The first half of the book is so focused on the reader's motivation and abstract arguments for my taste (is a million a miracle? What do you really think about money? etc.) that I had to force myself very hard not to quit reading altogether. The author of the book gained financial independence at the age of 30 (Kyosaki only at 47) and obviously has the right to give advice - but not everyone is given the opportunity to do this in an accessible form. In an interesting way, a number of tips are very similar to the same Kiyosaki. Compare:
Schaefer: If we ask ourselves: “Can I handle this?”, then we do not exclude the possibility of failure. Only because of this formulation of the question does one remain, at the very least, in doubt about one’s abilities. A better question would be: “How will I deal with this?” This question eliminates failure.
Kiyosaki: Rich dad told us not to say, “I can’t afford it.” Instead, we should have asked, “How can I afford this?”
Schaefer: There is an alternative in the use of our energy: we can work on a long-term solution to the problem or on a short-term - imaginary - solution to it.
Kiyosaki: Rich dad said work is a short-term solution to a long-term problem.
Schaefer: No one becomes rich just because they earn a lot. Wealth comes from saving money. Too many people hope in vain: “If I earn enough, everything will get better.” In reality, however, the standard of living always rises along with income.
Kiyosaki: Poor people have more liabilities as their income increases.
Schaefer: The average German works for himself until July 20, and from July 21 all his earnings go to the state (which uses most of this money to pay interest on the national debt).
Kiyosaki: Working for the state from January to May is too high a price.
And so on. However, if Kiyosaki has his own “brands” - a view of assets and liabilities, a rich dad (who has long lived a rich afterlife in all new Kiyosaki variations) and a cash flow quadrant, then Schaefer does not have such vivid images of his own. He, however, gives simple drawings in the form of a table (the lid is an opinion, the legs are experience) or an explanation of how an increasing target becomes visible with the same size of the problem
but these drawings did not become “classical”. Having cited similar quotes from these people above, I will also talk about the differences. Kiyosaki’s rich dad could well be considered a mentor—however, in his book, Kiyosaki himself is generally silent about the role of a mentor for the reader, speaking about the need for a good financial education. Schaefer sees the need for a mentor, as a specific person from whom he can learn all his rich experience in a short time. Schaefer himself found such a mentor (or rather, even many), but it is clear that for the ordinary reader asking to become an apprentice to a millionaire would be a big problem.
Kiyosaki is a fan of real estate, since he made a fortune from transactions with it - Schaefer does not mention real estate at all. Kiyosaki, in his first book, gives advice by retelling his dialogues with rich and poor dads - Schaefer, on 136 pages of the electronic version, manages to place probably more than a hundred key ideas, tests and advice, which is why the value of each of them sharply drops and their I just want to scroll through.
What is the idea behind Schaefer's book? Nothing unusual - in the words of the author himself:
You save a certain percentage of your income.
You invest the money you save.
You increase your income.
You save a certain percentage of each income increase achieved.
At the same time, the author, with overly optimistic calculations (more on this later), is trying to prove that this scheme can give 1 million marks (euro) over a period of 7 to 20 years. Schaefer advises saving and investing in growth at least 10% of your salary and half of your free money, giving a good motivating example:
When one of my friends decided to give pocket money to his eight-year-old daughter, he gave her 10 marks and put her in the car. He said that he had to explain something very important to her.
He drove with her through the poorest neighborhoods of the city in which they lived. Everything looks grey-on-grey there. No greenery, instead dirt and concrete. He asked her if she would like to live here, or if she preferred the nice place where their family had their home.
He explained to her that she would still live with her parents for the next 10-15 years, but then she would have to be responsible for herself. Then she will either live in this ugly area or in a beautiful house. And he also said that she can now choose.
He spent half a day explaining the concepts of saving and paying himself to his daughter. He and his daughter got out of the car in this disgusting area and they wandered around. They had lunch there in an unkempt restaurant. And since the girl felt very uncomfortable here, he said: “People live here who always spent all 10 marks.”
