152 of 159 people found the following review helpful
Mr. Edelman used survey techniques in this book to find the common characteristics of how his firm's 5000+ clients acquired substantial real estate and financial assets with middle and upper-middle class incomes. The author modestly gives the clients the credit for their success, rather than his firm or himself. The lessons are distilled into 8 key points (which the author explains so you understand the benefits were created), and are fleshed out with quotes from clients about those points. The conclusions are at odds with many popular books on financial planning.
The book is simple to read, to understand, and to apply.
For the most part these people do not own their own businesses and do not work for Internet start-ups. Rather they average 57 in age, $120,000 in annual income, have $500,000 in savings, and own a home worth $256,000 with a mortgage of $142,000.
These people carry a long-term home mortgage, even though they could pay off their mortgage. The benefits are that they are more liquid financialy should job-related adversity strike, get more tax deductions, and have more funds to invest.
They invest their retirement accounts into a diversified set of stocks. That asset allocation decision gives them the ability to compound money rapidly over time. They make frequent, small investments (usually through monthly savings) that give them the benefit of dollar cost averaging -- which gives you more stock when the prices are lower. They rarely trade.
They have helpful mental habits, too. They focus on a goal of how fast they want their money to accumulate, rather than comparing their results to market indices. This allows them to avoid taking on risks or getting emotionally confused. Further, they spend little time thinking about their investments. They track costs to trim them, rather than doing elaborate budgeting. Many use Quicken to help them.
There are several other valuable sections. One is on how to avoid making mistakes, which identifies stalls that can cause losses from harmful emotional states like fear, greed, overconfidence, lack of confidence, regret, loss aversion, and fixation. I especially liked the section on the biggest mistakes that people had made in their lives (not starting investments soon enough, making a bad investment, getting bad financial or tax advice, and taking on too much credit card debt). There is also good material on what people did right.
The book's main weakness is that it does not give any advice on how to create greater wealth through entrepreneurial activities. Most of the wealthy people I know are entrepreneurs, not people who saved money while earning normal incomes working for someone else. With a slightly different methodology, Mr. Edelman could have helped his readers with that information, as well. I graded the book down one star for missing this important area. See Rich Dad, Poor Dad and Cash Flow Quadrant if you doubt the importance of this point.
After you finish reading this book, ask yourself how the future will probably be different from the past so that you should adjust what you do to create a more favorable risk-reward ratio. Copying what worked well in the past is seldom a perfect recipe for future prosperity.
89 of 92 people found the following review helpful
First off I'd like to say that the information in this book,8 so called secrets,is valuable. Mr. Edelman explains it in an easy to understand way. The reason I say not to waste your money is this. Each secret has a chapter with an average length of 11.5 pages. So basically the good information is in about 90 some pages. The rest of the book is filled with the authors' clients telling you how they do the things that the book says. In my opinion this should be a 100 page book at the most. It took me 2 hours to get all the valuable information out of this book(it is good information). I think the author expanded most of his energy trying to sell you his other books by the numerous footnotes telling you to by his other books. He was trying to be humorous most of the time with the footnotes but it became annoying.
My recommendation is..The library
49 of 50 people found the following review helpful
on December 16, 1999
If you've ever benefited from the advice of your elders; be it a parent, grandparent, or mentor - and realized the true value of that advice - order this book NOW! This book goes past what all the experts are always telling you to do with your money and looks are what 5,000 ordinary people are really doing to succeed.
Each section begins by going into detail about something each of these successful people share in common. I loved the stories about life from real people called 'In their own words' at the end of each section with. The stories are about the smart, foolish, happy or sad experience in their financial lives. Some of the stories are very moving... don't be surprised if you get choked up or shed a tear while reading. The special 'mind over money' section about psychological/emotional investing was very insightful.
This book packs all the motivation you'll ever need! It's the sledgehammer of common sense that we all need to get hit with to get us going.
