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Starting with this profoundly simple concept, bestselling author Sandy Botkin and his son, Matt Botkin, interviewed a host of millionaires ...
Starting with this profoundly simple concept, bestselling author Sandy Botkin and his son, Matt Botkin, interviewed a host of millionaires to learn how they made their money, invested it, and planned for the future.
The result is Achieve Financial Freedom—Big Time!, a simple, straightforward guide to building, keeping, and growing your wealth so you never have to worry about finances again.
The authors reveal the fundamental financial decisions this elite group makes in virtually every area of financial planning--from paying for college and healthcare to investing and estate planning.
Learn how to:
Achieve Financial Freedom—Big Time! tells you everything CPAs don't want to. Start taking action now--so you don't have to in the future.
The Beginning: We've Got to Start Somewhere
The first step towards getting somewhere is to decide that you are not going to stay where you are.
—John Pierpont Morgan
What You Will Learn
The problem: Why so many people are failing financially
Sixteen reasons people fail financially at retirement
The Problem: Why So Many People Are Failing Financially
It was a great day to see my friend Jeff, although the gray clouds were creating an ominous haze in the background. What would one of the top financial planners in both our state and in the country say to my wife, Lori, and me?
I have known Jeff for many years. He is one of the top CPAs and financial planners in the country. He manages a lot of money for a large base of clients. What I like most about Jeff is that he is straightforward. There is no "beating around the bush" for him. He will tell me the truth even if it goes against his own self-interest.
When I reached Jeff's home, I was surprised at a number of things. First, his house was smaller than I remembered. I had figured that someone as successful as Jeff would be living in a McMansion. Second, the house was all white! Basically, it was a scaled down replica of the White House!
Jeff greeted us warmly as Lori and I entered his well-furnished home and he ushered us into his private home office for our interview.
"Well, Jeff," I asked, "how's business?" He chuckled a bit and said, "Other than my clients, folks are in worse shape than ever. With all the seminars being given and books being written, you would think that people would be taking the right financial steps. Sadly, they are no better off than their parents were 30 years ago, and maybe they are a bit worse off."
Shocked, I asked dumbfoundedly, "What are you talking about?"
Jeff bristled at the thought of the problem that he was going to cover and responded, "Sandy, let me share some sobering statistics."
"First, total consumer debt is about $2.4 trillion. If you count mortgages it is over $13 trillion. Average Americans, until recently, saved an average of only $397 a year, and for many years, there were negative savings. This means that they borrowed more than they saved!"
Lori and I were both shocked. "Are you kidding, Jeff?"
He answered with a drawn look. "No, I am serious. I wish I were wrong. Moreover, about 60 percent of those who reach age 50 have a net worth of under $60,000."
Lori started at Jeff's last comment. I turned to her and said, "Don't worry, honey. I have plenty of insurance. You will be a rich widow." She rolled her eyes, which made me chuckle a bit.
Jeff further noted, "Over 22 percent of all those who reach age 65 live in poverty, of which the majority are women!
"In fact, many years ago a study was conducted that determined that only 4 percent of those who reached age 65 retired with the same standard of living that they had before retirement. The rest had to continue working, live on some form of charity from the kids, or substantially reduce their standard of living. From what I can see today, most Americans are going to be in that same boat when they retire. In fact, generation Xers, those born between 1960 and roughly 1981, will have it much worse than the baby boomers. Many of them won't get a pension, and the date for receiving their full social security will be age 67 and thereafter, which is a year later than it is for the baby boomers."
16 Reasons People Fail Financially at Retirement
I then asked Jeff, "With all these depressing statistics, what do you think were the reasons that many people failed financially?"
"Sandy, there are a lot of relatively new developments that have caused some of these problems as well as some old, recurring problems."
Scowling, I said, "I know two changes: the economy and the attitudes of people in our country. When my parents were growing up and when they were raising kids, most people worked for the same firm all of their lives. They were well taken care of with medical insurance, a great pension, and other benefits. I keep remembering the old TV shows such as Ozzie and Harriet (for us old coots who remember these shows) and My Three Sons and Leave It to Beaver. The couples stayed married all of their lives and worked at the same job in the same occupation forever. Besides attitudes, what else has changed?"