Returning home, they developed a savings plan: the daughter wanted to save 5 marks out of 10. Since for every mark saved, the father decided to invest another 50 marks in her name, it turned out to be only 250 marks per month.
Hence, the advice quite logically follows not to take on consumer debts - and if you already have them, then you need to use no more than half of your free income to pay them. There is another story in this part of the book that is worthy of full quotation:
According to the descriptions of ancient historians, for example, Herodotus, the walls of Babylon made a strong impression and belonged to the seven wonders of the world. Built under King Nebuchadnezzar, the walls were more than 50 meters high, approximately 18 kilometers long and so wide that six horses could pass along the top of the wall.
These walls were built by slaves. The work was incredibly hard. The sun mercilessly burned the builders carrying bricks to the top. The average life of a slave was three years. If he fell from exhaustion, the overseer beat him with a whip. If, despite the beatings, he could no longer rise, he was pushed off the wall and crashed on the rocks below. At night the corpses were taken away.
The Babylonians observed these scenes every day. Working slaves were a constant and omnipresent reality that every inhabitant of the city was aware of. But it is interesting that two-thirds of all the slaves at the wall were not prisoners of war enslaved, but townspeople who lost their freedom for debt.
This story clearly shows how difficult it is to resist the temptation of a loan at all times. However, credit is not a universal evil - it can be taken for truly necessary purposes at a low interest rate and a stable financial situation (including in the presence of an airbag, which Schaefer also, and rightly, writes about). For the majority, however, the situation is the opposite: a loan is taken out for luxury goods (at least not essential), while the loan interest is quite high, and the financial situation is not the most reliable. Moving on to the actual investment, Schaefer does not seem convincing to me. Here is his definition of investment and speculation:
Investments are aimed at generating annual income. Speculation has a different nature. Here you buy something to later sell at a profit. But before the sale, investing in speculation does not bring you any profit.
I don't completely agree with this definition. A bank deposit is also aimed at receiving regular income - but the interest rate on it is on average slightly lower than inflation, so it is difficult to call such a deposit an investment. Rather, it is savings, preservation of capital. On the other hand, a competent buyer of shares also expects to sell them at a profit - see stock markets. However, he is not a speculator, even if he does not receive regular dividend income, which is not guaranteed on ordinary shares. He receives the same income from the business, which was converted into higher stock prices.
So, in my opinion, what is more important is whose money you want to get - speculators with an opposite view of the market or from the work of a business, as free as possible from the speculative influence of market players (which is achieved by holding the asset for a long period of time). Buffett, for example, in order to limit the influence of speculators, has two types of shares in his fund, which differ incomparably in price. We can say that a long-term investor “cleanses” his income from the influence of speculators, although he, of course, has the right to use the speculative wave to his advantage by selling the entire asset at a relatively high price. However, then he will be forced to look for a new asset to invest...
Investing in stocks and stock funds
New section - Schaefer moves on to increasing capital through shares. Where did he come from? For my reasons, I read Peter Lynch’s Outplay Wall Street (it came out about 5 years before Schaefer’s book) and largely retold it in the form of theses, passing off my experience as someone else’s. Kiyosaki also mentions Lynch, but in any case honestly writes that he is simply studying his way of valuing stocks. I have serious doubts that Schaefer was able to make a significant capital from investing in stocks.
What does the reader see next? Schaefer states directly: “let me base my examples on interest rates as high as 12% and 20%.” Looking at the historical returns of the markets, I would like to say: “let us not allow this.” In the US there has never been a 20% rate; the maximum was about 14% in 1980. But these are the rates that allow, armed with compound interest and a considerable initial amount, to calculate an income of 1 million in 7 years.
In general, writing specific numbers for future profitability, without tying them to it, is, in my opinion, bad manners. What is an income of 12% per annum if there is inflation of 15%, as happened in the 70s in the USA during the oil crises? During hyperinflation, all Russians became millionaires in 1992-93. Well, probably the residents of Venezuela and Zimbabwe.
