Book Review- Killing Sacred Cows by Garrett Gunderson

Killing Sacred Cows by Garrett Gunderson really sparked my interest when I first heard about it and perused the cover. Subtitled “Overcoming the Financial Myths that are Destroying your Prosperity caught my attention, because, if there are myths that are destroying my potential for future prosperity, I would like to know about it. The inside of the dust jacket has a blurb about Gunderson’s website, 401khoax.com and the blurb states that 401ks are “risky and destructive to most individuals”. Wow! As someone quite interested in money, finances, and my financial future, I felt compelled to see if what Gunderson is saying made any sense, although I must say was skeptical to start off.

Myth 1-The Finite Pie-

Gunderson describes this myth as “limited resources”, that is if you want something for yourself you have to take it from someone else. in reality, he says, there is enough for everyone and we can all prosper. He talks about the troubles of a scarcity mindset, saying that this limits our potential.

I do think that this type of thinking can stifle people, but I am not sure how many people it really effects.

Myth 2-You’re in It for the Long Haul-

This is where Gunderson addresses the 401k hoax proposition. He says that wealth is measured by the money we have “accumulated”, and most people are afraid to use it, even after they retire. Utilizing money, not accumulating or hoarding it, is the most direct way to achieve wealth. He points out that financial institutions want our money, on a regular basis, and want to hold it as long as possible. Gunderson says it is more productive to base our investments on our “Soul Purpose”, which he describes as “What we would be doing all day if we didn’t need money”. This is more effective than the accumulation theory, which creates the “broke millionaire”, where rich people live like poorer people because they are afraid to spend money. He says many people postpone their dreams until their retirement, and many don’t know what their money is doing, which is akin to gambling. He recommends people seek value rather than practicing frugality. Cash flow is a better measure than net worth. Taking money and buying rental houses that produce cash flow is an example of utilization.

Where he talks about the 401k myth, his example of buying rental houses, although it may be a better investment these days with real estate prices dropping, fails to take into account all of the extra work involved, as well as maintenance costs, insurance, etc. Suggesting people ignore the 10% penalty when deciding whether to withdraw money from a 401k does not seem like smart advice to me. He also talks about an office building he owns in Utah, which sounds eerily familiar to some of Kiyosaki’s detail less real estate deals he talks about in his books.

Myth 3-It’s All About the Numbers-

It is a myth that wealth is all about your account balance. Wealth is really doing what you enjoy, and focusing on the numbers prevents us from doing that. We are trained by financial institutions to look at the numbers. He brings up the broke millionaire in this myth as well. He also says we are only deferring taxes in a 401k, and we may be in a higher tax bracket when we retire, so we would pay a higher percentage.

When he says it is not all about the numbers, he does have a point. But why would anyone pass up free money in the form of a company match if it was available, irregardless if we think we may be in a higher tax bracket when we retire?

Myth 4-Financial Security-

The Chapter starts off with a quote from Robert Kiyosaki. Gunderson says that most people think financial security comes from a paycheck and benefits, which is a myth, that true security can only come from ourselves. He calls staying in a job we do not like for security is akin to “golden handcuffs”. He talks about the Enron scandal, and how employees were not mitigating risk.

I agree that some people are “stuck” in jobs because they need a paycheck, but there are ways to get out or improve our situation. The Enron employees may have been unwise to place so much in their company stock, but there were illegal activities going on which caused the company to go bankrupt.

Myth 5-Money is Power-

Gunderson says this myth is destructive, because we think if we don’t have money, we are powerless, and think it is futile to try to become wealthy. Money is not value, but represents value created by others or to others. Having money does not make us evil. Having money does not make you an exploiter he says, and uses the example of Gandhi as someone who was very powerful but has no money. We need to break the myth that money is evil, and accept the fact that it is OK to prosper.

Most people I know do not really think money is evil, at least not in their personal lives.

