The Lazy Millionaire

by Marc Fisher

  If they used reasoning similar to how the lazy millionaire disciplines himself, and worked on their defence, and invested, and saved…

  But interest rates are so low, you might say, especially if you live in Japan, where the lending rate has not exceeded 1% for several years.

  At the end of 2005, a bank in my neighbourhood offered the following program:

  A 7.5% interest rate, which is very attractive these days, if you deposit a fixed amount every two weeks for at least 5 years.

  The advertising brochure gave the following examples:

  By depositing $50 every two weeks, you will have the following amounts at the end of the following time periods:

  5 years: $7,749;

  10 years: $18,617;

  15 years: $33,860;

  20 years: $55,239.

  I realize that it takes time, …

  It’s not the investment of the century!

  It doesn’t hold a candle to the $1,000 US that you may have invested in 1965 in Berkshire Hathaway Inc., which is the company that was founded by Warren Buffet, who is the second wealthiest man in the United States. Today, in 2006, that same $1,000 is worth the incredible amount of $5,500,000!

  Yes, more than $5 million —you read it right!

  Berkshire stock has tripled over the past 10 years alone.

  I would advise you to buy some shares, but they are very hard to acquire for the small-time investor, selling for approximately $90,000 US per share!

  But let’s get back to our little investment.

  You can’t do much with $55,239, and besides, what will $55,239 be worth in 20 years, in 2025 dollars, when you consider inflation!

  Much, much less than today, I know…

  You have a good point!

  I don’t disagree - $55,000 isn’t much, it’s no Fort Knox!

  On the other hand, all of the lazy millionaires I know demonstrated frugality and foresight, living well below their means, and saving in one way or another, at least when they started out, and often for many years. Anyone can spend everything they earn.

  In fact, most people spend MORE than they earn.

  Which is the real reason why they have financial problems, and not because they don’t earn enough.

  This is true even for those who earn $100,000 or $300,000 per year!

  This is also why we often read stories in the newspapers about artists who, after being rich and famous, are ruined. If these spend-happy artists had controlled their expenses just a little during their glory years, if they had saved even 15% of their unfathomable income, like lazy millionaires do systematically, they wouldn’t be in this position, faced with bankruptcy and virtually forced to beg.

  Some artists have allowed their managers to handle their affairs.

  And we know the results of this!

  The lazy millionaire, even if he is an artist, and even if he has financial advisors and a manager, takes care of his own affairs, or at the very least, oversees them.

  He knows that, even if he isn’t the greatest financier or accountant in the world, and even if he occasionally makes mistakes, he will never steal from himself!

  By monitoring his expenses, by eliminating pointless expenses, by constantly spending less than he earns, the lazy millionaire gradually frees himself from the tyranny of work, while others are forced to work virtually until their death, which often leads them to die before their time!

  But I can still hear you: $55,000 at the end of 20 years, it’s not enough…

  I agree: so instead of $50, set aside $150 every two weeks. Now look at what you end up with…

  5 years: $23,534;

  10 years: $57,320;

  15 years: $105,825;

  20 years: $175,459.

  $175,000…

  That’s better…

  It’s still not that much, you might say, but it’s more than the amount of savings that many people have at retirement, in fact, one in two people in America…

  You may also say that you are just barely making ends meet, and sometimes not even that, and because of that, you don’t have the $50, not to mention the $150 that this program calls for every two weeks.

  In order to offset this objection, which isn’t really valid, you could refer to the sausage technique.

  What is the sausage technique?

  It’s a time management method that suggests that, when we are overcome by the overwhelming scope of a task, we divided it into small portions, like a sausage.

  It works —you’ll see.

  For example, if I ask you:

  “Could you put aside $300 per month?” You’ll probably say: “No, that’s too much!”

  But if I ask you:

  “Could you put aside $10 per day?” You’ll probably say: “Yes, I could do that, $10 is nothing!

  Ten dollars per day, how much is that when you stop to think about it?

  A glass of house wine at a restaurant costs $7…

  With taxes and tip, we will often leave $10 on the counter, especially if the waitress is nice, and of course, pretty.

  $10…

  This is the $10 that you need every day…

  Yes, most people have $10 per day…

  At any rate, most have $50 every 2 weeks, which is the $100 per month that they need to subscribe the program I just told you about.

  You have it too.

  At least if you are an average North-American in terms of revenue and consumer habits…

  $100 per month is a meal at a restaurant; a meal that you could skip. You won’t die! And your waistline will probably thank you…

  $100 is 6 or 7 bottles of wine per month. If you already drink one per day with your spouse, like my wife and I did for years, you’ll be left with 23 or 24 bottles per month —it goes unnoticed: and it will be much better for your liver and your weight!

  Just think about all the invisible expenses that we identified in the previous chapter, which you could eliminate if you started to save… If saving seems boring to you, and seems like an unadventurous way to go, think of it like jogging.

