People make several mistakes when saving and investing for retirement, and one of the biggest ones is not getting started because they think they need a large sum of money to begin, says Tony Robbins, 54, an inspirational speaker and best-selling author.
Some folks think investing and personal finance are so complex that they “never take the time to figure it out,” he says. His goal with the new book is to “help the average person to cut through all the complexity and all the mythology that is sold to us about how you really can’t manage your own finances, and show them that the best people on earth have given them the guideposts and the steps to go from wherever they are financially to where they truly want to be.”
But his advice isn’t guaranteed to make you money. Even professional investors took different paths to their fortunes.
After researching the new book, Robbins developed what he calls the seven steps to financial freedom. Those are:
Step 1. Make the decision to become an investor, not a consumer. “You don’t want to own an Apple phone, you want to own Apple,” he says.
You have to commit a certain percentage of your income to savings for your financial freedom. Whatever that number is — 10%, 15% — stick to it in good times and bad. Have it taken automatically from your paycheck and put directly into a retirement or savings account.
Step 2. Become an insider on investing. Know the rules of the game. Understand mutual funds and learn what mutual funds beat the market or their benchmark over any 10-year period. Look into the fees you are paying on mutual funds and how that affects your financial future.
He says people also don’t read the fine print on their investments so they don’t realize what fees they are paying. Just like there is compounding growth, there are compounding costs, he says.
If you are only paying 1% in fees, you will probably end up with a lot more in your final nest egg than if you are paying 3% in fees, he says.
He points out that if you had a $100,000 investment and were lucky enough to get 7% annually, paying 1% in fees, you’d have about $574,000 after 30 years. If you paid 3% in fees, you’d only have about $324,000.
“What you don’t know will hurt you in the financial world. But once you know these things, you’ll be able to take advantage of the system instead of having the system take advantage of you.”
Step 3. Make the game winnable. “Most people have a number that’s so big that they never begin the journey,” Robbins says. Figure out how much money you need for financial security and financial independence. Calculate this and come up with a plan. Look for places you can save more.
Step 4. Evaluate your asset allocation. “You have to create a bucket list. You have to learn where to put your money to keep it safe and where to put your money to grow it with some risk,” he says. Put your money in different types of investments, such as stocks, bonds, commodities or real estate. Diversify your investments.
Step 5. Create a lifetime income plan. Make sure you won’t run out of income for as long as you live. “Income is all that matters. Assets won’t buy your food. They won’t let you travel. You have to focus on income. The investment community wants you to think about keeping your money in assets.”
Step 6. Invest like the .001%. “That means learn from the very best on earth (Schwab, Icahn, Bogle, Dalio, Forbes and others he interviewed for the book), and what you learn from them apply and you’ll achieve financial security faster than you will any other way.”
Step 7. Just do it, enjoy it and share it. Make a commitment to be wealthy now, not in the future. “Start where you are, and you’ll begin to find out that there’s more than enough.”
Robbins advises people to educate themselves in investing. It’s worth the time, and it’ll pay off. “You master money, or it masters you,” he says.
Based on article written by:
Referencing book written by:
Money: Master The Game