Fast forward to today, expecting the US market to grow 12% per year (let alone 20%) over the next 10 years would only be a crazy optimist. Bogle expects three times less - about 4%. To justify such numbers, Schaefer himself mentions the profitability of three (out of many hundreds!) mutual funds, including Fidelity Magellan, managed by Lynch. The book doesn't directly say to invest in them - but it's hard to imagine another option with this information. And if Schaefer looks at how much the fund has earned since Lynch left (the early 90s) to the present day and compares the result with his 12% per annum, then he should, to put it mildly, be a little uncomfortable.
And yet, advice on stocks (since taken from a professional) is generally not bad, although it is worth clarifying some points. The least important is the clarification of the phrase “since 1948 there have never been more than two bad years in a row.” Bad - probably unprofitable; two years after the book was written, a three-year loss streak would occur in 2000-2002. More significant is that the author considers an adequate investment period in shares to be from 2 to 5 years. I will not delve into examples that will clearly show the insufficiency of this period - history says that you need to invest in stocks for at least 10 years. Better - by 20 or 30. Schaefer also does not take into account the possibility of strong inflation, as a result of which high market returns only compensate for rising prices - as was the case in 1966-1981 in the USA.
He goes on to talk about , but advises not to take more than 10 stocks, because otherwise they become difficult to watch (as far as I remember, again a verbatim quote from Lynch). How about an index mutual fund, Bodo? Schaefer's purchase of an entire market is not even mentioned, since Lynch does not write anything about indices. Meanwhile, Vanguard's first index fund was already more than 20 years old at the time of the publication of Schaefer's book, five years ago Armstrong's book on portfolio theory was published... but who is interested in them when in 1998 the much more entertaining dot-coms were already inflated?
My opinion
For me, Schaefer is bad both as a motivator and as a mentor for an investor. The general principle: save, do not take ruinous loans and invest in assets is an axiom of many authors. Schaefer loads his book with an abundance of advice, but practical examples next to them are rare.
I have no idea at all how exactly Schaefer made his capital. Information about him is intermittent: he was fat, hated running, had a cheap car with a broken handle; I heard my lawyer father complain about poverty, moved to the USA as a teenager, found mentors, attended some expensive seminars that paid for themselves... Kiyosaki describes his real estate transactions indicating the place, time and price of buying and selling a house.
Shares in Schaefer’s book are essentially the only universal method of increasing capital, but Schaefer himself uses the experience of others and most likely did not make money on shares (like Kiyosaki). But he actively teaches how to invest in them and operates with huge returns, entering a million within the period specified by him. Reasonable: the name “a million in 7 years” will sell out much better than a million in seventy years. The author is great for changing his life and making money - but as a mentor he did not impress me at all.
Apart from a couple of interesting examples, I didn't take anything away from this book. But this does not mean that you will not endure it - each book can be effective at a certain point in time, for a certain level of knowledge. If you are not put off by the abundance of advice, key ideas, and you need more of an emotional charge than a clear plan of where exactly to invest your money, then maybe this book is for you.
Bodo Schaefer The path to financial freedom
Translated from German by S.E. Borich according to the publication: DER WEG ZUR FINANZIELLEN FREIHEIT / Bodo Schäfer. – Aktualisierte Neuausgabe. – München: Deutscher Taschenbuch Verlag GmbH & Co. KG, 2003.
© 1998 Campus Verlag GmbH, Frankfurt am Main
© Translation. Decor. Potpourri LLC, 2006
Preface to the new edition
For many people, there is a gap between their dreams and their sense of reality. And they think that this is absolutely normal. To put an end to this misconception, in 1997 I wrote the book The Path to Financial Freedom.
I wanted this book to touch the hearts of readers and show them the path to the riches that our lives contain, including money. I wanted to demonstrate in it that wealth is a right given to us from birth. A decent life in an environment of financial freedom is our natural destiny. In this new edition, I want to strengthen your faith in this possibility. Since the publication of the first edition, two major events have occurred.
Firstly, we have witnessed another stock market cycle. The stock price collapsed, then rose sharply, only to collapse again. This is a completely normal course of things, and such events have happened more than once. However, in the process, many people lose money because they are not familiar with basic financial laws.
