"SMART
COUPLES FINISH RICH" by David Bach
Buy
This Book
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Additional thought
of Graham White in highlights.
There
is a great deal of information in the latter part of this book that I have not
attempted to condense. It goes into detail about specific financial
strategies of managing and investing your money. If
you want to gain control over your financial future as a couple - buy
this book.
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This book might be
able to entertain you and get you thinking about some important issues, but
there's no way it's going to change your life unless you are willing to take
some real action yourself.
Values are the key
to living smart and finishing rich. The sooner you and your partner
start putting your values first - and stuff second - the sooner the two of you
will start living a life that excites and empowers you both. That's
because when you understand your values, you tend to live the life you really
want almost automatically. Instead of having to "motivate
yourself" to do the right things, you find yourself being pulled in the
right direction by the power of your values. Stuff may be nice, but it
rarely pulls us anywhere worthwhile. Only values can do that.
Too many of us
spend our lives pursuing stuff, without really looking at our valued.
What happens is that it leads to a mid-life crisis, which generally leads to
all sorts of unhappiness, including divorce.
The truth is that
most mid-life crises occur because people get to a certain age with all this
stuff they've accumulated and suddenly it hits them that their stuff isn't
really making them happy - that this stuff they've spent all this time and
effort getting is actually the wrong stuff.
This almost never
happens to people who've got their values straight. You don't hear
someone in their 50s say, "well, I've lived my life in line with my
values, but now I don't think I like my values anymore, so I guess I'll get
divorced and start over."
In order to create
a sensible Purpose-Focused Financial Plan, you must understand what money means
to you, what values it can help you achieve. Once you know this, you can
quickly focus your time and energy on what matters most to you- not what
society, friends, or advertisers say matters, but what you say matters.
If you're going to
get rich, you're going to have to learn how to get rich! Being
smart and finishing rich doesn't just happen - it takes real actions and
positive commitment on your part. Take classes, read books, study the
stock market, and make friends with rich people.
Though taking
control of your finances can be both fun and easy, it does require a real
commitment, so do yourself a favor - make a commitment to yourself that you
will invest the hours necessary to really read this book and put the steps to
work. If you do them, they will change your life. Even if you do
only two or three of the steps, you will be better off than 80% of the
population. If you do five or six steps you will be better off than
90%.
A
high income and a high net worth are not the same thing. You can make a
lot of money and still be broke or in debt. On the other hand, you can
make very little money and still become rich.
You don't have to
be rich to be an investor. Investing is not the same thing as working at
becoming rich.
Many
people invest, but few take the time to learn about what their money is doing
for them. Being a parent is more than having children - it is about
learning about them, what they like, what their dreams are, what they can do,
what they struggle with. The same is true of money, you must study
it, spend time learning about what it does well and what it can't do.
Simply sticking it in an investment and hoping it will grow is like sending
your child off to a boarding school and hoping they turn out alright.
If you and your
partner aren't BOTH looking after your money, you can't have any real
confidence in your financial future.
The Facts and
Myths About Couples and Money
The truth about
money management s that it's not really that difficult. If you know what
to do and what not to do, it's actually pretty easy. The challenge is
that we're not taught about money in school. As a result, much of what
we learn about it comes from friends, word of mouth, and marketing. This
is why a lot of otherwise smart people spend their whole lives doing the wrong
things with their money.
It comes down to
this...
It's not what
you know about money - it's what you don't know that can wipe you out.
So much of what
people have learned about handling money is actually dead wrong.
Myth: If
we love each other, we won't fight about money.
Fact:
Money has very little to do with love...and a lot to do with how much you
fight.
Love has nothing to
do with money. It doesn't matter if you love your spouse or partner more
than anything in the world. If the two of you have conflicting values
about money and make financial decisions that fail to accommodate each other's
feelings about the subject, you are going to have serious relationship
problems.
-
How you spend
money has nothing to do with how much you love each other.
-
The two of you
were probably raised differently when it came to money.
-
The two of you
probably value money differently.
-
The tow of you
probably spend money differently.
You don't have to
change who you are or what you value in order to finish rich. Nor do you
need to become financial geniuses. The things you need to do in order to
become wealthy are basically quite simple. They don't require
positive-thinking exercises or memorizing mantra. All they require is what I
call "positive action."
