written database of clients and their needs. “This is worth gold” he told me, regarding his small notebook he started writing in long before e-mail was a thing. This guys knows marketing and the value of keeping a big record of clients, I thought.
The biggest lesson I learned from Antonio was that, even if it seems like it, life ain’t about the money. Not always, at least. Antonio ended up developing an inability to feel good when achieving something. He’s always wanting more. Even now that his business has expanded into 6 cities, he’s not satisfied. He never will be.
Lesson #2: Do What You Love, and The Money Will Come
Jose told me he never thought he could become a multi-millionaire selling tiles. “I never thought anyone could make a decent living doing this, even though I always loved home renovation and tiles.”
(If you’re thinking this is a strange thing to love, btw, know that Portugal has a history with tiles, bricks and stones. If you ever visit Lisbon you’ll understand why!)
“I wanted to become rich, so I started multiple businesses. I would move from business to business, looking for one that was really profitable, until I started selling homes.” But Jose never really made significant money selling homes. “The market was always very volatile, and crashes were terrible for us. This is not London or New York – it is a small city with a small market.”
A prospective buyer once told Jose he would buy the home he showed him, but only if he could find someone to renovate it for him on the cheap. He didn’t like the tiles in the kitchen and in the bathroom, but Jose knew no one he could refer to.
“I remember looking for days, asking all the other brokers in the company, but no one knew any business doing that.” Eventually that led to Jose setting up his own renovation business, and he started buying tiles in massive amounts for not only his own business but for other contractors too. Contractors who normally buy tiles in bigger cities, like Porto. It was a costly and slow process, but Jose saw an opportunity and jumped on it – eventually making more money on the tiles themselves than all the renovations!
He finally gave up the renovation business and focused solely on what he loved the most – selling tiles. Which eventually made a multi-millionaire. “Whenever anyone asks me what I do, I very proudly say that I sell tiles!”
Lesson #3: Taking Risks Is a Part of Wealth Building
“I mortgaged my house and I didn’t tell my wife. She would have had killed me if she knew!” I cannot name the guy who told me this as part of our agreement (he said I was the only one he ever told!), but for the sake of this article, I will call him “A.” A. was definitely the richest guy I interviewed, even though he didn’t reveal how much his net worth was. (He also didn’t pay for the coffees either. :-))
A. had a wonderful life. He had “the most beautiful girl in town!” and owned two paid-off homes by the age of 25 (and this was about 50 years ago. “No one had a house back then – only the rich!”) I asked him whether he was rich then, and he told me that he only became rich later on – after risking his two homes in a matter of months.
The story goes that this guy use to run a bike business. Back then, bikes were a true luxury and not many people had them. He would fix and sell bikes for the rich, but he “would never become one in the bike business.” Eventually, the real estate where he had his business was listed for sale. He decided to mortgage his home to buy it.
“It was not a smart move at first – my rent was fairly low so it didn’t make sense. I was starving for wealth – it was an impulse buy.” But a few months later, when he sold his business, he became highly aware of the value of that piece of real estate. “The guy who bought my business didn’t want to pay me dividends as part of our agreement, so instead I charged him a higher rent on the property I still owned – and he accepted!”
A. eventually realized he could replicate what he had just done, so he opened another bike business in a nearby town, bought the location from under it, and then listed both the business and the attached real estate for sale.
The word spread fast, and A. would sell his businesses for small losses, but more than recoup the money from the lucrative rents attached.
He’s still doing this today, decades later. Creating and franchising businesses to owners, who then agrees to move shops where A. wants them to: at his own locations! I remember this story every time I pass by a McDonald’s, as they have a pretty similar model as well.
(Interesting to note, A. still owns that first location he rented out and the bike business is also still there, now run by the second generation of the family.)
Lesson #4: Money Cannot Be Sitting In The Bank
This is also something I learned from A., as well as most of the other guys. All that A. does today in his holdings is making sure that liabilities are never too low and that money is always available. “I cringe if debt is too low – there must be something wrong!”
