Quit like a millionaire is a book about the FIRE (Financial Independence Retire Early) Movement. The author of the book was written by Kristy Shen and Bryce Leung.
quit like a millionaire book summary
I didn’t like this book at first because of the way that it started, but it turned into one of my favorite personal finance books.
I would recommend this book to anyone considering financial independence.
Like I said before, this book starts out negative with the author talking about the scarcity mindset. The author was an immigrant from China. She talks about how poor she was in China, and how that warped her view of the world. However, she likes that she was poor because it allowed her to save enough money to retire. She constantly lived in fear of losing money and not controlling her future. She suggests that everyone else has the same mindset and suggests that many people are too soft to save enough money to retire. You have to toughen up to become like her.
She also suggests that scarcity made her creative. Since she didn’t have enough money to buy fancy things, she learned to live on less. She would stretch her resources farther than most people. She left college with no student debt.
Then she goes into talking about how she spent a lot of money early in her career until she realized she was doing so pointlessly. Her husband helped her a lot along the way too, which goes to show you that it wasn’t really the scarcity mindset that helped her to achieve her dreams.
She saved a million dollars which is where the title comes from, but she didn’t do this by herself. Her husband was also responsible for a lot of the savings. They both had high paying jobs as software engineers.
She offers some great advice in this book to those pursuing financial independence.
Decrease Expenses and Increase Savings
Your savings rate determines your time until retirement. The more you save; the faster you will retire. If you are trying to retire early, then you should save more than 50% if possible.
The author also recommend several ways to save more money.
- Eliminate baseline costs first – this is things like bank fees, subscriptions you no longer use, cable packages, land lines etc.
- Eliminate baseline costs that hurt but that you’ll get used to
- Eliminate expensive things that cost you money – this includes things like buying a car or a house.
Debt
Don’t have consumer debt. It’s the worst kind of debt.
Don’t invest in the market until you’ve eliminated your consumer debt. Consumer debt has a higher rate than market returns, so you should not be investing before you’ve eliminated debt like credit card debt.
Housing
Don’t buy a house. Buying a house is a trap unless you are going to rent a portion of it out. Most housing increases at the rate of inflation. This rate of inflation will not be enough to cover all the expenses – mortgage interest, property tax, pmi, repairs, upgrades, etc. If you put 20% down, then you also most likely concentrate most of your wealth into your house and not into your investments.
Investment strategies
The author also provides several investment strategies. She focuses on modern portfolio theory. This was also covered in Money Master The Game by Tony Robbins, but Kristy makes it easier to implement since she provides specific detail.
She also recommends etfs because they have lower fees than index funds.
She does recommend buying etfs that mirror indexes like the S&P 500. She doesn’t stop at that though like most other FIRE authors. She recommends adding bonds to your portfolio so that your portfolio survives in a downturn. She also recommends rebalancing your portfolio when one asset class performs better than the other.
Taxes Matter
If you’ve followed any of my content, you know that I talk a lot about habits and the compounding effect. What this means is that small habits and percentages add up to big numbers.
I look at taxes and fees as small things that most people neglect. The author talks about how rich people pay the minimum amount of tax possible. They do this because they know they can gain greater wealth by optimizing taxes in their portfolio.
Kristy provides guidance on how to balance your portfolio so that you pay the least amount of tax possible. The advice she provides is way better than most other FIRE authors as well.
In general, I’d advise any looking to retire early to put the maximum amounts into their pretax accounts like a 401(k). The greater the amount in your investments accounts, the faster you will retire.
A lot of her strategies do depend on the reader having investments that result in long term capital gains which means you must hold investments for more than a year. That’s just something to keep in mind as you read because she doesn’t mention that many times.
When you retire
Once you decide to retire, the author provides many great strategies to survive retirement. This includes a roth conversion ladder. You can go to the madfientist.com to learn more about roth conversion ladders, but it basically entails converting a regular ira to a roth ira.
Unfortunately, you can’t withdraw from a roth ira until 5 years after contribution. Once you retirement begins, you won’t be earning any money, so you should contribute the amount of your standard deduction to a roth ira. Do this every year of your retirement. 5 years down the line you will be able to withdraw that contribution tax free. THe author provides specific details and charts on how this works. I recommend grabbing this book just for that. You should also consult a cpa before doing any of this.
The author also recommends changing the mix of your investments once you retire. She has a certain reasoning and strategy behind it. You should pick up the book to find out the specifics of that. Her strategy will help you increase your chances of making it all the way through your retirement with the maximum amount of money.
Different types of financial independence
One of the best parts of the book is the ending where the author speaks about the different types of people that reach financial independence
Each one of these characters is good at one of three things. The three things are producing income, investing or saving. People that achieve financial independence are exceptional in at least one of these categories.
The hustler – this is the first type that the author covers. The hustler is exceptional at creating income and average in the other two categories. These are people like Elon musk. These people usually take a lot of risk to make a lot of income. They are willing to sacrifice their investing and savings to make more money.
The next person is the investor. The investor is exceptional at investing and average at everything else. Think of someone like warren buffet.
The last “type” that the author profiles is the optimizer. This person is exceptional at saving and average at the other categories. The author says that she falls in this category.
I think this section was meaningful because it shows that you don’t have to penny pinch to make it to financial independence, but you do need to be good in at least one of these categories. She could have easily not covered the fact that there are plenty of people that are insanely who rich who don’t pinch pennies, but she chose to show that it is possible to become rich other than pinching pennies. However, you most likely will not become rich as an employee of a corporation unless you save and invest your money wisely.
Other advice
There is also tons of other advice that the author covers such as:
- How to retire with kids
- How to have health insurance when you retire
- What types of insurance you need when you retire
- Tax optimization strategies
- Specific fund guidance
- Fantastic charts to help with retirement advice
- What number should you shoot for in retirement
The amount of advice in this book is phenomenal, so make sure to check it out.
Conclusion
In conclusion, anyone can reach financial independence. Even if you don’t make that much money. However you must save and invest starting today. You also can’t ignore fees and taxes if you want to become rich. If you want detailed strategies on how to retire wisely, make sure to check out the book Quit like a millionaire.
