The Quiet Millionaire: Parts 4 & 5 - Building Your Net Worth


In The Quiet Millionaire, author and Certified Financial Planner Brett Wilder shares common-sense advice on how to build net worth. His instructions on accumulating assets and borrowing intelligently will get you started on the path to financial independence, beginning with this wisdom:

“Your goal should be to make the value of what you own go up and the amount of what you owe go down.”

Here's his basic formula

  • Spend conservatively
  • Save/invest 25% of your income (you may need to start lower and build to this percentage!)
  • Limit downside risk of your real estate investments (primary residence and/or vacation homes)
  • Match your borrowing terms with the life of your purchases
  • Avoid high-interest credit cards

with specifics (based on Chapter 4: "Do You Own the Right Assets?" and Chapter 5: "Are You an Intelligent Borrower?"):

Personal Use Assets 

  • How To Buy: plan purchases for personal use assets such as clothing, cookware, electronics, and furniture; realize that the value of most personal use assets are in their usage (antiques, collectibles and your residence being exceptions) so if you don’t use something, it has little value.
  • How To Pay: use current income or savings earmarked for purchases. 
  • Warning: avoid paying with credit cards as the total cost of personal use assets may be double the original cost if you pay only the minimum monthly payment on the account balance.

Primary Residence

  • How to Buy: select a solidly constructed home (e.g., brick exterior and hardwood floors with predictable/quantifiable maintenance costs) in an established neighborhood with history of price appreciation in a desirable school district; watch and wait for a deal if possible.
  • How to Pay: commit up to 21% of your income to your mortgage payment (principal, interest, property taxes) rather than the 28% considered affordable; borrow with a 30-year fixed rate mortgage so that you can lock in a relatively low rate for a long period of time; don’t prepay your mortgage or elect to get a 15-year mortgage but use extra funds for investment.
  • Warning: avoid taking out a second mortgage and putting your house at risk for foreclosure.


  • How to Buy: buy from overstocked inventory at the end of the model year; or choose a used car among recent models with relatively low mileage. 
  • How to Pay: make sure that your loan balance never exceeds the value of the car; make a down payment of 25% or more and limit the loan term to 36 months; use a home equity line to deduct interest fees; or take advantage of incentive programs that offer 0% or very low interest rates as long as your loan amount is not greater than the car value. 
  • Warning: avoid a lease but if you do lease, make sure you understand the lease terms, lease a new car, and pay attention to mileage restrictions.

Vacation Homes

  • How to Buy: choose a home in an established area to minimize risk of price depreciation and a desirable area near recreational and cultural activities; consider infrastructure (road access, availability of utilities such as electricity and water).
  • How To Pay: make sure your financial obligation for the vacation home doesn’t prevent you from funding for retirement, college, and other future needs; get a traditional mortgage.
  • Warning: realize that vacation rental income involves complex tax rules; avoid buying raw land as you will typically have little appreciation but ongoing costs associated with property taxes and mortgage interest.


  • How to Buy: buy timeshares on the secondary market (if you choose to buy).
  • How to Pay: pay cash preferably; use your home equity line for a short time only while you are waiting for forthcoming funds (e.g., tax refund).
  • Warning: avoid long-term borrowing for a timeshare.

More tips on building wealth

  • Limit holdings in liquid assets (even high yield savings accounts) as rates/returns typically do not exceed actual inflation rates, eroding your net worth over time; arrange a home equity line of credit to have access to cash.
  • Consider using Modern Portfolio Theory to structure your investment assets.
  • Determine your rate of return on rental properties to see if you are making an adequate rate of return.
  • Generate income and accumulate assets through business ownership and stock options.

Want to know your net worth and how it compares to others?

Though comparisons are interesting (and perhaps comforting depending on how much you've set aside), focus on building your net worth by accumulating appreciating assets and reducing debt.

Note: I received a copy of The Quiet Millionaire in exchange for a review and I have created a series of posts based on the book.

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Guest's picture

I disagree with the book's advice to not prepay one's mortgage. Yes, if one has a mortgage with a fairly low interest rate, one may be able to find investments with a higher rate of return. However, for many people that's far from certain.

I've found great peace of mind from outright owning my home. That, in combination with having no other debts whatsoever, means that our "burn rate" is relatively low if the household income disappears. Investing the money we were previously spending on the mortgage is giving us additional padding.

Julie Rains's picture

Mr. Wilder has a somewhat conservative, stay-the-course, keep-investing advice, which I think is very useful. From what I can tell, his main audience are high earners who seem to have secure jobs but need financial discipline and will benefit greatly from this approach. Either way (prepay or not), having discipline over a long period of time is extremely helpful (as you mentioned taking your extra money and investing) and having minimal expenses (in case of a job loss or change in your income situation) is comforting.

Guest's picture

I appreciate the link to my blog.

Keep up the good work and let me know if you ever need my help on a post.

Julie Rains's picture

Thanks for the easy-to-decipher net worth chart.

Guest's picture

I see the recommended term for mortgages on your primary as well as a vacation home, but do you know if the same rule applies for a rental: 30 year fixed rate?

Julie Rains's picture

It looks like the recommendation is to match the life or usefulness of the property with the borrowing term. It seems that Mr. Wilder doesn't recommend tying too much up in one particular investment to make sure that clients have cash flow and extra money to invest each month. So I am thinking that the 30-year fixed rate mortgage would be the easiest way to borrow and maintain an even cash flow.