Secret of the Millionaire Mind: Wealth File #13 Rich People Focus on Their Net Worth

This is a chapter-by-chapter summary of a book by T. Harv Eker’s Secret of the Millionaire Mind: Mastering the Inner Game of Wealth (2005) series. One chapter, one article. Read this summary, buy the book. Enjoy!

Wealth File #13:

Rich People Focus on Their Net Worth.

Poor People* Focus on Their Working Income.

“The true measure of wealth is net worth, not working income,” said Harv Eker, “Always has been, always will be. Net worth is the financial value of everything you own. This may sound a well-off or only for the rich - but it’s valid.” Eker explains that there are four net worth factors: #1 Income; #2 Savings; #3 Investments; and #4 Simplification.

#1 Income. Income comes in two forms: Working Income and Passive Income. You all know what the working income is, you go to work and you earn money for your work (or time, as discussed in previous posts earlier). You’ve probably also heard of passive income. This is money you earn without actively working (We’ll discuss that in more detail in Wealth File #15). Working and passive income together make your income (for most people it’s just working income).

#2 Savings. You can earn massive amounts of money, but when you spend it all, you have zero savings. Many people have a financial blueprint that is wired for spending (I’m guilty). These people spend everything they have no matter how much they earn. That’s what Eker called the Parkinson’s Law: Expenses will always rise in direct proportion of income. “That’s why income alone will never create wealth.” That certainly makes sense. We need to make savings.

#3 Investments. Because of savings, we can make investments, another piece of the net worth puzzle. Rich people take time and energy to learn about investing and investments. Poor people* think investing is only for the rich people, so they never learn about it and stay broke.

#4 Simplification. The fourth net worth factor is simplification. This is about saving money by leading a ‘cheaper’ lifestyle. By decreasing your cost of living, you increase your savings and the amount of funds available for investing.

For more details about each factors of net worth, please refer to the book. In short, Eker explains that “rich people understand that buildings a high net worth is an equation that contains all four elements: Income, savings, investments and simplification.” We can raise our income either through promotions and/or by increasing our value. We all also can save more money. Follow the 50:30:20 Rule, spending 50% on needs, 30% on wants, and allocating 20% to savings (find out other Rules from the internet. Choose what’s suitable for you). We too can learn about investments and spend less money on our lifestyle. As Eker said, “To increase your wealth, you either have to earn more or live on less.”

[*I need to note that the Harv Eker makes it clear in this book that he does not mean to degrade poor people. He does not think that rich people are better than poor or middle-class people. They’re just richer.]

I Have A Millionaire Mind!

Nurture Creativity: Keep It Simple

“Making the simple complicated is commonplace;

making the complicated simple, awesomely simple, that’s creativity” (Charles Mingus)

To create complicated thing is not the same thing as creating complexity. For example, even though internal software and electronic stuffs in the phone are complex (at least for me), the use of phones like iPhone is insanely simple. iPhone is a complicated product made easy to use. Making our ideas take shape does not necessarily have to be so complicated. Have you ever get annoyed by a difficult-hard-to-use tool or get bored by a looooonnnnggg elaborate project presentation or browsing website with too many options or answering that full-of-never-ending questions of your friend survey paper for his research project? What a waste of time!

One day after I shared in a Bible Study, a student came to me and said, “Wow, thank you brother. All this while I find it’s hard for me to understand this part of the Scriptures, now you make it so simple that I just can’t missed it!” Of course I thank God for his response. But behind the scene, it took me hours to reread, understand, prayed, asked God for wisdom and studied the text to present it in such a way that it will be easy for people to understand. Sometime I’m amazed (negative kind of) that people are making the simple complicated rather than simplify it. Common people tend to love complicating stuff; creative people however will think and ask: What does people want or need? Can I make it simpler? How can I remove ‘clutter’? Highly creative people understand that simplicity is not necessary the absent of complexity but the removal of unnecessary distractors and clutters.

Marty Neumeier author of The 46 Rules of Genius writes, “People tend to view simplicity and complexity as opposites. But this isn’t strictly true. The enemy of simplicity isn’t complexity, but disorder. And the enemy of complexity is also disorder. While complexity seeks order through addition, simplicity seeks it through subtraction. A goal of design is to drive out disorder by maximizing both simplicity and complexity. In most designed products, what we respond to best is a rich, layered experience (complexity) combined with ease of use, ease of understanding, or ease of purchase (simplicity).” He continues, “Most people have a build-in bias toward addition instead of subtraction. For some reason, the concept of ‘more’ comes naturally to us. Yet the innovator knows that the value of any design doesn’t lie in how much is piled on, but how much is discarded. More is more, but less is better.” Spot on!

We have reached the peak in creativity not when we have nothing more to add, but when there is nothing to subtract. Like many habits, simplicity is a hard thing to do initially. But in the long-run, it is worth the fight. “Simple can be harder than complex,” said Steve Jobs, “You have to work hard to get your thinking clean to make it simple. But it’s worth it in the end because once you get there, you can move mountains.” How to be creatively simple? Buy books on the subject or/and start to think and live simple. In the meanwhile, do this: look around you. What are the project, presentation, work and ideas that you can make it simpler today? How can they be improved? What can you do to reduce it to bare essentials? Could some of them be removed? Is there something missing?

Keep it simple.

God, Give Us Today Our Daily Idea(s)