  When we see people jogging, we often ask ourselves why they are jogging: they’re already so thin! (I don’t ask that, because I have been jogging since I was 16, without even missing one week, even when I’ve been sick!) The clear answer is that they are thin because… they jog!

  It’s the same when people ask themselves how lazy millionaires can save —it’s the reason why they are millionaires!

  It’s exactly because they saved and invested (often starting very young in their lives!) that they became wealthy, and are even wealthier today!

  Like the slightly bigger goldfish, which had only a small advantage over the others at the outset, but which became immeasurably bigger!

  You pay bills, accounts, property tax, and a variety of other taxes every week, or at least every month.

  But you don’t pay yourself, as we say in financial terms.

  The lazy millionaire does it all the time.

  HE PAYS HIMSELF FIRST.

  Imitate him.

  Do what all lazy millionaires recommend to their young —and older —disciples: put 15% of your salary before taxes away, by taking it (or having it taken) directly off your paycheque.

  That way, you will be guaranteed (like insurance coverage) that you will be able to live below your means, instead of living above your means. In addition, if a portion of this 15% “forced” savings allows you to subscribe to a tax deductible retirement savings plan, as is the case in our tax system, then so much the better!

  What you must remember is that. You won’t suffer!

  YOU WON’T EVEN NOTICE THAT YOU HAVE LESS MONEY AVAILABLE: you would have spent it elsewhere anyway!

  In fact, you will gradually start to feel better.

  It’s like going on a diet that involves consuming 300 calories less, yes, only 300 calories less per day, which is one piece of cake, one beer, or one bag of chips!

  Just look at how much thinner you will be at the en
d of the year!

  You will feel better, because little by little, without even noticing it, you will have:

  1. a small cushion (inflatable) in case of hard times: illness, unemployment, divorce, recession;

  2. the capital you need to start up a business or make an investment;

  3. a pension for your golden years, which will help to make your retirement a little more golden;

  4. the $15,000 or $30,000 you need for that trip you’ve always dreamed of, but wouldn’t be able to take otherwise.

  So start saving right now. You won’t feel a thing, but you will soon become the biggest gold fish in the pond…

  CHAPTER 14

  THE LAZY MILLIONAIRE LIVES

  LIKE A KING ON A BEGGAR’S SALARY

  In their fascinating book The Millionaire Next Door, the authors draw portraits of “invisible” millionaires, or at least millionaires who are less flamboyant, and they cite the following numbers:

  66% of millionaires work for themselves…

  Of this number:

  75% are entrepreneurs, and…

  25% are professionals, such as lawyers, doctors, dentists, etc.

  The Lazy Millionaire sees another benefit in having his own company whether it is for him a full time job or not.

  This way, he can live like a king on a beggar’s salary.

  The thing is, being self-employed has tax benefits that are often quite surprising.

  a. You can have (at least in many countries) an expense account for lunches, gas, and hockey tickets, for example, and it’s even better when your clients are also your friends…

  b. You can travel on company expenses for business trips, of course, but you still have the right to take a peek at the Eiffel Tower when you decide to rub shoulders or do some prospecting in Paris! Do you follow?

  c. Your business can pay for your cell phone, your regular phone line, and your Internet connection. If you work at home, your company can pay for part of your rent or your mortgage, your insurance, your heating, and your electricity.

  You can have a company car that you use for business. I know it’s a taxable benefit under certain circumstances, but if you already have a personal car, a car that may even be used and older, and worth almost nothing —one that was paid for a long time ago, your second car —, which is your company car, is not a taxable benefit. Do you follow?

  How can this be beneficial —even very beneficial?

  Because if you don’t have a company, your travel, all your meals, your cell phone, and your Internet access —all of this —ALL OF IT —is paid for with AFTER TAXES DOLLARS.

  Take the example of paying for your car, which you lease and which costs you $500 per month. You basically have to earn more or less $750 ($1000 in Canada!) before taxes in order to make your monthly payment, which means that $9,000 of your gross salary goes toward paying for your vehicle.

  However, if your company pays for the car, the $500 is an expense —a $6,000 per year expense, and these dollars are not taxable since they are deducted from your profits. (Of course your company renting a car may cost you a little bit in taxes, but you will still save…)

  Your company also pays for your car insurance.

  Let’s say $1,000 per year…

  You would need to earn roughly $1,500 to pay this…

  And I haven’t even mentioned repairs…

  In fact, all of these tips, which are perfectly legal, can make a HUGE difference in your life.

  You can live better by paying yourself a far lower salary.

  In fact, you can live like a king on a beggar’s salary?!

  One day, when I was first starting out, a friend, who was in fact a great lazy millionaire nearing the end of his days, told me:

  “When you really start making money, you spend nearly as much time trying to find ways to pay less taxes as you spend making money!”

  He was talking about perfectly legal ways.

