Seems to me there are loads of "how-to" books when it comes to investing: how to invest your 401(k), how to finance real estate, how to pick stocks, etc.
In my opinion, if you take this approach, you're really putting the cart before the horse. Before you get down to specifics, it helps to have an overview so you can see how all of the separate pieces of the puzzle fit together.
That's what you get in A Step-by-Step Guide to Financial Bliss by Ken Marinace. We've arranged for 15 readers to receive their own copies to see for themselves. (Read on to see how to apply.)
Marinace, a Certified Financial Planning professional with 35 years of experience, says he wrote the book because clients kept saying things like, "Gee, I wish someone had told me about [financial concept] 10 years ago." Or, "If only I'd had a book that could have explained [financial concept]."
Financial Bliss is a kind of "Financial Planning 101," minus the jargon that so often clouds the message in books on this subject. There are no equations. You won't find endless charts depicting stock market performance or inflation rates. What you will get is a down-to-earth explanation of the components that comprise a financially secure life.
In a nutshell, the book shows you that your financial security is in your hands. Our ideas about money, our choices as to how we spend it, determine how sane -- or insane -- our financial lives are. "Each one of us has certain ideas about money, both about earning it and spending it," writes Marinace. "Some people can't see any way to earn more; others can't fathom how to spend less. In every situation, there are choices, but being human, we don't necessarily see all the options that exist."
That's what this book attempts to lay out.
The first step in financial planning is having clearly-defined -- as well as realistic -- goals. Not just dollar amounts you hope to accumulate some day in the future, but actually envisioning the kind of lifestyle you want -- the way you will dress, how often you want to be able to eat out, the types of activities you hope to be involved in. As Marinace puts it, "if you don't know what you're trying to accomplish, it's virtually impossible to make smart decisions-- much like sailing without a compass." In other words, it's easier to resist the urge to splurge if you have a clear picture of where you're headed.
Once you come up with a list of goals, most books about financial planning typically focus on outflow: How are you spending your money? Do you really need a new car every three years? Could you get by with basic cable and forego the premium channels? Are you taking full advantage of your company retirement account? Sit down and make a budget.
Instead, Marinace, spends two chapters on inflow: How do you find out if you are getting paid what you're worth? What strategies can you use to increase your current income? What types of jobs and in which industries offer the most potential? What types of skills or experience are required?
In other words, if you don't like the size of the paycheck you're currently getting, what can you do to improve things? Among other things, he suggests you should "keep increasing your professional knowledge by reading, getting more formal education, participating in professional or business groups -- doing whatever you can to grow professionally." Put down the beer, get off the couch and enroll in a class, for instance! Take responsibility for your life.
In fact, that's the message that underlies this entire book: Financial security is less a function of the amount of money you make thank what you choose to do with it. And investing is just a piece of the picture.
The chapter on insurance explains the different types available and why you might or might not need a particular kind of coverage. Thinking about a new car? Check out the chapter entitled "The Use and Abuse of Debt" and you'll understand why car dealers prefer that you lease rather than buy. Learn what successful people already know: that effective tax planning starts in January, not April of the following year.
Another thing that differentiates the financially secure from the rest of us, according to Marinace, is "their relationship to money. Dollars work for the rich, whereas the poor work for dollars." Where are your dollars?
Are they earning a return for you (i.e. invested), or are they earning a return for someone else, such as your credit card issuer?
Here are some other traits that, according to Financial Bliss, distinguish the wealthy:
- They are aware of how their actions toward money today will impact their future.
- They have the discipline to make plans and carry them out.
- They generally spend less than they can afford.
- They work hard in their chosen field.
- They do not try to acquire status by buying symbols of success they can't afford.
To be sure, Financial Bliss eventually gets around to discussing investing. Why do I need to own stocks? What's meant by the term "growth stock"? What's a "growth and income" mutual fund? How about "asset allocation"?
Marinace also puts "risk" into perspective, explaining that what most folks think of as "risk" is really volatility, that is, fluctuation in the value of their investment. In layman's language Financial Bliss explains how diversification and patience can reduce volatility. "If we measure risk by asking 'how likely are you to make money, rather than losing it?' history shows that if you allow more time for your money to multiply, you face more favorable odds."
He explains how a retirement plan works this way: "...a 401(k) or IRA is not an investment, but a place where your money is protected from taxes. Think of it as a coat. It protects you against the cold, so that you can go places, but simply wearing it doesn't mean you will go anywhere unless you start walking." The message: your retirement plan can't help you retire with adequate income unless you use it correctly.
In addition to the chapter on retirement plans, there's another on "Nest Egg Hatching" once you've left the workforce. (Something, by the way, that fewer people are doing. The trend is to return to work, at least part-time, after you "retire.")
I especially like the discussion about finances being a family matter. Why it's important to discuss money with your parents, particularly if they are elderly and nearing the stage where they might need to transition to some
sort of assisted-living arrangement. How to teach your kids about money, so they appreciate where it comes from (i.e. it's about more than an ATM and a "PIN") and how to use it wisely.
In short, Financial Bliss provides a roadmap to the basic financial issues most folks face over their lifetimes -- from earning and accumulating wealth, to spending and passing it on. It's meant to be a reference book, not something you read once and never pick up again.
If you'd like a complimentary copy, tell us why you think this kind of book would be helpful in your particular situation. How would you use it? Be sure to include your mailing address in case you're selected as one of the 15 recipients. (Omitting your mailing address guarantees you will not be selected!)
I can't promise you'll actually find "bliss" after reading this book, but you should be further down the road to financial peace of mind if you can put some of its advice into practice.
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The views expressed in this article are those of Ms. Buckner or the individual commentator, and do not necessarily reflect the views of Putnam Investments Inc. or any of its affiliates. You should consult your own financial adviser for advice regarding your particular financial circumstances. This article is for information only and is not an offer of the sale of any mutual fund or other investment.