Myth: It
takes money to make money.
Fact: It
takes very little money to make money...as long as you are patient and
disciplined.
Many people pay way
too much in taxes because they don't understand that there are many simple,
legal ways to reduce their tax bite.
Myth: If
we don't talk about money, everything will work out okay.
Fact: If
the two of you don't start talking about money, you'll more than likely die
broke.
Smart Couples
Talk About Money All The Time
Couples who plan
together have a better chance of being happy together. The fact that
most of us are not raised to talk about money is a real tragedy. Show me
a couple who doesn't talk about money and plan their finances together, and I
will show you a couple headed for financial trouble - if they're not already
in it. People find it difficult to bring up the subject of money with
their partners. They think their money problems will just go away - they
won't, they'll only get worse.
You have to
clean up your mess before you can move forward.
Couples
Financial Quiz
-
I know our
current net worth (i.e., the value of the assets we have minus the
liabilities we owe).
-
I have a solid
grasp of what our fixed monthly overhead is, including property taxes and
all forms of insurance.
-
I know how my
partner feels about our monthly overhead. We have discussed both the
size and nature of our regular expenses and obligations, and are
comfortable with them.
-
I know how much
life insurance my partner and I carry. I know exactly what the death
benefits are, how much cash value there is in our policies (if any), and
what rate the money is earning (if applicable).
-
I have reviewed
our life insurance policies sometime in the last 1-2 years and I am
comfortable that we are paying a competitive rate in today's insurance
market.
-
I know the
current value of our home, the size of our mortgage, the interest rate on
the mortgage, and how much equity we have in our home. I also know
the length of our mortgage-payment schedule and how much it would cost per
month to pay down the mortgage in half the time. OR I
know how much rent we pay, when our lease expires, how much of a security deposit
we gave the landlord, and what renewal rights we have.
-
I know what
type of homeowner's or tenant's insurance we have and what the deductibles
are. I know whether or not our policy would provide us with
"today's replacement cost" or actual cash value, if our home
and/or property were destroyed or stolen.
-
I know the
nature and size of all or our investments (including cash, chequing
accounts, savings accounts, money-market accounts, GICs, Treasury bills,
savings bonds, mutual funds, annuities, stocks and bonds, real estate
investments, and collectibles such as stamps, comings, artwork,
etc.). I also know where all the relevant paperwork is kept.
-
I know the
annualized returns of all the above-mentioned investments. I know
the current value of all of our retirement accounts (including RRSPs,
RESPs, company pension plans, etc.). I know where the statements for
these accounts are kept and I have a solid grasp of how all our accounts
performed last year.
-
I know what
percentage of our income we are saving as a couple.
-
I know how much
each of us is putting into our respective retirement accounts, whether
that amounts to the maximum allowable contribution, whether our employers
are making matching contributions and what our respective vesting
schedules are.
-
I know how much
money each of us will be getting from our pension plans and old age
security when we retire, and what our pension benefits (if any) will be.
-
I know whether
or not we have a will or living trust, what its provisions are, and how
up-to-date it is.
-
I know whether
our income would be protected by disability insurance should I or my
partner become unable to work. If we do have disability insurance, I
know the amount of the coverage, when the benefits would start, and
whether they would be taxable. If we don't have disability
insurance, I know why we don't have it.
-
I know what my
partner's wishes are regarding medical treatment (including being kept
alive by artificial means) in the event he or she falls seriously ill or
is seriously injured. I know whether or not our will includes a
valid power of attorney covering such situations. I also know how my
partner feels about being an organ donor.
-
I know if my
partner has taken an investment class in recent years.
-
I know how my
partner's parents handled their finances and I know what effect that has
had on how my partner feels about how we manage our money.
Give yourself one
point for every time you answered "True" and zero for every time you
answered "False."
14-18
points. Excellent! you and your partner have obviously been
planning together, as a result of which you have a good grasp of the state of
your finances and how you both feel about money.
9-13
points. The two of you are not totally in the dark, but there are
some areas in which your knowledge is less than adequate.
