Table of Contents

Introduction 1

About This Book 1

Conventions Used in This Book 2

What You’re Not to Read 3

Foolish Assumptions 3

How This Book Is Organized 4

Part I: Getting Your Finances in Order 4

Part II: Strategies for Building Wealth 4

Part III: Paths Paved with Gold 5

Part IV: Managing Your Wealth 5

Part V: The Part of Tens 6

Icons Used in This Book 6

Where to Go from Here 7

Part I: Getting Your Finances in Order 9

Chapter 1: Gathering the Building Blocks 11

Shattering Money Myths 12

Understanding Your Relationship with Money 13

Asking yourself how you think about money 14

Changing your thinking 15

Making a Plan 16

Choosing Your Path to Wealth 17

Staying There When You Get There 18

Things Wealthy People Know 19

Chapter 2: Understanding Your Money Personality 21

Figuring Out How You Feel about Money 22

The planner 22

The spender 23

The needster 23

The Lord (or Lady) Bountiful 25

The hoarder 26

Changing How You Feel about Money 27

For the planner: Focusing on flexibility 27

For the spender: Discovering yourself 28

For the needster: Unlocking emotions 28

For Lord (or Lady) Bountiful: Compromising 29

For the hoarder: Growing up 30

Knowing What You Won’t Do for Money 30

Living your values 31

Understanding trade-offs 31

Minimizing Your Risk 33

Knowing what you’re getting into 33

Developing a long-term outlook 34

Starting Your New Life with Money 34

Chapter 3: Setting Your Financial Goals 37

Identifying What’s Important to You 38

What you want in the next five years 39

What you want for the future 40

What you want now 41

Putting Your Goals in Writing 42

Starting with the general 43

Making your goals SMART 43

Keeping your goals in mind 46

Staying on Track 47

Chapter 4: Working Out Finances with Your Spouse or Partner 49

Spill Your Guts: Sharing Your Financial Story 50

How much you know 50

What you need to know 51

Why you need to know 52

Getting the most out of your financial partnership 53

You Like Potato and I Like Potahto: Identifying Your Differences 53

Talking about your expectations 54

Discussing your goals 57

Go Team! Setting Priorities Together 58

Finding a mutual comfort zone 58

Focusing on the positive 59

Part II: Strategies for Building Wealth 61

Chapter 5: Living below Your Means 63

Spending Money You Don’t Have 64

The instant gratification factor 65

Who are you keeping up with again? 66

Changing Your Spending Habits 67

Anticipating Changes in Your Means 69

Losing an income 69

Dealing with a struggling economy 70

Planning for new expenses 71

Chapter 6: Managing Debt and Freeing Up Your Money 75

Understanding Your Credit 76

The credit bureaus 76

Your credit score 77

Good Debt versus Bad Debt 80

Figuring out what your debt costs you 81

Getting a handle on your debt 83

Organizing Your Budget 84

Getting started 85

Creating your budget 86

Keeping it flexible 87

Freeing Up Your Money 87

Saving money with your car 87

Saving money at home 88

Saving money when you’re shopping 89

Avoiding Fees and Extra Charges 91

Overdraft charges 91

Maintenance fees 92

Late fees 93

Chapter 7: Starting on Your Savings Plan 95

Understanding Why Saving Matters 96

Unexpected expenses 96

Major life changes 97

Developing a Saving Attitude 98

Finding pleasure in saving 99

Saving for specific things 100

Changing your life 100

Figuring Out Where to Start 101

Setting your priorities 101

Paying yourself first 102

Making it automatic 103

Putting it beyond temptation’s reach 104

Filling your emergency fund 104

After your emergency fund is full 105

Chapter 8: Getting the Most from Your Job 107

Allocating Your Paycheck 107

Using direct deposit to augment your savings 108

Taking advantage of pretax deductions 109

Pensions 111

Stock Plans 112

Stock options 112

Employee stock purchase plans 113

Restricted stock awards 113

Restricted stock units 114

Using What You’ve Earned 114

Holiday, vacation, and personal time 114

Raises 115

Bonuses 115

Other perks 116

Changing Jobs 116

What to do with your 401(k) 117

Severance pay 118

Health insurance 119

Part III: Paths Paved with Gold 121

Chapter 9: Starting Your Own Business 123

Before You Jump In 124

Starting from Scratch 126

Determining the kind of business you want 126

Assessing your skills 127

Figuring out what you’ll need 127

Building it into the black and beyond 130

Buying a Franchise 131

Weighing the pros and cons 132

Focusing on funding 133

Determining the best opportunity for you 134

Taking Over an Existing Business 135

Reviewing financial statements 136

Keeping an eye on contracts and leases 136

Paying attention to potential or ongoing litigation 137

Investigating other areas 137

Chapter 10: Inventing a Better Mousetrap 139

Coming Up with Your Big Idea 140

Pairing problems and solutions 140

Checking out your idea 141

Getting Paid for Your Big Idea 142

Seeing the value in your idea 142

Outcommercializing the competition 144

Licensing versus producing and selling outright 145

Protecting Your Big Idea 147

Patents, trademarks, and copyrights 147

Confidentiality 149

Recordkeeping 150

Chapter 11: Inheriting Wealth 151

Dealing with the Emotional Impact 152

Understanding what you feel 152

Taking your time 154

Thinking of your inheritance as yours 155

Managing Your Inheritance 155

Recognizing the tax implications 156

Breaking out that list of goals 156

Matching goals and strategies 157

Blowing it — or at least some of it 157

Chapter 12: Winning Wealth 159

Coping with Sudden Wealth 160

Building Wealth from Winnings 162

Taking your time 162

Getting professional advice 164

Talking to your family 164

Implementing a management plan 165

