Before you stop reading because this doesn’t seem nutrition related, answer these questions: Does money cause you stress? Does that stress affect your health and happiness? If yes, read on. If no, read on to see if this would be a good book to increase your money and investing knowledge. If none of this interests you, thanks for reading this far and I’ll be back next time with a food-related post. ;)
I haven’t read a money book in quite awhile. I’ve read Dave Ramsey’s books and used his concepts to tackle our debt (yep, debt free except the house!) and avoid new debt as I do not want to be a slave to the lender. They are highly recommended if you want to get out of debt, however, I think they fall short when it comes to how to invest your money so it can grow and work for you and be there to support you in retirement.
That’s where this book comes in. At over 600 pages, it can seem a bit daunting to read, but it isn’t completely full of complex terms, equations and numbers. The goal of the book is to educate the average person of the importance of investing in yourself and for your future and several ways to do so.
First, why is money important? Robbins gives these six reasons:
- Certainty / Comfort (you can pay for food, shelter, utilities, etc…)
- Uncertainty / Variety (when you’re uncertain about money, you can become very stressed.)
- Significance (people with a lot of money tend to be well-known, right? Think movie stars, professional athletes, etc…)
- Love and Connection (money is useful for courting a relationship along and taking care of a partner, children, etc..)
- Growth (paying for continuing your education, life experiences, etc..)
- Contribution (GIVING to others)
Have you ever thought of why money is important to you when coming up with your money goals? Have you explained to your children when they are learning about money that it isn't just to pay for stuff, but to have experiences whether it just be a nourishing home cooked meal, a trip to another country or the act of giving to someone in need. Through my personal development journey, I have determined that money is important to me for certainty and comfort for me and my family, growth in the form of experiences and education and for contribution. The experiences and contribution is why you’ll see such a big difference in numbers in the next paragraph. :)
I think the best part of the book is how he helps you calculate how much money you’d need in your retirement account to have Financial Security (pay the basics: food, shelter, utilities, insurance), Financial Independence (add some luxury items like vacations, new car, entertainment) and Absolute Financial Freedom (live your wildest dreams). And, it is not as much as you may think. He told a story of a man who thought he needed $1 billion and after walking through his goals, they came up with a number closer to $10 million. Wow. Magnitudes of difference. Imagine actually being able to calculate based on your goals how much you’d need in that account, earning a modest return such that you can live off the returns. I did the calculations and came up with $900,000 for Financial Security, $1,300,000 for Financial Independence and $6 million for Absolute Financial Freedom. Those numbers aren’t that scary for my age and time I have left until a traditional retirement age. I could feel the stress lift away after gaining that knowledge and working on a plan.
Point 1: Start setting a percentage of your income into a retirement account. 10% is a good starting point, but figure out how much you want to have in retirement, how long you have to get there and adjust your contributions accordingly. Take advantage of your company’s 401(k) match. See if they have a “Save More Tomorrow” Plan meaning each pay raise, you increase the amount that goes into your retirement account. The idea is if it never makes it to your bank account, you won’t miss it. If you don’t have an option of a 401(k), you can open an IRA account. You will have a lot more investment options and possibly less fees. There is also a company that kind of has a DIY pension plan via annuities which may be another great option to consider: www.lifetimeincome.com.
Point 2: Be wary of the fees charged in your investment vehicles. This can be detrimental to the amount of returns you can potentially earn. For example, fees of mutual funds are average of 3.17% versus 0.14% for index funds. If you already have an investment account (or several) www.strongholdfinancial.com will analyze your current investments, fees and risks and suggest new asset allocation. This was eye-opening to me when I ran our investment accounts through their system.
Point 3: Diversify your investments. Robbins interviewed billionaires and hedge fund managers for the information in this book, so there are several strategies, but they all agree to diversify your investments. In one of my retirement accounts, I’m just using index funds via Warren Buffet’s plan. In another account, I’m using the Ray Dalio plan outlined in the book which is referred to as the “All Weather Portfolio.”
- 30% stocks - S&P index
- 15% - Intermediate (7-10 year) Treasury Bonds
- 40% - Long Term (20-25 year) Treasury Bonds
- 7.5% - Gold
- 7.5% commodities
These percentages will be different based on how close you are to retirement and your investment risk tolerance. There is a 20 question quiz that just takes a couple minutes to help determine your risk tolerance: http://njaes.rutgers.edu:8080/money/riskquiz/
Point 4: Use a fiduciary to manage your accounts for you. This was tempting to me as I just don’t have a ton of interest in doing this myself. His tips are to find a fee-based advisor, meaning someone who is paid based on a percentage of your investment balance versus fees for buying mutual funds, trading stocks or selling products for a broker-dealer. Make sure all fees are clear up front and your money stays in a third party investment firm like Fidelity, Charles Schwab or TD Ameritrade. Here is a website that may help you find someone. http://findanadvisor.napfa.org/home.aspx
Point 5: Find ways to contribute more to have more in retirement or retire earlier. You know, stuff like cutting out the expensive lattes and paying extra on your mortgage to get out of debt sooner and putting the money into your retirement accounts. But this can also mean find ways to provide more value to others so you have more money to invest. Personally, this is more my goal. I want to live in the present while planning and saving for the future. The more lavish my goals for each, the more money I’ll need, hence the more value I’ll need to provide to more people.
Point 6: Taxes. Learn how taxes affect your investments. Consider utilizing ROTH IRAs or 401(k)s to take the tax hit now rather than in retirement. For me, it was a simple as checking a box on my 401(k) distribution form to change from pre-tax to ROTH. If you are getting ready to retire or in retirement, there are many tools for keeping your money safe from taxes. Honestly, I glossed over that section since it does not apply to me right now.
Point 7: Don’t forget about giving some of your money to others. That will bring so much joy and possibly purpose to your life. Robbins introduced me to a program called SwipeOut which rounds up your credit card purchases and donates the change to feed hungry children in the US, provide clean water for children in India or rescue a trafficked girl in Cambodia. Swipeout.com
So what if you’re reading this and you’re a few years from retirement or already in retirement? Well, there is still plenty of great information in the book. I would still go through the exercise of determining how much you need for Financial Security, Indepence and Freedom. He talks about fixed annuities and income insurance to provide a fixed monthly income until death. There’s some certainty for you.
Will this book help me reach my money goals for retirement? Only time will tell. I do know it opened my eyes to several products and tools I was unaware of. It brought to light how fees can really eat away at your investment returns. And most importantly, it gave a simple way to come up with a goal to reach for being able to retire comfortably.
How’s that for some nutrition for the mind?
Until next time, with love, hugs and smiles,