The Armchair Millionaire

Offers the reader a plain English guide to wise investing, without the headaches and stress of high risk. Shows how an investor can pay lower taxes, build a nest egg and still stay on top financially, and how to make each investment dollar go as far as possible. Also offers readers a way to build a totally personalized investment plan, with worksheets and other tools.

Chapter One

What Is an Armchair Millionaire?]

When you visit Armchair Millionaire on the Web (www.armchairmillionaire.com), you'll see this phrase scattered throughout our site. It means that being an Armchair Millionaire is not about having a million dollars, but having the attitude that will get you there. It is a state of mind, rather than a number in a bank account. When you are an Armchair Millionaire, you are mindful of the future, walking on a path toward an attainable goal of financial freedom.

You'll discover as you read this book and meet actual members of our community that Armchair Millionaires come from all sorts of backgrounds. They are in different stages of life, and their portfolios are of widely varying sizes.

But there are some distinct characteristics that all Armchair Millionaires share. Once you understand these traits and begin to adopt them for yourself, you too will become an Armchair Millionaire. Even those of you who are terrified to start digging around in your personal finances. And those of you who don't think you have enough time to actually maintain an investing plan. And all the folks who dare to dream of being financially secure but don't have the first idea how to go about it — especially you!

An Armchair Millionaire Is...

Someone with a Goal
The basic goal for every Armchair Millionaire is financial security. Even though there are an infinite number of ways to define "security," we can probably all agree on this basic definition: Security is having more than you need to survive; not living paycheck to paycheck; and not lying in bed at night worrying what would happen if you lost your job or got sick.

On the other hand, having more than you need to survive doesn't necessarily mean having the best of everything — such as shaved mink coats and multiple luxury cars and adorable little six-bedroom summer cottages. If your goal is to live extravagantly, you're missing the Armchair Millionaire mantra. Money is our friend, but it's not our savior. And the less we spend, the more we'll have. Even fabulously wealthy people can spend themselves into the poorhouse. An Armchair Millionaire is too smart to do that. Which brings us to our next characteristic:

Someone with Common Sense
An Armchair Millionaire is a skeptic. Not a cynic, mind you, but a skeptic — someone who likes to know the facts before jumping to any conclusions. And someone who knows there probably aren't any quick and easy fortunes headed our way. Armchair Millionaires know the idea of getting rich quickly is a waste of our time. For that reason, we probably won't be spending our hard-earned money on lottery tickets. (Not unless the prize is really big.)

But Armchair Millionaires know that it is possible, and even likely, to get rich slowly.

One quick look at the growth of a single dollar at a 10 percent annual rate of return over two centuries ($190 million!) will show us that time and compounded returns — as you'll learn in Step 5 — are very powerful tools for making a lot of money. More powerful tools than expensive brokers, or elaborate investment theories. In other words, an Armchair Millionaire is...

A Do-It-Yourselfer
After all, how else are you going to know that your investment plan is being done right? Sure, we'd love to have it done for us, but when it comes to the really important things, it's worth knowing how to do it ourselves — especially if we are going to rely on it.

There's another advantage to running your own plan. One of the most common investing mistakes, so common that it's legendary in investing circles, "is selling into a panic." Everyone's heard a story (or has one of their own) in which someone sold their stocks or mutual funds when the market was in a downward spiral — only to see the market quickly rebound.

When you understand how your investing plan works and how the stock market has worked historically, then you'll understand why selling into a panic is irrational. Armchair Millionaires know how their investing plans work. And they never invest in anything they aren't comfortable with.

By bringing the control over your financial freedom into your own hands, you achieve ultimate security. It's captured best in the old saying, "Give a man a portfolio and he'll invest for a day. Teach a man to invest and he'll eventually become a millionaire." (Okay, so maybe the saying doesn't go exactly like that, but you get the drift.)

Someone with a Plan
There isn't an Armchair Millionaire out there without a saving and investing plan that's intended to build their wealth over the long term. That's a given. But what really sets an Armchair Millionaire apart from other investors is that an Armchair Millionaire's plan can run on autopilot. The plan requires some planning, a little implementation, and then basically you never have to think about it again. Of course, if your personal style is to spend time researching investments and plotting your course, you can do so. But an Armchair Millionaire's plan works reliably and on its own while you sleep, when you're on vacation — all the time. You don't ever have to break a sweat. Just sit back and relax. Once you master the basic skills and disciplines — emotional and intellectual — that you need to build wealth, then you can use the twin levers of short-term desires vs. long-term gains to build your portfolio at any pace you want. So every Armchair Millionaire is...

