I'm somewhat surprised that this book hasn't become an instant classic, as it's a combination of an inspirational personal story, and a step-by-step process for creating wealth – especially in the hands of a young person. The author himself is pretty young … 30 years old at the time of writing in 2011 … but he had built a net worth of around a half a million dollars by working at McDonald's. He didn't (like my girlfriend from college) start as a manager – he came out of high school (where he found himself “failing class after class”, in fact he claimed that he graduated not being able to read) at 17 and got a job at McDonald's making fries … then doing the titular flipping burgers.
Needless to say, this is about a low on the wealth ladder as one can start, but if there was one thing that sets the author apart from others in his position, is that he “became fascinated with all things McDonald's”, and after encountering a group of McDonald's executives who came through on a store tour he decided:
Which he follows up with the observation:“I could do what they do. I could be good at what they do. This is something I can really succeed at.”
Again, the author stands out by his willingness to apply himself to the opportunities presenting themselves to him (in contrast to the mobs demanding a $15/hr wage for flipping burgers), and taught himself to read (!) and immersed himself in the “people, systems, and processes that make up the McDonald's world”. Further:The day you can say to yourself, “This is my thing,” is a great day.
Obviously, Bernard Kelly, despite having been a massive failure in school (to the extent of coming out unable to read), was able to see something in his situation that the semi-sentient slugs so often in the same positions were either incapable or unwilling to consider. He has a fascinating list of prominent people whose first jobs were at McDonald's, including Amazon's zillionaire founder Jeff Bezos. However, Flipping Burgers to Flipping Millions isn't really about McDonald's (although it is an obvious anchor of the author's story), but a look at how anybody (especially somebody just getting started) can build wealth, even if starting from nothing. Kelly notes:It wasn't long before my passion was recognized. Passion stands out in any environment, but the more mundane the environment or job, the more passion stands out. I worked hard and produced measurable results. I was promoted over and over again. By the time I was twenty-five, I was a store manager, and throughout the process the McDonald's Corporation was educating me. I attended every course that was offered. I was hungry to learn everything I could about this business, and to grow as a person.
Aside from the cultural factors, generally speaking we don't teach kids about money management (the level of “financial illiteracy” is stunning), the author points out (regarding “the unchanging laws of money”):Money and the creation of wealth are not that difficult to understand. You save some money, invest it, and it multiplies. Save a little bit, often enough, for long enough, and it will become an enormous fortune. The problem is that most people cannot think beyond today and what they want to spend their money on right now. They do not have a vision for their life ten years from now, or twenty years from now, and nobody saves money for a future that they have not yet imagined.
Again, this book is full of really awesome quotes, here's one that I found particularly notable (comparing regular investment with a dripping faucet eventually wearing a hole in a rock slab):We don't teach it in high school, we don't teach it in college, and we don't teach it in the business world. … In the corporate world I am amazed at how often we put people in charge of million-dollar budgets who cannot manage their own personal budget.
Kelly defines four stages of one's financial life: Right Now – Quality of Life – Retirement – Legacy … and devotes a chapter each to these, walking the reader through strategies to maximize one's wealth building in each, including multiple options (“good, better, and best”) for achieving different levels.A little bit of pressure – saving and investing – consistently applied over time can create an incredible fortune. … For example, if a person saved $1 a day for her entire life and invested it with a return of 10 percent, she would retire at sixty-five years of age with $2,404,853. One dollar a day is just like that dripping faucet. … It is difficult, but it is not impossible. What makes it difficult is not that it requires some extraordinary set of skills, but that it requires the discipline of consistency in a world dominated by erratic impulse.
For a relatively slim book (a mere 160 pages) this is remarkably comprehensive in terms of scope. Before it moves into the four stages of life, the author presents a chapter which has a central section of “How To Be A Great Employee”, with seven steps which pretty much anybody would benefit from if enacted in their own lives. He then has a chapter on “the basics of wealth creation”. Unfortunately for most, these basics require things like discipline, the willingness to delay gratification, and the capability to set goals, and maintain the desire to achieve them (with the quote from Henry David Thoreau that “In the long run, men only hit what they aim at.”). For most people, much of this is very uncomfortable, with the realities of what one needs to have by retirement to produce a comfortable income being especially daunting. One of the exercises he offers here is looking at what that purchase you're considering today will have “cost” by retirement age. A fancy big TV system that costs $4,280 today, would represent a value of $68,480 in 30 years (again, the figures in the book to tend towards those starting out their financial lives), and that opting for a $1,500 TV (still a pretty fancy unit!) would “save” you $34,240 over that period of time. Obviously, this is sort of “modified gratification”, where you're making deals with yourself between what you might want vs. what you actually need, in regards to how it would effect your future finances.