92 of 103 people found the following review helpful
on May 6, 2001
Developing and implementing a solid long-term financial plan for whatever your goals may be, requires an understanding of numerous financial, investment, and psychological principles. The author does a good job covering the basics, and if you are looking for an introductory book, (which many people desperately need) this one is fair.
Ordinary People, Extraordinary WEATH can be summed with the following points:
1) Carry a mortgage on your house, even if you can afford to pay it off.
2) Don't diversify among different asset classes, the money you throw into a 401k
3) Invest whatever you can, lots of little investments add up to a lot.
4) Buy and Hold
5) Ignore the Dow, S&P, NASDAQ
6) You don't need to spend lots of time analyzing your money
7) Talk with, and educate the family about money.
8) Tune out the fodder the analysts are constantly spewing.
Generally speaking, good principles to follow. If you want to read explanations for each of these, then read the book. Half of the 300+ pages of this book is "In Their Own Words" consisting of clients reinforcing what the author talks about. The cocky writing style the author utilizes gets annoying, as do the constant plugs to buy to more of the authors books.
Bottom line: Even though this feels like a sales brochure, it is better than many of those published during the net bubble (because its realistic). Half of it could be cut out without losing anything. It's a two or three star book at best.
32 of 36 people found the following review helpful
on May 26, 2001
I made the mistake of buying this used, I should have borrowed this form the library. The points the author makes are very simple and you defintely don't need to keep the book around. The book has a lot of filler, including many redundant quotes from successful people (How many times do I need to hear "I wish I started saving money earlier?")
One thing that bothered me was the chapter that said most people purchased their investments for less than $1000. However the book is very vague about what these investments were. Also, If these investments were purchased 20-30 years ago, that was a lot more money then. There are a lot of examples in which people bought stock, only a few shares, that they made a good return on. Well that's great, but you can't buy a few shares of stock anymore; you have to buy lots of 100, so that's just useless info. Yes, you can buy stock mutual funds with very little money, but it's not the quite the same in terms of risk/reward.
The tone of this book can get rather nasty and condenscending. Also the constant plugging of his other books is just horrible. It makes you feel like this book was just a scam to get you to buy his other books.The editors should have put their foot down on this issue, it really cheapens the book.
I did find the book useful, though, in convincing me that wning my house "free and clear" might not be my best option. That is why I do recommend getting the book from the library; the explanations are short but decent.
23 of 25 people found the following review helpful
on February 5, 2001
Ric Edelman has a gift of being able to distill complex financial situations into easy to understand concepts, explained in layman's terms. His book shows how he counsels his clients and the results they have achieved as a result of his advice. Wealth is achievable by anyone who desires it, given time and the proper discipline. He provides insightful perspectives to help you duplicate the efforts of his clients.
The key seems to be controlling the largest pool of assets you can, not necessarily owning them all outright. At the same time, you must evaluate how you are using your resources, own appreciating, rather than depreciating assets with borrowed money. Unlike books expounding on entrepreneurial efforts as the key to wealth, this book applies to anyone who is earning a living by some means.
Of course the future will never be the same as the past, but the strategies he outlines will perform relative to the whole situation just as well. If you can only buy one book of financial advice, make this the one! You won't be disappointed if you follow the strategies outlined in the book.
