That One Time I...

… Read A Thought Provoking Book

I finished reading The Millionaire Next Door last weekend and there were a few characteristics that piqued my interest.

Not flashing my wealth. I agree with the authors to a point. I bought those Tommy Bahama shirts strictly for Palm Desert, and my TUMI backpacks and sling bag can potentially become investment pieces with proper care. Otherwise I don’t really wear any flashy clothes or accessories. 

My favorite piece of jewelry? It’s a 28” .925 silver rope chain I bought when I was 18.

Buying used cars. Nothing screams “I’m broke” like someone that bought a high mileage, half decade old Mercedes, BMW or Maserati from a no-name car lot. If they aren’t broke on the day of purchase, give them six to twelve months when they get that first repair bill.

My new cars were Nissan. My used ones were Dodge, Chevrolet, and MINI. Enough said.

Investment strategies. Diversification is a must. Only 30% of my portfolio is in publicly traded stocks. None of it is in crypto, EFTs, or any other investments that I do not clearly understand. I’m well acquainted with bonds, CDs, high yield savings accounts, dividend stocks and indexed annuities. I miss out on the big gains, but I avoid the big losses everyone else is experiencing lately. 

For example, someone who had $1 million in Bitcoin two months ago is now $200,000 poorer as of two days ago. Meanwhile, I don’t bat an eyelash when I have that rare month where I outspent my asset growth.

Live within my means. I made $100k exactly once in my lifetime, and until I retired I gave up hobbies like travel, wine tasting and dining so I could save money for the future. I only allow myself to do those things today since I no longer pay half my take home pay to a landlord. Otherwise my blog in recent months wouldn’t be nearly as interesting.

Manage debt. It’s a best practice to be paid interest rather than pay it. Other than the three years I had a new car loan on a Nissan Versa, I’ve been debt free for a dozen years. I prefer to pay cash for everything, but when a credit card is required I pay for whatever I’ve spent on it when the bill arrives.

And here’s some bonus characteristics not in the book…

Buy like Warren Buffett. In recent months I sold Costco stock at $740 and Take-Two Interactive at $168 out of fear they were inflated by speculators. Some people will chide me for selling them when their prices were still rising. My counter argument is anyone can play Monday Morning Quarterback but no one can time the stock market. 

When I buy stocks I’m like Warren Buffett. I look for value and then sell them for modest gains. I nearly doubled my money in Costco due to buying my shares below $400, and I netted a nearly 20% gain from TTWO a lot quicker than I anticipated. Mission accomplished.

Federal tax loopholes. Ford pays a fifteen cent dividend per share every quarter, and if you held those shares for at least sixty-one days on the ex-dividend date that dividend is classified as a qualified dividend. Why is that distinction so important? If you’re single and your gross income is less than $47,025 like mine is in retirement, then your federal tax liability on qualified dividends is zero. 

People shit on Ford all the time for its low stock price, but investing in it is like having a high yield savings account that pays at least 6% interest. It would be foolish to put all your money in one stock, but who would turn down that payout as part of their diversified portfolio? 

I now hold 1,250 shares, which pays $750 a year in qualified dividends, for that reason — that money would’ve covered the hotel room for my recent three night stay in Palm Desert.

I won’t admit I’m The Millionaire Next Door, but life can be a lot more comfortable when you think like one.