Review: Millionaire by Thirty

It’s probably wrong to call this a review. It’s more of an outline. So here goes:

Preface – The book starts out with some big promises. It shows how the author educated his sons who started out with $30,000 incomes to be millionaires by thirty. Not only that, but it promises not to be focused on frugality like avoiding lattes for 40 years – a clear shot at personal finance guru David Bach.

Chapter 1 – This chapter focuses mostly on promising to tell us information later in the book. In the meantime, Andrew tries to identify with those who feel “confused”, “isolated”, and “powerless” about their money, especially since “most people in their 30s have a net worth of $15,000.” In ends, with the all too common issuing of a “challenge.”

Chapter 2 – This is where the book gets good. The chapter focuses on identifying dangers, opportunities, strengths. There are several of each listed, but I’ll just give an example of each. A danger is trying to live like your parents. The parents might not be financial sound and they probably make more than the young adult out of college. An opportunity is having time on your side. A strength is the Internet, the ability to research almost anything quickly and communicate with others anywhere instantly. While these examples don’t sound exciting there are a couple that give a hint on how the million dollars is going to be achieved without frugality on a limited starting salary.

Chapter 3 – This isn’t just chapter 3, it is Andrew’s homage to the number 3. He cites just about everything except Schoolhouse Rock’s Three is a Magic Number. There are a lot of topics rolled into this chapter, but the main premise is that there are strivers, arriver, and thrivers. The strivers are really living paycheck to paycheck, the arrivers are doing the right things and the thrivers are doing quite well. An illustration in this chapter gives more hints or things to come. The striver has no ownership. The arriver owns their home. the thriver owns multiple homes. Yes, the secret sauce of this book is going to be leverage with real estate.

Chapter 4 – This chapter brings us back to the basics of personal finance. It covers paying yourself first, and budgeting with the envelope system (as well as a more advanced system). Then it gets to a murky area of suggesting that it might not be best pay off a student loan at 7% and that it would be wiser to put the money in a conservative investment earning 8% (which he’ll give more information on later). He suggests that because student loan interest is deductible to an extent, you are better keeping that. Finally, Andrew suggestions only putting the amount that is matched by an employeer in a 401K account. He’s going to show us how to do better later in the book.

Chapter 5 – This chapter covers the basic concept of compound interest and the complex topic of taxes. Jumping between the two is a little like learning multiplication tables and Calculus at the same time. As part of the tax writing, Andrew discourages investing in 401Ks and Roth IRAs because you still have pay the tax at some point. He suggests ignoring traditional CPAs and investment advisors and keeping an open mind. I’ll be honest, it’s awfully difficult to do this. You’d think that CPAs would know a tax-free investment environment. That kind of thing has a tendency to spread like wildfire.

Chapter 6 – Andrews starts off this chapter by giving what I’ll simply say is bad advice: Renting is like throwing money away. It really depends on where you live and what the rental market is. Where I lived in Silicon Valley home prices were routinely over a million dollars leading to a mortgage that would have upwards of $6000/mo. Renting the same place was less than $3000 a month. At some point if you can rent at a much lower rate that a mortgage would be, it’s better to rent and pocket the money to invest elsewhere. The Silicon Valley market is an anomoly, but it’s important to realize that blanket statements like this can be dangerous.

The chapter goes on to say that if you were making $800 rent payments, you could probably afford $1000 mortgage payments because of the tax deductions. That logic simply dies when you realize that, as a homeowner, you have to have money to cover repairs on the home. To his credit, the author mentions the need to pay extra for insurance and property taxes.

The author then suggests that you don’t wait until you have a 20% down-payment before buying a home. Again this is dangerous advice. Andrew also suggests that “if you need to relocate in a year… you can… sell it and buy a different home. Sure, if we gloss over the costs of selling the home (typically 6%).

As if to seal the deal, Andrew offers the story of his son who had bought a place for $170K that appreciated to $240K after 3 years and how that lead to a gain of $70,000 on paper. That’s great until a housing crash comes, which it did, and takes it away.

Chapter 7 – This chapter covers what happens when your house appreciates significantly like Andrew’s son. The problem is that the $70K in equity is trapped in the house. Andrew suggests a cash-out refinance to get that equity out of the house and put it to work. I suppose that’s not terrible advice if three conditions are met: 1) you have significant equity 2) interest rates are going down or at least stable and 3) you have a nice investment to put that money into. Of these three most people are likely to only meet condition and that’s arguable. The home I bought 8 years ago has zero equity. Due to the housing crash it lose 30% of its value… a far cry from the 6% appreciation that Andrew’s plan assumes. I was able to refinance it last year getting a low rate on a 15-year mortgage that I will likely never see again. That safe investment? I don’t see it other than rinsing and repeating and buying another real estate property.

Chapter 8 – This is the chapter where we learn the magic tax-free investment that Andrew has hinted at previously. He’s looking for four things in an investment: liquidity, safety, rate of return, and tax-favored harvest. He goes through over a dozen investments from business ventures (not liquid) to stocks and commodities (too risky) to treasure bills (too small of a rate of return) and eliminates them. Finally we learn the sole survivor…

Chapter 9 – … and it’s maximum-funded, tax-advantaged insurance contracts (or MFTA insurance). I’d give you more, but there isn’t a lot to write. It’s 5 years ago, so I don’t know if the 6-9% returns the book mentions are still accurate. Additionally, you can’t just go online at StateFarm and sign up for this investment vehicle. It seems that you have to have the right financial company that knows about it (like the one the author owns) to be able to set it up. There’s no talk about fees for setting up such a system. Personally, I think this investment could be eliminated because it is not very transparent, is difficult to understand, requires professional guidance that will certainly come with fees, and probably a few more things that I am missing.

Chapter 10 – Chapter 10 closes out the book and is more of a recap of how to live a good life in general. There are things like being healthy and teaching someone else to play a musical instrument. It is out of place given the rest of the book. The topic could cover several volumes and to put it all in a few pages. It feels like the author didn’t really know how conclude the book.

Having finished the book, one of the more interesting questions I have now are where are the sons financially now 5 years later. I looked up Emron Andrew (an easier search than his brother due to the unique name) and found that he works for his father at his financial management company. It a lot of ways this seems like a circular reference in Excel. It would appear that they could make money by working with the father, who makes money by having successful sons. That’s probably a little too skeptical of me, but I hope I’m not the only one seeing the symbiotic relationship in the family when it comes to finances.

I can’t give this book a real recommendation, but maybe you’ll get more out of it than I did. I often forget that I’ve been blogging about personal finance now for 7 years and reading about it for a couple dozen years overall. I shouldn’t necessarily judge what you’ll find helpful by my experience.