But what is really bad according to him is “money simply sitting in the bank.” He says there are 100 reasons to put it to work, and not one to hold onto it. I am not sure he didn’t overdo it there – as I think that holding onto cash can be an intelligent decision too. However, I totally understand why he said that, and that philosophy has worked quite well for him over time.
[Editor’s note: I agree there’s nothing wrong holding onto some cash – not every dollar always needs to be maximized! They all have their own place in the equation….]
Most of the guys I interviewed told me that money is not made to stack up. “You can stack it at the top but it will vanish from the bottom” one of the millionaires said. These guys all lived through high inflation periods, so even those making more money than they could spend understand the power of inflation.
Lesson #5: Working For Someone Else Won’t Do The Trick
The only guy I interviewed who still worked for someone else was a banker. Yet, he had so many investments and had invested for so long that he could barely keep track of them all. When I asked him why he hasn’t left yet when he obviously can, he said “I like working at the bank, that is why I never quit. Plus, the benefits are great!”
He’s following lesson #2 :-)
All the other guys I interviewed, however, had businesses of their own. Though to be fair, finding millionaire employees would have been way more complicated to find so I didn’t even try – thinking I wouldn’t find many anyways. At the end of the day, most of the millionaires told me that they would have never accumulated so much wealth working for somebody else.
Manuel was the biggest advocate of self-employment among the 19. “I did $100k in one month, and almost $1 million total that year (this was probably in the 90s – my notes fall short on this, sorry!). Tell me a job where I could make that much? I only worked for somebody else when I was 14. I realized that it wasn’t for me when I had to deliver the profits at the end of the day and be given only a small portion of it. That made no sense to me…”
“Working for yourself is the best thing you can do. No boss, no rules and no limits.” Manuel went on to say. He even told me he “felt sorry” for some of his employees because they’ll never truly understand how much better off they’d be going out on their own.
I personally still work for a university where I do research part-time, so I see the merits of working for someone else, especially in what pertains to safety and comfort. However, I want to work entirely for myself after March 2018. My real estate portfolio should yield enough money to employ me by then :)
(Editor’s Note: I have to disagree here. While it may take longer getting wealthy working for someone else, it’s still very much do-able. Check out this 401(k) millionaire! You also have to keep in mind that not everyone has the personality or would be GOOD at running their own business. It takes a certain personality, along with a whole lot of risk. So if you know yourself well enough that a 9-5 is the place for you to be, then keep on rockin’ it and continue doing your thing. Self-employment can be amazing, but it’s not for everyone (nor is it the only path).)
Lesson #6: Educate Yourself Financially… and on Everything Else!
The first step I took towards becoming financially independent was educating myself by reading tons of books on personal finance. It surprised me that most of the millionaires I interviewed didn’t know who Robert Kiyosaki was (whose quote, “If you want to go somewhere, it is best to find someone who has already been there” led me to interview these people in the first place!), or even who Warren Buffett was.
Side note: If you haven’t yet, you should read Rich Dad Poor Dad by Robert Kiyosaki, or check out my own Rich Dad Poor Dad summary!
But it’s obvious they educated themselves financially in other ways, like by reading the newspaper every day and learning through their own businesses on how to negotiate, make more money and ultimately scale. Most of them learned through trial and error.
I also noticed how most of them were really curious about how things worked in general. One asked me “How much do you think this café makes every year?” as we were sitting there in it. I didn’t know the answer, and neither did he (he was just trying to take an educated guess and fostering discussion) but it showed how his brain worked. During another interview, the guy started asking me so many questions about my own job that it seemed like I was the one being interviewed!
So basically, knowledge is key. And it seems that the rich understands this like nobody else.
I’m in the process of writing a big book on all these notes I’ve collected over the interviews, and if you’d like to be alerted when it comes out, be sure to sign up to my blog. It will include parts of all my interviews and many more lessons that I haven’t put here.
Hope you’ve enjoyed the article!
Ben blogs at FromCentsToRetirement.com and covers everything from investing to real estate to how to be a great landlord. He’s also published a book on early retirement titled, My strategy to retire early: My journey to become financially independent and retire in my early 30s.