Under 9
points. You and your partner don't make a habit of talking about
money, do you? As a result, your chances of being hurt financially
because of insufficient knowledge are enormous. You need to learn how to
work together in order to protect yourselves from future financial disaster
If you scored well
on this test, congratulations! But don't go out and start celebrating
just yet. Even among knowledgeable money managers, it's rare to find
people who have a handle on every aspect of their own finances and what they
could and should be doing to assure themselves secure futures. So even
if you scored 12 or above, I guarantee you'll discover a few secrets and ideas
that will be of enormous value to you.
Decide what you
feel are your top 5 values, write them down, and start planning your life
around them.
What is really
important to you? What is the purpose of money in your life?
Financial planning
involves values first and stuff second. What can happen if you do
financial planning strictly by the numbers, instead of by what's important to
you is that you can convince yourself to not even bother trying.
Unpleasant
situations are the result of repeated decisions and actions that conflict with
your value system - your behaviour doesn't match your personal values.
You Can't Plan
Where You Want To Go Until You Know Where You're Starting From
A Purpose-Focused
Financial Plan requires actions needed in order to bring they way you life
your life into harmony with your values. Stay focused on values - not
goals, not things, not stuff to do or buy.
Many of us can be
with our partners for years, sometimes decades, and not know their most deeply
held values. If you have children, consider doing this exercise with
them. There's no reason young kids can't start living life in line with
their values. Think about the impact you could have on your children if
you actually knew what their values were and helped make them real.
Think about how much better your life would be if you had started doing this yourself
when you were still a child.
Your values are
what motivate you and shape your life. They have already motivated and
shaped you, whether you know it or not. People will do more to protect
their values than almost anything else. People will do more and act more
quickly, with regard to their finances when they understand how their actions
relate to their values.
There Are Three
Fundamental Truths Of Financial Planning
-
You can't plan
your finances if you don't know where you're starting from.
-
You can't plan
your finances if you don't know where you want to end up.
-
In order to
stay on track from your starting point to your destination, you have to
monitor your progress.
Unfortunately, most
people don't plan together, they just let their financial life happen to them.
A Little
Planning Can Lead To Big Rewards
Financial freedom
and happiness don't require that you make a lot of money. Anyone can do
it, it's just a matter of planning:
-
When
you are settled in a center where you want to live, buy a house as soon as
you can.
-
For
purchases other than a vehicle, pay cash. If you don't have the
cash, don't make the purchase.
-
Put
some of your money into investments, don't just spend what's extra on
"fun". Consider buying rental property that will provide a
return on your investment and increase in value over time.
-
Purchase
used, but well-maintained cars and look after them. Wait for a good
deal if you can.
-
For
big luxuries, like a boat or a cottage, put aside a little bit of money
and wait for a great deal. You may find you can buy your dream for half
the cost by watching and waiting rather than buying new and making
payments. (Wouldn't it be nice to buy two dreams rather than
one?)
-
Plan
your work around the lifestyle you want. Determine how much
flexibility and free time are important to you and design a lifestyle that
supports those goals. Don't take on a huge house if you want to work
less, retire sooner or have one of you stay home with the kids.
-
Find
a way to do work you love so that your job fulfills you rather than just
feels like "work".
-
Keep
trying until you find what works for you.
Taking Your
Values An Making Them Real
Nothing can change
a person's life faster than defining a number of specific, meaningful goals
and then putting them down in writing. Simply writing down a few
meaningful goals can literally transform your future in just a matter of days.
Life Is
Difficult
It's not easy to
get good grades or graduate from university or find someone to love and then have
a great relationship or marriatge. It's not easy to succeed in work or
business. It's not easy to become wealthy. It's not easy to raise
good kids. It's not easy to stay healthy. BUT it also
happens to be true that it takes just as much effort to have a "bad
life," in which you don't get what you want, as it does to have a
"good life" where you do. So given the choice, why not go for
the good life?
Most people simply
let life "happen" to them. wherever the river of life takes
them, that's where they go and you know where most people end up? On the
rocks!
Most people who
just go with the flow wind up complaining about where they
"floated". They go around saying life is not fair. Well,
I disagree. Life is totally fair. You get what you go for.
Go for nothing and you get nothing. Go for something and even if you miss your
main goal, you might still achieve a lot of good stuff along the way.
I'm not just saying
this. Goal-setting works. It's a fact. The world is filled
with people who started out with nothing and wound up with more than they ever
dreamed - simply as a result of having set goals for themselves. One
phenomenal example of this is a woman we all know named Oprah Winfrey.