"You are right, Sandy. Attitudes and circumstances have changed in this country. However, there are many other factors that are causing folks to fail financially. I will outline the major factors that cause people to not be rich, and I'll also outline those risks that can not only keep you from getting rich but actually wipe you out."
1. People's Longer Lifespan
"First, people are living longer than ever," said Jeff.
Chuckling, I noted, "I have no intention of dying in order to save money. That isn't one of my favorite planning techniques."
Jeff laughed, but he continued: "During the time of the ancient Greeks, the average life expectancy was around 20 years old. As little as 200 years ago, the average life expectancy was under age 35. In 1900, it was about 47. In 1930, it rose to about age 60, and today it is about 78. This has caused numerous problems. For example, people have multiple families (due to increased divorce rates) and multiple careers. And, of course, they have more costs for the longer periods of time they are sustaining their lives. Living longer also increases the chances that people will be sued. In addition, people incur more medical and dental costs by living longer. It is no wonder that people have more month than money these days."
"Jeff, don't forget that living longer might increase the chances of having disabling health problems, either physical or mental, which could create the need for a variety of services such as independent-living assistance and/or nursing care. There really are a lot of issues here."
Jeff agreed, "Yes, Sandy, you are quite right. Moreover, costs for everything have skyrocketed over the past 20 to 30 years." As an example, Jeff showed us some budgeted estimates for his son's friend's wedding:
Photography and video: $2,000
Clergy and church (or synagogue) rental: $1,000
Engagement ring: $2,500
Wedding ring: $700
Groom's tuxedo: $175
Reception, including food: $22,000
Jeff continued, "Think about prices today for many items such as cars ($25,000 to $30,000). The average price of homes in our area is $350,000. People will also need enough funds to have a successful retirement for 365 days a year for at least 20 years. But nursing home costs can easily be $55,000 per year and more."
Scowling, I said, "Okay, Jeff, stop. I get the point. You are depressing me."
"So, living longer is one problem," concluded Jeff.
2. The Huge Amount of Information People Must Process
"The second problem is that we require much more knowledge to deal with the burgeoning amount of available information. The Internet has geometrically accelerated the growth of information available to people."
I didn't initially understand the problem. But Jeff explained: "The problem is that folks just can't keep up with everything."
Caustically, I noted, "You're telling me. You know how fast our
Excerpted from ACHIEVE FINANCIAL FREEDOMâ?"BIG TIME! by SANFORD C. BOTKIN, MATTHEW I. BOTKIN. Copyright © 2013 by Sanford C. Botkin and Matthew I. Botkin. Excerpted by permission of The McGraw-Hill Companies, Inc..
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Chapter 1 The Beginning: We've Got to Start Somewhere
Chapter 2 Reserves
Chapter 3 Compound Interest: The Eighth Wonder of the World
Chapter 4 Saving Money, Part I: The Real Secret of Wealth
Chapter 5 Saving Money, Part II: How to Pay for College
Chapter 6 Getting Out of Debt Forever
Chapter 7 How to Avoid Scams, Slams, and Shams
Chapter 8 Homes and Mortgages
Chapter 9 Investing, Part I
Chapter 10 Investing, Part II
Chapter 11 Insurance, Part I
Chapter 12 Insurance, Part II
Chapter 13 Social Security
Chapter 14 Estate Planning
Chapter 15 Retirement Planning
Chapter 16 Asset Protection
Chapter 17 Alternative Housing for the Elderly
Chapter 18 Evaluating a Financial Planner
Appendix A Comparison Chart for College Savings Plans
Appendix B Getting In-State Tuition Rates for Out-of-State Students
Appendix C Comparison Chart for Term Versus Permanent Insurance
Appendix D Normal Retirement Ages
Appendix E Benefit Reductions When Beneficiaries Retire Before Their Full
Retirement Age and Take Benefits at Earliest Age Possible
Appendix F Yearly Benefit Rate Increases When Beneficiaries Retire After
Their Full Retirement Age up to Age 70
Appendix G State Rules Providing Homestead Protection for Your Home
Appendix H Additional Helpful Websites and Other Resources
Posted April 15, 2014
Posted April 15, 2014
Posted April 3, 2014