Home Sweet Home:
How to buy your first home, your next home and save on taxes when you sell.
A-Z of Investments:
From annuities to zero-coupon bonds, go from owing money to OWNING money. Get out of debt (and stay that way).
Estate Planning & Long-Term Care:
Learn how to protect yourself and your family.
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About the Author
Ric Edelman is Barron's #1 independent financial advisor, the bestselling author of seven books on personal finance, and host of The Ric Edelman Show, heard on radio stations nationwide. Ric's firm, Edelman Financial Services, manages $5 billion in assets and has been helping people achieve financial success for twenty-five years.
Read an Excerpt
The Truth About Money 3rd Edition
The Four Obstacles to Building Wealth
As you begin trying to accumulate wealth, you'll encounter four major obstacles. The first is the most deadly, but if you think it's the economy or taxes, you're wrong. Your biggest enemy, as I can attest from having worked with thousands of people just like you, is yourself. Without question, procrastination is the most common cause of financial failure.
To understand this, consider the story of Jack and Jill. You know Jack fell down the hill, but you didn't know that he suffered head injuries. As a result, Jack decided not to go to college. Instead, at age 18, he got a job, enabling him to contribute $3,000 to his IRA each year. After eight years, he stopped, having invested a total of $24,000.
Meanwhile, his sister Jill, inspired by Jack's accident, went to medical school. At age 26, she began her practice and started contributing $3,000 to her IRA. And she did so for 40 years, from age 26 to 65. She invested a total of $120,000 and she put her money into the same investment as her brother Jack. Thus, Jill started investing the same year Jack stopped, and she saved for 40 years compared to just eight years for her brother.
By age 65, whose IRA account do you think was worth more money?
Assuming Jack and Jill each earned a 10% return, Jill accumulated $1,324,778, but Jack collected $1,552,739 -- $227,961 more than his sister!
While Jack had invested only $24,000 to Jill's $120,000, his money earned interest for eight years longer than his sister. It wasn't the money that made him successful -- it was the time value of money. Jack didn't procrastinate, and by investing sooner than Jill, his account grew larger.
I have heard the complaint that procrastination does not belong at the top of my "Enemies of Money" list. There must be other, more serious causes for financial failure, right?
Obstacle#1: A Procrastination
I cannot stress enough the need for you to get started right now. Procrastination says you'll do it tomorrow. It's easy to see why you put planning off until later: After all, who has time? You've got lots of deadlines and you don't need another one. You've got to get to work on time, get your kid to soccer practice and prepare for out-of-towners who will be visiting you this weekend. With today's deadlines, you don't have time to work on something whose effects win not be felt for 20 years. But that's okay because you're young and you'll still have plenty of time later! Right?
Maybe this is why so few of my firm's clients are under 30. It just seems that young people don't want to talk about something 40 years away: They're more concerned about this weekend's party!
In fact, I've heard all the excuses: If you're in your 20s, you figure you've got 40 years to deal with it, so you'll put it off until you are in your 30s...
... but by then, you've got a new house, new spouse, and new kids -- and you're spending money like never before. Who can think about saving at a time like this? You'll deal with it later, after things settle down in your 40s...
... when indeed you're making more money than ever, but now you find that your older children are entering college. On top of that, your income growth isn't as rapid as it used to be. No problem, you say, because by the time you hit your 50s, you think your major expenses will be behind you...
... only to discover that your younger kids are entering college and the older ones are starting to get married (with you footing all these bills) and maybe the graduates need help buying a house, too. Your parents probably need some help as well, because they're getting up in years. And you can't remember the last time you got a promotion; after all, you've moved up so high in the company that the only way you'll get promoted is for somebody to retire or die.
You're also finding that the cost of living has never been higher, so planning for retirement will just have to wait a bit longer..
... and when you hit 65, you lament your anemic savings and wish you had started 40 years ago.
I see this all the time.
If there is only one thing in this entire book that you need to take on faith, it's this: There is never an ideal time for planning, and while you can always find a reason to put it off, don't. Do it now. Procrastination will cause you financial ruin more effectively, more completely, than the worst advice a crooked broker could ever give you.
The Cost of Procrastination
There is, in fact, a specific cost to procrastination. If you are 20 years old and you want to raise $100,000 by age 65, you need to invest only $1,372 today (ignoring taxes for the moment and assuming a 10% annual return).
But a 50-year-old would need to invest nearly $24,000 to obtain that same $100,000. This is the cost of procrastination. As you can see, it's not money that makes people financially successful, it's time.The Truth About Money 3rd Edition. Copyright © by Ric Edelman. Reprinted by permission of HarperCollins Publishers, Inc. All rights reserved. Available now wherever books are sold.
Most Helpful Customer Reviews
This book is fantastic. It is comprehensive for the average person who needs to know about crucial areas in personal finance. The author covers everything, and not only on a superficial level, but quite a bit in depth. One aspect that I really appreciate is that he doesn't just say, 'This is good, but this is bad', he really takes the time to explain how certain market forces work, as a working background, then says, 'And that is why this is good' - and in that way enables the reader to be able to analyze certain investments, not just memorize specifics. For instance, his section on explaining bonds was really eye-opening. Finally, he does all of this in a very conversational manner, so you don't get bored like other techincally oriented books might induce. This is a must-own, mini-finance dictionary for the person who is asking, 'How do I start understanding all this finance stuff?'
For several years, I've been weeding through financial books to get different 'professional' opinions and thoughts on money and how to manage assets. If you went to the personal finance section of a bookstore, you'll see dozens if not hundreds of titles. This book is the ONLY book you need- period! Read everything else, then buy this book. All of your necessary questions are answered. I like a guy who says WHY to do what he tells you, and what to expect if you don't follow his advice. I like all of Ric's stuff, but this is the true original, and is the only book you'll need.
The Truth about Money covers the prerequisite fundamentals for financial intelligence. It delivers the information in a clear concise fashion, and uses real-life examples to further explicate the matter. Highly recommended for those who want to better understand the financial world and create a foundation for future investments.
I read this book from the library and then decided to buy it so I could have it available to discuss the wide range of financial areas covered with my college age children.
The book lays it out plain and simple so those that understanding nothing of the finance world...can!