17 of 18 people found the following review helpful
on January 15, 2004
I've noticed that several people are comparing this book to The Millionaire Next Door and making it as a either/or deal.I ve read The Millionare Next Door as well as this book and I believe they compliment each other, even though they also contradict each other. Who says that anyone has a corner on truth or that there is only one way to become financially successful? The Millionaire Next Door beats the frugality concept to death and shows how ordinary people can become successful via frugal living.Ordinary People/Extraordinary Wealth also shows how ordinary people achieve extraordinary wealth only with a slightly different method.Edelman, and his successful clients, recommend not paying off your mortgage early (I did but took out a home equity line of credit later) I didn't initially agee with Edelaman on this, but I do now.A paid off mortgage may make you feel good but it ds you no good. It's like money in a shoebox generating nothing.Some people also compared Edelmans book with the poular Rich Dad Poor Dad by Robert Kiyosaki, another great book. Kiyosaki emphasizes that a house is not an asset and that money is better used to invest in real assets as opposed to paying off a non asset---mortgage. In this regard, Edelman and Kiyosaki are very similiar.To me it makes more sense to invest in assets like rental properties and equities than to pay off your mortgage to be debt free (you are also cash flow free). Although I wouldn't have said that 10 years ago--live and learn!All three books: The Millionaire Next Door, Rich Dad Poor Dad and Ordinary People Exxtraordinary income make great, highly instructional and profitable reading.These books deliver only if you follow through on the advice given.If you are new to Edelman, I highly recommend that you read The Truth About Money first, then move on to Ordinary People Extraordinary Wealth.
17 of 18 people found the following review helpful
on November 8, 2000
I really enjoyed reading this book, however, I felt that the people the author described were all his clientelle. I suppose there is nothing wrong with that, but I don't think this book is an accurate example of all wealthy individuals nationwide. his concept of saving and investing rather than paying off ones mortgage is debatable. I do believe Mr. Edelman is a very astute and knowledgeable individual. As far as comparing this book to 'The Millionaire Next Door', I have mixed feelings. They are both good books. I would recommend; The Millionaire Mind by Thomas J. Stanley or, Debt Free and Prosperous Living by Dave Ramsey. I've yet to read any other books by Ric Edelman. His style is very readable and interesting. Eventually I'm sure I will read more of his work.
15 of 16 people found the following review helpful
on July 24, 2003
I would like to know what these same people are doing now that the market is down.
My friend's "success" was very similar. COUld've been an example in this book.
My friend bought a house and that house has TRIPLED in value. The mortgage payment was very low but, as Ric says, that house had a lot of money "in the walls," and he could get a bigger return if he invested that money. Now he has a big mortgage bec. he refinaced, which was a good thing, took out some cash and invested it in a variety of ways. Diversified. His mortgage payments are pretty high, but not too high for the income this man has had for the past 10 years. Now, the market is down, he seems to have lost money, well, as Ric says, hang in there and the market will go back up. Yes, that is true. But wil it go up ENOUGH in my friend's lifetime? Now, my friend ws managing pretty well but then he lost his job. Got laid off, company had some losses, they downsized. Not too much of a problem, my friend has -- HAD -- 8 months of cash reserves. That was 10 months ago. He hasn't found work in his field. He used to be able to. He had offers from other companies. So, he sold his vacation home, cashed in some of his investments at a big loss and he is paying his mortgage but he still hasn't gotten the job he needs to be able to make his payments in the future. He's working but for 1/6 of what he was earning before. Before, his story could've fit into this book. My friend wanted to retire "early" - sometime in his 50's but unless some wonderful things happen, he won't. His IRAs are down, even though he thought they were in relatively low risk investments.
Remember, just because some one tells you something is a good idea, doesn't mean it's a good idea for YOU.
33 of 39 people found the following review helpful
on June 27, 2001
Ric has good insights into a breadth of topics, none of which are novel to the world of people that work in the financial services arena. This is an easy read that is ok for most people. Becareful of some of Ric's advise though, carrying a large mortgage is not a huge deal however don't go too far with his advise and over buy when you purchase a home. You should always pay yourself first, save a set dollar amount every month and invest it for your future, don't get caught up trying to beat the Jones's...you will always loose in the end. Finanlly, my last piece of advise...you don't know what you don't know until someone tells you something you don't know. You aren't a tooled financial advisor...don't be affraid to seek professial advise. There is a reason we are out there, we know things you don't and things that can't be put into a book such as Ric's books and others of the like. By the way, the most complete personal finance book I have ever read is Your Complete Guide to Money Happiness by Henry S. Brock. I recommend this book to clients, friends and family, it is an easy read packed with great information...check it out!