One thing he brings up as “almost legendary” is something that I hadn't heard about previously, the “Latte Factor” … this counts up small regular indulgences that build up over time – the author says that instead of Lattes, for him it was cigarettes in his youth – figuring a $5/day habit. If instead of consuming $5/day of fancy coffees or smokes, one were to invest the equivalent $150.00/month, at the end of 40 years that would have built up to just shy of a million dollars! It's amazing how most people don't think they can find $150/mo to invest, yet they'll blithely spend on trivial expenses like high-priced coffees, fast food lunches (as opposed to bringing one's own), and the like.
Another “factoid” which I found disturbing was that “The average American spends 106 percent of his or her annual income annually.” Needless to say, there's no way that one can “build wealth” doing that. He also notes that “Less than 10 percent of Americans have and use a budget.”, and that a budget is essential to, well, budgeting money for investing.
Again, the issue of what one needs vs. what one might want comes into play here. I must admit that the author was rather extreme in his willingness to “go without” … he challenged himself to not buy any clothes for an entire year, and he did not “indulge” in buying a car until he was 30, using public transportation to get around. He goes on an interesting side piece on the self-storage industry in the U.S. – using it as an example of how much “extra stuff” most of us have … to the extent that “In the United States today, the self-storage business is larger than the motion picture business.”(!).
He recommends way to make some of this self-denying fun, with things like “Zero Dollar Days” where one strives to not spend anything for the day. The flip side of this is what he calls “Guilt-Free Money”, an amount that one sets aside to spend on anything one wants once a month.
In the first phase of the 4-stage program, he looks at what one could expect to be making starting out at age 18 working for McDonald's, and how that would likely increase over 8 years. Now, here again I think the author is a bit of an outlier … in his good-better-best figures it goes saving 10% of one's income to saving 30%, the latter being what he did from ages 18 to 25. The total paychecks for those 8 years come to $245,567 and he was able to save $135,326 (with interest) over that period, which invested through age 65 would be over six million dollars. Now, he is aware that the assumptions for returns on investment sound pretty extreme, but he also notes that if one had bought McDonald's shares, the return would have been in excess of 10%.
Now, if one has been diligent in one's early years, it sets one up to be able to spend pretty much what one makes in the next phase, but continued saving/investing would be better, especially in terms of putting money away for one's kids. He has some other eye-opening figures about houses, etc., and how making a choice to live a bit more simply (and invest the difference) can make huge returns down the line.
Obviously, the last two parts, on retirement and “legacy” really depend on the previous phases, as it's mighty hard to start planning once one gets to retirement, let alone considering any sort of (positive) financial legacy. Interestingly, part of what Kelly considers his legacy is the lessons imparted in this book. I know that I was eager to get copies of this into the hands of my daughters (and I really hope they'll read it – but “you can take a horse to water” and all, and one of the hardest things for a parent to do is to force a kid to read something they're not inclined to).
The final chapter in Flipping Burgers to Flipping Millions is something of a rah-rah session about McDonald's, which I found somewhat irritating at the time of reading it, but in reflection, it's pretty much all the author knows first-hand, and the points he raises are certainly good illustrations of the principles in the book in practice. There is, however, one glaring fault with the book … in several places the author points the reader to a web site, http://www.MoneyClassroom.com/ ...which, four years after the book's release, is “under construction” with a field to put in one's email to get notified when it goes live. The “whois” listing doesn't seem to have anything to do with the author or his publisher, so I wonder if somehow over the past four years the domain got lost and is being “squatted” by another group. It's a pity, as the references in the book to the site sound like there was supposed to be some interesting material there.
Anyway, this is one of those that I would recommend to “all and sundry”, especially as the recommendation in it hone so closely to my own “financial literacy” project. It appears to not currently be in print (expect via the publisher), except for in the e-book format, however the new/used guys have it with “very good” copies for as little as a penny, and new copies for under a buck (plus shipping). If you can find it in the dollar stores, pick it up … I wish I'd been able to get more copies via that channel myself!