To better prepare people for future stock cycles, I have re-written chapters 10 and 11. Firstly, I showed in them how important it is to prepare in a timely manner for unfavorable years. It would be wrong to believe that only good times await us all the time. Secondly, I provide a list of basic principles that investors need to know. Third, I challenge you to make important decisions that precede a successful investment. Of course, handling money and securities is not difficult when the entire economy and stock markets are booming. But in life everything happens differently. Therefore, my advice is: learn to see chances and opportunities not only in good times, but also in bad times. This book will help you with this. It is designed not only for periods of good weather and will accompany you throughout your life. Follow the truths set out in it, many of which date back thousands of years, and money will turn into a force that will support your life.
Something else has happened since the book was written. Obviously, in the first edition I really managed to reach the hearts of many people. To date, more than 2.5 million copies of the book have been sold, it has been translated into about 20 languages and has become one of the world's bestsellers of the last 50 years. However, for me, more than 36 thousand (!) letters received from readers are of much greater importance. The success stories of these people are simply amazing. Since they took up the topic of money, amazing changes have occurred in their lives.
Most of these letters can be boiled down to a simple and at the same time surprising idea. When the movement of money begins in your life, it often comes to you so quickly and in such quantities that you involuntarily ask the question: “Where was it before?” I want this story to be repeated with you, and I will be glad to receive your letters.
Sincerely yours Bodo Schaefer
Introduction
Do you know what prevents most people from living the life they dream of? Money, and only money. After all, money is a symbol of a certain attitude towards life, a measure of a way of thinking. They appear in our lives not by chance. Here we are talking, rather, about a certain form of energy. The more energy we invest in some really important things, the more money we have. Truly successful people have the ability to make money. Some keep them for themselves, others use them for the benefit of people. But they all know how to attract money to themselves.
Do you know when money becomes especially important? When they are constantly missing. If a person has problems with money, then he thinks about it too much. It is necessary to thoroughly understand this topic, and then money will become a good help to you in all your life endeavors.
Each of us dreams of something. Everyone has ideas about how to live and what they deserve in this life. In our hearts, we all believe that great things await us to make this world a better place. But too often we see dreams wither away under the influence of everyday routine and the realities of life. Many people forget that they were originally destined for a place in the sun, believing that they do not have the strength to free themselves from everyday worries.
We often put ourselves in the position of victim. We make compromises and before we know it, life passes us by. Often people blame their financial situation for the fact that they cannot live the life they want.
For more than 10 years I have been dealing with problems of money, success and happiness. During this time, I learned to look at money with different eyes. They can prevent us from realizing our full potential, or they can help us achieve this.
There are several opportunities to earn your first million. They fit into the four strategies described in this book:
1. You save a certain percentage of your earnings.
2. You invest the money you save.
3. You increase your income.
4. You save a certain percentage of your increased income.
If you do this, depending on what financial situation you are in at the moment, in 15-20 years you will have one or two million. And this is not a miracle. If you want to make your first million faster (say, in seven years), then you'll need to put more of the strategies in the book into practice. Every strategy you master gets you closer to your goal faster.
How to become a wealthy person in seven years? You obviously already guess that in this case we are not talking about a specific amount of money that you would like to have, but about the personality that you should become.
Of course, the path to financial freedom won't always be easy. However, living in financial dependence is even more difficult. If you follow the recommendations in this book, you will surely achieve your goal. In my seminars, I have brought thousands of people onto this path and constantly observe how the knowledge gained literally changes their lives.
Please do not think that just purchasing this book will help you achieve wealth. Even if you read it, it does not mean that you will get rich. You must work hard on this book and understand its contents deeply. Only in this case will it help you discover the treasure that is hidden inside you.
Let's hit the road together. First, decide on your current financial situation. The following pages are dedicated to self-reflection. Please read this book only after you have determined exactly what your financial situation is.
I sincerely hope that this book will not only make you rich, but also touch other deep and important chords in your soul. I don’t know you personally, but I know that if you are holding this book in your hands, then you are a very special person who is not satisfied with the status quo. You are a person who wants to write your own story. You want to build your own future and achieve more from life. I wish with all my heart that this book will help you with this.