Someone with a Portfolio
There's one last thing that any Armchair Millionaire will eventually have. It's the inevitable result of a lifetime investing program: a seven-figure portfolio.

What an Armchair Millionaire Is Not

Okay, so now you know more about what an Armchair Millionaire is. Here's a brief rundown on the things an Armchair Millionaire is not:

A Cheapskate
Yes, it's true that the less money you spend, the more money you'll have. But that doesn't mean you have to deny yourself anything that could be construed as a luxury. After all, it isn't unreasonable to want to enjoy the well-deserved fruits of your labors. Modern life is demanding and we all deserve to pamper ourselves now and again. What you'll learn as you develop your plan is that you can create a personalized balance between short-term desires — such as the desire for an expensive cup of coffee, or a cushy new couch — and long-term goals, such as financial freedom. This balance will decide how fast your portfolio will grow. So you can still be an Armchair Millionaire and spend money on nonessential items; you'll just take a little longer to reach your goal. The choice is entirely up to you. If you're deep in debt as you read this, your story may be a little different — but we'll cover that shortly.

An Extravagant Spender
When you hear the word millionaire, chances are you imagine someone with deep pockets, eating fancy dinners, ordering custom-made shirts, and flying on the Concorde for dinner in Paris. In other words, someone who never worries about money.

This image of a millionaire is so firmly entrenched in American mythology that it's hard to shake. But as we've said before, even millionaires can spend their way into the poorhouse. The first way to become an Armchair Millionaire is to curb your frivolous spending. But before you panic and say you'll never be able to do it, please finish reading this book. The Armchair Millionaire Five Steps to Financial Freedom can help you overcome your preconceived notions about money and build a commonsense savings plan that will make you rich. In other words, you'll learn how to make money work for you, not against you.

"The most popular watch among millionaires is a Seiko, a fine timepiece, moderately priced. This is also the most popular brand among CEOs of Fortune 500 companies."
— From The Millionaire Next Door

Bet you were expecting a Rolex, weren't you?

Someone with a Perfect Credit Report
Many Armchair Millionaires were once in debt. And they never want to be there again. Some have never been in debt, because the idea of owing just isn't for them. Still others are digging themselves out of the hole one bill at a time. As far as being an Armchair Millionaire is concerned, where you are when you start isn't important — it's where you're headed that matters.

The real beauty of the Armchair Millionaire's plan to help you achieve financial freedom is that it can work for anyone. So take a deep breath and repeat after us: "I'm ready to be a millionaire!" And turn to the next chapter....

Copyright © 2001 Lewis Schiff. All rights reserved.
ISBN: 0-7434-1191-9

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While some might guess that an armchair millionaire is someone who can answer all the questions on Regis Philbin's hit TV show, ArmchairMillionaire.com is actually a Web site frequented by tens of thousands of ordinary investors. In this investment guide based on the site's philosophy, Schiff and Gerlach, two of the Web site's principals, assert that investing intelligently requires little more than common sense, discipline, patience and a goal-oriented mentality. Most members of Armchair's virtual community are neither excessively frugal nor do they have perfect credit reports, the authors maintain. Learning about the stock market, avoiding brokers who insist they have the answers and controlling debt are the keys to financial success, they say. In fact, the heart of this program is based on five simple steps max out tax-deferred savings plans, set aside money for yourself before paying your creditors, invest automatically, use the "armchair" investing policy and start today. Schiff and Gerlach's mix of anecdotes, homespun advice and investment strategies will be familiar to those who frequent the site. Uninitiated readers, on the other hand, will have to suffer through what is essentially an extensive ad campaign for the Web site to glean the book's practical benefits. (Apr.) Forecast: Given the popularity of ArmchairMillionaire.com, fans of the authors may well push this book onto some bestseller lists. Ultimately, though, Schiff and Gerlach don't offer much that's sufficiently new or insightful to distinguish their book from the many others on the overcrowded investment shelves, so the book's long-term prospects may fade. Copyright 2001 Cahners Business Information.