I recently finished reading Quit Like a Millionaire by Kristy Shen (mostly) and Bruce Leung. The book came out in July of 2019, and there was a bit of buzz surrounding the release in the personal finance world.
I honestly had not heard of Kristy or Bruce, or their blog Millennial Revolution. But I was curious to hear their story after learning that Kristy was able to retire at the age of 31 (jealous).
What’s Quit Like a Millionaire About?
Kristy was born in China, and spent a portion of her childhood growing up there. The book begins with Kirsty talking about one of her fondest childhood memories in China: Digging through waste heaps looking for treasures. Apparently “treasures” came in the form of rubber bands, which her and her friends used to make jump ropes.
During this time Kristy’s family made $161 U.S. dollars for the entire year. So it’s reasonable to assume that there wasn’t money left over to purchase real jump ropes.
Reaching Financial Independence
Despite Kristy’s upbringing she was able to obtain a computer engineering degree in Canada. She states that following your passion is overrated (hers is creative writing), and that instead you should pick a degree with a high pay over tuition (POT) score.
Quit like a Millionaire continues with Kristy’s story after graduation and how she was able to reach financial independence by investing around 50%-80% of her income. She even goes into the details of the exact asset allocation. I for one appreciated this, as I feel like a lot of financial independence writers don’t provide this information to their readers.
Surviving a Market Crash
After reaching financial independence, Kristy and Bruce were worried about being able to survive a stock market crash (and rightfully so after living through the 2009 recession). I think this is a worry that a lot of people struggle with and something that holds people back from being able to fully retire.
In my fail safe retirement plan, I discuss the term “safe withdrawal rate” and the 4% rule. Quit Like a Millionaire discusses the 4% rule in great detail. Studies show that a 4% withdrawal rate has a 5% chance of failure. And that 5% chance of failure occurs most often if you reach financial independence right before a stock market crash.
Their solution to eliminate this 5% chance of failure was to create something called the “Yield Shield” which is a temporary shift in their asset allocation during down years into assets that pay higher dividends.
Quit Like a Millionaire shows the steps involved in creating a “Yield Shield” for yourself to reduce your 5% chance of running out of money when using a withdrawal rate of 4%
Traveling the World and Tackling Life’s Big Questions
Quit Like a Millionaire finishes with Kristy and Bruce traveling the world after reaching financial independence. The first year after quitting their jobs, Kristy and Bruce visited 20 counties from North America to Europe and on to Asia. They spent a little less than $30,000 on their year long trip, which led them to the realization that they could travel the world indefinitely for the rest of their lives. That must be a pretty great feeling!
In the final chapters, Kristy also discusses topics such as covering healthcare and the costs of raising children during retirement years. She explains that these costs are often much less than people think.
Issues with Quit Like a Millionaire
In Quit Like a Millionaire Kristy slams on home ownership. She states that owning your home is an antiquated idea, and that renting is a far superior alternative. She provides a detailed breakdown of the costs that go into owning a home.
Although not always the case, I personally think that renting for the long term is a terrible idea. In the book, Kristy gives an example of someone who purchases a home every nine years. Nine years!? Just like all investments, home ownership should be something you hold onto for the long term.
Why Owning is Better
The cost of your rent is at the mercy of your landlord. On average, rents increase at a rate of 3% per year. On the other hand, a 30 year fixed rate mortgage stays fixed for 30 years and then you never have to make a mortgage payment again.
As an example, a $1,500 per month rent will be $3,600 per month is 30 years (assuming a 3% increase every year). A $1,500 principal and and interest mortgage payment will stay $1,500 per month for 30 years and then goes away forever. I go into more detail on this subject in my post Renting versus Buying a Home.
Later in Quit Like a Millionaire, Kristy says that owning real estate can be a good investment if the real estate is used as a rental property…!?
After Kristy spent an entire chapter explaining why owning a home is a terrible investment, I thought this was a pretty bizarre statement. But this leads to a good point. A good rule of thumb when looking at purchasing a home is to see what similar homes in your area are renting for. If you find yourself in a situation like losing a job and needing to relocate, you still have the option of renting your house out IF the rents in your area are more than your mortgage payment.
I had this exact situation happen to me. I relocated for a job from Washington to Oregon, but was able to rent out my house for a profit during my time in Oregon.
So in my humble opinion, owning a home is a good investment if you’re willing to own it for the long term.
The Yield Shield
Quit Like a Millionaire also goes into great depth about creating a “Yield Shield” during market downturns. One of the tiers of my three tier retirement plan is passive income from rental properties. With rental property, you don’t have to over complicate your investments with a “Yield Shield” because if there is a market down turn, you can lean on passive income from rental properties to tie you over until the market recovers.
What Quit Like a Millionaire Gets Right
Overall, I really enjoyed reading Quit Like a Millionaire. I think Kristy is a great writer. She made boring topics like retirement accounts, tax optimization, and asset allocation fun to read. Kristy was able to mix in a good amount of humor into the book along with incorporating her personal story, which made the book much more engaging than a typical personal finance book.
I think the steps that Quit Like a Millionaire outlines provide a proven and repeatable method for people wanting to reach financial independence for themselves. Kristy’s family started out making less than $200 dollars per year, and yet she was able to reach financial Independence by age 31. She didn’t win the lottery, she wasn’t a day trader on the stock market, and she obviously didn’t receive any trust funds. Kristy went from the bottom financial 1% to the top 1% in 30 years. That’s pretty impressive.
Kristy shows that with hard work and by taking the right steps in life, anyone can reach financial independence. It doesn’t matter where you came from or what’s happened in your past. You can take control of your own financial situation and reach freedom.
Quit Like a Millionaire Rating
I definitely recommend Quit Like a Millionaire to anyone trying to reach financial independence. I also think this book would make a great gift to a high school student who is about to embark on their own life journey.
The more we can teach financial literacy at a young age, the better our society will be as a whole. I give Quit Like a Millionaire an 8.5/10.