Myth 6-High Risks = High Returns-

Gunderson says that believing high returns can only come from taking risks is a myth. Investing according to your Soul Purpose can have less risk and greater returns. He says people need to take responsibility for increasing their chances of “winning”. He says when we blame the market (which I am sure a lot of people are doing now!), we are not taking responsibility. We are acting like gamblers instead of investors. We should invest in ourselves, and buy into businesses (stocks of businesses we have studied and know about) not just “stocks”. When we lose money in the market, we also lose the future opportunity of that lost money.

I do agree many people, myself included, need to look at alternative methods of income, like starting a part time business, invest in ourselves, and educate ourselves about personal finance. But investing in the stock market is a way to do that, and a 401k can be a great vehicle for that purpose.

Myth 7-Self-Insurance-

We are told to spend as little on insurance as possible, Gunderson says. In fact, the more we have , the more insurance we need, and we should not skimp in this area. People try to “self insure”, when we should be putting that risk on others-the insurance companies. He says permanent life insurance can be a better option than term life insurance, because it provides value at death.

Gunderson mentions several times people who own their homes and don’t carry homeowners insurance. While I am sure that there are many people who do this, I do not think it is anywhere near the majority, so I don’t think it is a great example. As for life insurance, if investing the difference in premium prices results in more money over time (which it almost always will do), it seems term life would be better.

Myth 8-Avoid Debt Like the Plague-

Believing that all debt is bad is a myth. We should know the difference between debt and liabilities. Gunderson takes a few shots at Dave Ramsey in this chapter, saying few succeed with his system because they don’t address the underlying “root causes” of their problems. We should focus on making sure our liabilities are productive, and once again goes back to the real estate example. He even mentions how his career blossomed when he bought a new house, because he became more confident.

I do agree that not all debt is “bad” per say, and some is necessary, like borrowing to buy a house. I disagree with his assessment of Dave Ramsey’s method, and since most people Dave deals with have credit card bills, etc., it is probably a good thing. I am sure more people than he thinks have success with the debt snowball. I am really not sure what to think about his statement regarding his career taking off after buying a house though, either.

Myth 9-A Penny Saved is a Penny Earned-

Gunderson says we focus too much on price, and that “price is the only thing that matters” is a myth. We should look at value, and price should be a secondary concern. He talks of coupon clippers spending 30 minutes to save $5, and also how paying someone to cut his grass allows him to use his time more productively. He mentions the value that can be created by income producing real estate again.

I agree that price is not the only consideration, but most people like to save money on the same or similar items, everything else being equal. But spending 5 minutes clipping coupons while drinking your morning coffee doesn’t seem to be time you could use more productively, in my opinion.

Defeating the myths-

We can defeat these myths, Gunderson says, by discovering our Soul Purpose, asking the right questions about what we want in life, and determining what value is created in our decisions, investments, etc.

My Thoughts-

Gunderson does bring up some valid points throughout Killing Sacred Cows. Most people do need to pay more attention to their investments and financial future, and not blindly put money into our 401ks without at least understanding the funds we are in, etc. The wild swings and recent drops in the stock market affirm this position. Some of his advice, like cashing in your 401k to buy rental properties, is probably dangerous advice. If people bought houses right before the bubble, they could be in a very precarious position now.The book also lacks much in “concreteness”, he mentions investing in real estate and rental properties many times throughout the book, but doesn’t give any details on how one would do it. He also neglects to say how much work it can be. I found it similar to Rich Dad, Poor Dad, in that it did make me think about different methods for increasing income and potentially diversifying investments as well. Unfortunately, like Rich Dad Poor Dad, I found it a little too nebulous in detail. He also seems to push his website and his programs in the book, where I guess you can pay him to teach you to be become wealthy following his methods.

Want a copy of Killing Sacred Cows to read yourself?

Leave a comment below, and I will pick one winner randomly next Saturday who I will send my copy to. Open to US and Canada residents only. I will contact the winner for their address once the winner has been chosen.

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