I’m usually pretty critical of guru’s in general, but after reading The Millionaire Maker, by Loral Langemeier, I’m left with an especially bad taste in my mouth. Before explaining my reasons for disliking Langemeier’s piece, her main points are briefly summarized below.
Okay, Loral’s basic argument is that in order to achieve millionaire status, you need to do the following things:
1) Have a written set of goals on a 4 month time line
2) Aggressively re-orient your assets to achieve maximum profitability
3) Start a business
4) Create a corporate entity to achieve tax efficiency
5) Dump bad consumer debt
6) Keep good records that accurately reflect your financial situation
7) Work with a good team
8) Maintain the correct psychological relationship with money.
She doesn’t use this terminology exactly, but this seems to be the gist of what she’s saying. A couple of our fellow bloggers have done very good reviews of her book as well, so I won’t say too much more. (Click here for All Financial Matters’ review and here for the Mighty Bargain Hunter’s essay on her book).
There are at least three flaws in Loral’s writings.
1) One size does not fit all. Not all of Loral’s eight steps are appropriate for all people. For example, working with a good team might not be appropriate for people who are just starting out on building wealth or for those who have bad credit.
2) Some of Loral’s advice assumes that people are competent and educated. Most of the time, this is a fair assumption, but it isn’t always the case when it comes to personal finance. Many people don’t understand the basics of mortgages, checking accounts, etc.
3) Loral de-emphasizes two major findings which have consistently linked with building wealth. These factors are: a) frugality and b) home ownership. Regarding frugality, Loral is pretty dismissive of frugal living. In fact, in her book she comments that “you should be able to have a latte with breakfast”. While I’m often wrong, it seems to me that if you aren’t spending money on useless consumer goods, you’ll have more to invest.
Finally, a major predictor of household networth, according to the Federal Reserve, is home ownership. Loral’s book is clearly directed at a general audience, but her writing lacks a discussion of home ownership. This is surprising because of the obvious financial advantages of owning your own home.
In conclusion, I advise you to avoid Loral’s book. If you’re interested in emulating millionaires, you might consider picking up a copy of The Millionaire Next Door, which seems a far more practical and realistic portrait of the road to wealth.
Best,
James
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