Learn the basic rules of financial literacy. Get simple and accessible models for handling the money that comes into your life. See if your behavior patterns are conducive to creating lasting wealth and life satisfaction.
The author sincerely hopes that this book will not only help you become rich, but also touch you in the most profound way. If you are holding this book in your hands, then you must be a very special person. A person who is not ready to be satisfied with what circumstances offer him, who wants to write the story of his life himself, to earn a million dollars. Such people create their future like an artist creates a work of art, and the author wishes with all his heart that his book will contribute to the creation of your masterpiece.
You will find out why your overall effectiveness decreases by 50% when you have financial problems.
You will ask yourself 7 “painful” questions that will allow you to take a critical look at your financial condition
You will listen to the “500 euros” exercise to build a “bridge of friendship” between you and your potential earnings
You can use the 25 Reasons exercise to take a giant step towards your financial freedom.
You will learn 4 ways to maintain high motivation to earn money
You will receive recommendations about 3 groups of people who can professionally help you make money
You can choose your mentor wisely based on your and his income.
You will see in which of the 5 areas of your life you need dramatic changes
You can ask yourself 3 questions that will allow you to be more optimistic about your financial future.
You will learn how to manage money professionally as your income grows. You will also learn why, in most cases, increasing your income does not improve your well-being
You will have a reason to think about 4 unpopular money principles that, in fact, provide a significant increase in your income
You will learn about the previously secret recipe for making money from US billionaire Warren Buffett
You will receive a formula for how to fit the purchase of a car and its expenses into your family budget.
You will get acquainted with a huge list of consumption habits of millionaires based on statistical data
You will learn the difference between smart and stupid debts. Find out the terrible details of how consumer loans are breaking your character every hour
You will receive 13 tips on how to get rid of your debts as quickly as possible
You will learn 14 tips on how to increase your income in 3 months by 20%
You will be able to create a summary about yourself or your product that will give a stunningly positive result
You will feel the power of long-term investments using the example of $100
You will create 3 unique financial plans and be flexible in their choice
At your disposal will be 5 criteria for reliable investments and new methods on how to turn any risky investment into risk-free
You will receive 10 selected rules for smart investing at your disposal.
You will receive the guarantee of true peace of mind of owning a significant fortune and will be able to truly enjoy your money
And finally, you will listen to a 10-point summary of the entire audio training that will inspire you to follow the basic laws of money every day for your vibrant financial well-being
Distribution with bitrate: 128 kbps
Greetings, friends!
First of all, I want to thank you for your trust.
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And I would like you and I to make a pact from the very beginning: I have put all my energy into this DVD set, into the audio seminars and into the advisory letters. I did and am doing everything in my power. If you work on this program with the same enthusiasm, you will undoubtedly achieve your goals. Therefore, I suggest: when working with this package, do everything in your power.---
I don't know what your current situation is. Maybe you have already achieved a lot in life and have become quite a wealthy person. Maybe you are at the very beginning of the path. Or maybe your finances are completely frozen. But from any position you can rise to a higher level.---
This is the essence of our program. It should help you constantly learn and grow so that you become exactly the person you want and can become, so that you can become the best you can be. First of all, this applies to your financial situation.---
For this, I am ready to become your mentor. The purpose of this letter is to support you and help you achieve your goals. If you recognize me as a mentor, this letter will be especially effective.True prosperity is our inalienable right.
Bodo SchaeferBodo Schaefer's "First Million in Seven Years" program includes:
- DVD1 "what millionaires really think about money"
- DVD2 "how to save, plan and invest to get your first million"
- DVD3 "how to double your income in 5 ways"
- Bonus 1: DVD "The main secrets of investing money that no bank will tell you"
- Bonus 2: CD with materials and documents for the seminar, tips for doubling your income
- Bonus 3: 4CD audio seminar "first million in 7 years"
- Bonus 4: 4CD audio seminar "successful thinking"