Treating Gambling as What It Is 167

Understanding the odds 168

Taking the right attitude 169

Chapter 13: Investing for Wealth 171

Developing Your Investment Philosophy 172

Determining your risk tolerance 172

Getting advice from the big guns 175

Choosing whom to listen to 178

Taking control of your investments 179

Investing in the Stock Market 179

The importance of diversifying 180

Cultivating patience 182

Things to look for 183

Things to avoid 183

Getting a broker 184

Doing it yourself 185

Avoiding Big Mistakes 186

Hidden fees 187

Misrepresentations 188

High-pressure sales tactics 189

Ceding control to your broker 189

Chapter 14: Joining the Landed Gentry 191

Building Wealth in Your Home 192

Knowing what you can afford 192

Understanding your mortgage options 195

Building equity — and keeping it 197

Considering Investment Property 200

Figuring out your plan 200

Understanding the market 202

Dedicating your time 203

Developing your professional network 204

Exploring Real Estate Investment Groups 204

Understanding Real Estate Investment Trusts 205

Things to look for 206

Things to avoid 207

Part IV: Managing Your Wealth 209

Chapter 15: Going to the Pros 211

Choosing a Financial Planner 212

What to look for 212

Where to look 213

Meeting prospective planners 214

Knowing what you’re paying for 216

Choosing an Investment Broker 218

What to look for 218

Figuring out the fees 221

What to stay away from 222

Choosing an Attorney 223

What to look for 223

Where to look 224

What to avoid 225

Choosing an Insurance Agent 225

Independents versus captive agents 225

Where to look 226

Choosing a Tax Preparer 226

What to look for 227

What to avoid 228

Chapter 16: Going for Growth versus Going for Income 229

Determining the Right Mix for You 230

Factoring in your risk tolerance 232

Assessing other factors 232

Understanding Investment Risks 233

Low-risk investments 233

Moderate-risk investments 234

High-risk investments 236

Keeping Your Balance 239

Reassessing your goals 239

Avoiding common (and expensive) mistakes 240

Chapter 17: Minimizing Uncle Sam’s Share 245

Filling Out Your W-4 Form 246

Selecting your filing status 246

Claiming single/zero 248

Claiming allowances 249

Figuring deductions and adjustments 251

Keeping Records 252

Knowing what’s deductible 253

Investing in accounting software 253

Creating your own spreadsheet 254

Crunching the Numbers 254

Are you better off itemizing? 255

Will you run up against the Alternative Minimum Tax? 255

How can you offset capital gains? 256

Avoiding Common Mistakes 257

Missing deductions you’re entitled to 258

Setting yourself up for penalties 259

Doing It Yourself or Hiring a Pro 260

Chapter 18: Covering Your Assets 261

Insurance Basics 261

Understanding coverage and limitations 262

Weighing deductibles and premiums 263

Evaluating insurance companies 263

Homeowner’s Insurance 264

Auto Insurance 265

Collision 266

Comprehensive 266

Liability 266

Insuring against the Inevitable 267

How much life insurance you need 268

Term life versus whole life 270

Disability Insurance 273

Your employer’s plan 274

Private disability insurance 275

Social Security disability 277

Long-Term-Care Insurance 277

Insurance You May Not Need 279

Car-rental insurance 279

Travel insurance 280

Life insurance for your kids 281

Chapter 19: Planning for Your Heirs 283

Putting Your Wishes in Writing 283

Figuring out what you have to leave 284

Choosing an executor 285

Divvying up your estate 286

Paying final expenses 288

Using Trusts in Estate Planning 289

Defining trusts 290

Recognizing the advantages of trusts 290

Getting Professional Help 293

Starting early 293

Getting the right kind of help 294

Knowing what it’ll cost 295

Storing Your Estate-Plan Documents 295

Chapter 20: Keeping Your Finances in Good Health 297

Keeping It Simple 298

Engaging the autopilot 298

Cleaning up the clutter 299

Taking the universal view 300

Letting your money work for you 301

Giving Your Finances Regular Checkups 301

Rebalancing your portfolio 303

Weeding out what you no longer need 303

Part V: The Part of Tens 307

Chapter 21: Ten Traits of Millionaires 309

Seeking Independence 310

Living Life, Not the Lifestyle 310

Working Hard — And Long 311

Staying Positive 311

Overcoming Failure 312

Being Organized 312

Building a Network 313

Being the Boss 313

Striking a Balance between Money and Your Life’s Work 314

Growing, Growing, Growing 315

Chapter 22: Ten Ways to Find More (Of Your Own) Money 317

Keeping Track of Your Spending 317

Distinguishing Between “I Need” and “I Want” 318

Assigning Your Own Value to Purchases 320

Avoiding Bargains That Really Aren’t 320

Spending Now to Save Later 321

Getting Rid of Credit Card Balances 322

Eliminating Hidden Fees 323

Maximizing Tax Deductions 324

Using Coupons, Rebates, and Rewards Programs 325

Finding Lost Money 325

Chapter 23: Ten Ways to Make Your Money Work Harder 327

Paying Yourself First 327

Making Your Money Earn Its Keep 328

Socking Away Money in CDs and Money-Market Accounts 329

Maximizing Matching Funds 330

Finding Free Money 331

Saving for Major Purchases 331

Funding Traditional IRAs 332

Taking Advantage of Roth IRAs 332

Saving for College with 529 Plans 332

Taking the Long View 333

Chapter 24: Ten Ways You Can Tell You’re a Millionaire 335

What Got You Here Stays with You 335

You Work Because You Want To 335

You Focus on Yourself — Not on What Others Have 336

You Update Your Goals 336

You Stay Informed and in Control 337

You Say No 337

You See the Benefits of Risk 338

You’re Prepared 338

You Enjoy the Abundance in Your Life 338

You Count Your Blessings 339

Index 341