Scott Galloway’s Wealth Formula

Scott Galloway’s new book is out and has quickly gained traction with anyone wishing for financial stability. Through a mix of humor, fun facts, and a bit of tough love, Galloway instills basic tenets to financial freedom, as he uses his book to provide modern approaches to combating economic disparity.

 

A quick internet search pulls plenty of positive comments for The Algebra of Wealth: A Simple Formula for Financial Security. In fact, you’d be hard pressed to find a negative one. One reader posted on Amazon that:

“There is so much good advice packed into this one book, that it’s difficult to summarize. The most important idea is that ‘wealth’ encompasses much more than material security, though that is certainly the basic necessity for a good life. Galloway writes about the importance of character, integrity, self-knowledge, and compassion for oneself and others, as being fundamental to wealth. His ‘formula’ for wealth comprises four areas: Stoicism, Focus, Time, and Diversification.”

Another states:

“I wish I had read this when I was younger. Although I started retirement savings early, the abstract concept of capital and putting it to work would have hedged my bets while pursuing ‘passion’ careers. The two were not as mutually exclusive as my Gen X thinking assumed. Going to get copies for my boys. I hope they read them. The truth of time for money is simple but profound. Figuring out your ‘monthly burn’ at a young age, saving, and putting capital to work to hedge that time for money trade off [sic] is an elegant solution.”

Lauded as a hard-nosed, successful professor of Marketing at NYU’s business school, Scott Galloways utilizes pointed language, and follows a growing trend of getting back to the basics–taking ownership of your actions, keeping your chin up, facing hard truths–along with some added advice that could only work in today’s economic market. The Algebra of Wealth offers a mix of tried-and-true techniques and plenty of new ideas to help you build and keep individual wealth. Essentially, Galloway’s book guides readers on how to eliminate economic anxiety by diversifying investments and establishing–and maintaining–effective financial habits. He even gives tips on how to boost your pay.

In the book, he breaks his message down nicely into three major lessons that are easy to follow:

  1. Being wealthy equates to economic security and nothing else.
  2. The algebra of wealth is derived through four components: Focus, Stoicism, Time, and Diversification.
  3. There are four big lessons to be learned from Galloway’s lifetime of investing (more on these in a moment).

Lesson #1: Wealth is the absence of economic anxiety

In this lesson Galloway attempts to adjust a common misunderstanding of what wealth is. Rather than the accumulation of goods, which is how most people define wealth, the author states that “Wealth is a means to an end: economic security. Put another way, wealth is the absence of economic anxiety. Freed of the pressure to earn, we can choose how we live.”

Lesson #2: The formula to building wealth consists of four components: Focus, Stoicism, Time, and Diversification

  1. Focus–Galloway explains that focus is “primarily about earning an income–and you’re going to need a decent amount of it.” Here he discusses following your talent rather than your passion (often these are the same thing), so that you can increase your earnings.
  2. Stoicism–is “about living an intentional, temperate life in and out of work.” This means establishing a communal mindset over an individualized one. Strengthening your character will ultimately strengthen your financial stability.
  3. Time–is “the real currency, the one asset we’re all given at birth.” Galloway says we need to start building wealth today–carpe diem! –in order to have our assets compound successfully.
  4. Diversification–means knowing the basics to investing, how the markets work, and making good choices on a consistent basis. Consistency is key!

Lesson #3: Four big lessons learned from a lifetime of investing

  1. Don’t do what everybody else is doing. Always be willing to look at options that other investors tend to ignore.
  2. Never let your emotions dictate your final decisions. Make mistakes, analyze where you went wrong, and try again.
  3. Day-trading is essentially gambling, “…but with worse odds and no free drinks.” Stay away from this, no matter how tempting it is.
  4. Consider moving if it means you can live in a lower-tax location. This is a great way to save money–one that is often dismissed.

Scott Galloway has yet again found a way to bolster individual wealth, and in his newest book he manages to provide meaningful and accessible tips for doing so. But you don’t have to take our word for it. Check out what one reader posted on Goodreads about Galloway’s Wealth Formula:

“Unsurprisingly, Scott Galloway wrote another awesome book. I binged this book in a day. In my humble opinion, this book is a must-read for everyone in their 20s or 30s, but it’s extremely beneficial for people of all ages. Unlike many other personal finance books, this book has a lot of great life advice as well. Scott is filled with wisdom and experience, and this book teaches you about being smart with your money, saving, and investing. It also manages to explain some complex finance topics in an easy-to-understand way.”

Here’s what USA Today had this to say:

“A must-have guide to optimizing your life for wealth and success…In The Algebra of Wealth, Galloway lays bare the rules of financial success in today’s economy. In his characteristic unvarnished, no-BS style, he explains what you need to know in order to better your chances for economic security no matter what.”

The big takeaway here is that you need this book–no matter your present financial situation–if you want to build and maintain a low-stress and financially stable life. At Credit Capitol, we give The Algebra of Wealth: A Simple Formula for Financial Security two thumbs up.