Here's someone who grew up poor, was abused as a child, was told she'd amount
to nothing, and yet became on of the greatest role models of our time.
Now, Oprah didn't wake up one morning when she was a teenager and say, "I
think tomorrow I'll have my own TV show and influence the lives of millions of
people every day." She worked for decades setting goals and
battling against all kinds of obstacles to make it happen.
Many people
"want" to be wealthier. Other "want" to be happier,
or have more romance, or a stronger family. Practically all of us want
something we don't currently have.
Wanting something
and getting it are two different things. In order to achieve a dream you
must set a goal and be prepared to get the education and do the work necessary
to achieve your goal. In order to achieve your goal, you must know
precisely what it is that you're after. In other words, you need to take
your vague ideas about what sort of life you'd like and make them specific.
Make Sure Your
Goals Match Your Values...As A Couple
THE PROBLEM IS
NOT YOUR INCOME, IT'S WHAT YOU SPEND!
Everyone in North
America makes enough money to be wealthy. So why aren't we all
rich? The problem isn't our income; it's what we spend. We simply
waste a lot of it on small, every day things. Those "small
things" can add up very quickly to some amazingly large amounts.
Most of us don't
really think about how we spend our money - or if we do, we focus solely on
the big items. At the same time, we ignore the small but steady expenses
that drain away our cash. We don't think abotu what it cost us to earn
our moeny, and we don't realize how much wealth we could have if, instead of
wasting it, we invested it.
It's not hard to
figure out why so many people have been going broke. These days you can buy
just about anything without actually having to pay for it...at least not right
away. You can go to a furniture store and decorate you whole house, and
the nice people there won't bill you for 18 months. Or maybe you want a
new car or a boat, or both. No problem. You just go to the
showroom, smile, and - presto! - you've got yourself a brand-spanking-new BMW
or Mercedes with low monthly payments (or not so low).
With all these
opportunities - all these temptations - all over the place, who wouldn't give
in? Gosh darn it, we're working hard. The world is a tough
place. We deserve nice stuff. Not only that, but we deserve it
now! Forget about saving. Give me my stuff today. FedEx
me my stuff. And, oh yeah, while we're at it, make sure to put it on the
credit card that gives us frequent-flyer points. Don't they have some
sort of special promotion this month where we can earn extra miles? Maybe
e we should spend a little more and get a little more stuff?
All too often,
being careful about the give things makes us feel as if we can afford to
forget about the little things. We don't like to admit it, but it's true.
There's a tendency to say to ourselves, "I'm not wasteful with my money,
but gosh darn it, I should at least be able to buy myself a nice cup of coffee
and a bagel in the morning. I ought to at least by able to rent a few videos
tonight and pick up a pizza. Five dollars here and $5 there isn't such a
big deal, is it?
Well, maybe it
is. $5.00 here and there can become a million-dollar investment if you
do it right.
Why We Blow It
Money is easy to
waste, especially on the small stuff. You can't go two blocks in any
city in America without coming across a fast-food restaurant or a juice bar or
a place to have a fancy cup of coffee. Stop in any one of them on a
regular basis and you can easily wind up spending $5.00 a day on
nothing. Drink a couple of cans of pop or bottled water and there's
another couple dollars down the drain.
We haven't even
talked about bad habits like cigarettes and alcohol that can eat through your
money like a termite tears through your house.
How To Stop
Track your expenses
for the next seven day. Were
you looking for a bigger miracle? Simply keeping all your bills, even
the ones for less than a dollar -ESPECIALLY the ones for less than a
dollar - will teach you a lot about how you waste your money.
Multiply
what you just "blew", nickel and diming yourself broke, times 52,
then multiply that times 30, multiply that times 1.5 to account for inflation,
multiply it by 5 to take into account how much it would have made had you
invested it and you'll see what you're going to waste over the next significant
portion of your life!
Albert Einstein,
widely considered one of the greatest minds of all time, was once asked to
name the most amazing phenomenon he had ever come across. He replied
that it was the power of compound interest. It was truly
"miraculous" when you looked at it, he said, and even more so when
you actually put it to work.
WANT MORE
INFORMATION AND DETAILED STRATEGIES?
David
Bach
www.finishrich.com
Buy
This Book