  All governments spend most of their time seeking new ways (disguised or otherwise) to tax us. And when we get the impression (naïve as it is!) that they are giving us a gift (normally during an election campaign), they hasten to take away with one hand what they give out with the other.

  So is it not perfectly legitimate for us to seek legal ways to defend ourselves from constant “fiscal attacks,” and to pay a little less in taxes?

  Here are some other examples of ways to defend ourselves:

  Your company can pay you dividends instead of a salary: the income tax rate is lower.

  Your company can practice a perfectly legal form of fiscal averaging, by not necessarily paying you a high salary because it posted high profits in a given year. The taxation rate is generally lower for a company, and you can pay yourself later, at a time of YOUR choice, for example, at a time when you may have less revenue from other sources, or when you have losses you can apply against your revenues that year.

  Under certain conditions, you can also split your income by paying a salary to your spouse or to your children, which represents another legitimate form of tax relief for you, especially if your spouse is at a lower tax rate than you are.

  Some people turn to trusts, holdings, foundations…

  But since I am not a tax planner, I won’t dwell on these matters any longer, because they vary from one country to another.

  I only want you to remember the general principle.

  A Lazy Millionaire (like any millionaire!) constantly strives to profit from all the fiscal benefits that the government offers to people who are self-employed.

  Because if we think about it for a few moments, it suddenly comes crystal clear:

  THE MONEY THAT WE SAVE IN TAXES

  IS THE MONEY THAT IS MOST EASILY EARNED

  It’s also the most fun to earn, because it is the money that costs us the most to give to the government, year after year.

  I realize that, deep down, we should rejoice at having to pay $1 million or $2 million or $5 million in taxes, because it means that we must have earned $ 1.5 million or $3 million or $7 million during the year… But I have never seen anyone offer a champagne toast after sending a hefty tax cheque to the government!

  Yes, the money we save in taxes is precious to us, as if we are able to subtly pull it from our pockets right before the government snatches it away!

  That, I believe, is why this money makes so many lazy millionaires happy.

  Because who likes to be duped?

  This “fiscal attention” is just another method that the Lazy Millionaire uses to monitor his expenses: because taxes ARE an expense, we should never forget that. In fact, taxes represent one of the most damaging expenses, especially for those who are not equipped for the battle.

  If you think about it —but not for too long, because you’ll only get depressed! —you work from January until April (even May or June in some countries) just for the government, and I mean just to pay your taxes.

  A final note. You may say: this is very well and I wish I had a company to benefit all that but I’m just an employee.

  Don’t forget that you don’t need to work for yourself exclusively to have a company.

  You can be an employee AND have a company.

  And enjoy the tax benefits.

  Think about it…

  All lazy millionaires think this way.

  This is one of the reasons they can live the life they live even with an income that is often far from being extraordinary.

  CHAPTER 15

  THE LAZY MILLIONAIRE

  TRUSTS HIS INTUITION

  One day, my publisher and I met with a promoter who was organising a motivational event featuring a number of speakers, including some as prestigious as Jack Canfield, co-author of the popular Chicken Soup for the Soul series, Les Brown, Janet Lapp, and a few others, including yours truly.

  I had an idea that could double my fee as a speaker:

  the publisher would print and sell to the promoter 10,000 copies of my yet unpublished book, The Golfer and
the Millionaire, which could serve as a gift book for the event. Since I would make 1$ a book in royalties, well it was easy to figure out the leverage of this idea…

  The publisher was thrilled too since it meant 10,000 copies sold right away and a free and sensational launch for the book.

  A launching that would make money instead of costing money: again the “differential”… As a matter of fact I think a lazy millionaire always tries to turn something that cost money into something that makes money —and it is possible more often then we think!

  So we met for lunch with the promoter, whom I will call Sergio, even though he wasn’t Italian.

  He had a dark tan, and announced to us that he had just returned from a 3-week vacation in Mexico.

  Everyone is entitled to take a vacation, but his announcement irked me, because the event was barely six weeks away, and it seemed like he was being a little reckless by taking off for such a long time before an event that was expected to be attended by 10,000 people.

  We chatted for a while, and the publisher handed Sergio the contract.

  I offered my Mont Blanc pen, and added as a joke, but also to speed up his decision, yet without really believing that it would be effective: “Do you want to sign with my pen or yours?”

  After a moment of hesitation, he replied “I’ll use yours…”.

  And with that, he signed the contract, without even reading it!

  Again, I wasn’t sure what to think.

  My intuition told me that this was not normal behaviour.

  Unless it was a contract that he had already signed dozens of times with the same company, any businessman worthy of the title never signs a contract without at the very least having it looked over or seen by his legal advisor.

  I followed this reasoning: If a man signs a contract in such a cavalier manner that it seems like the contract has no value to him, then there is a strong chance that he won’t honour it.

  During lunch, I gently insisted that I be paid up front as a speaker. The promoter agreed to sign a cheque dated the day before the event. Relieved, I slipped it into my pocket.