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.
What you want is at least “a small amount of money you consistently invest,” says Robbins, author of a new 656-page book, Money: Master the Game: 7 Simple Steps to Financial Freedom. It includes information from his interviews with more than 50 top financial experts including Charles Schwab, Carl Icahn, Warren Buffett, Steve Forbes, hedge fund manager Ray Dalio and Vanguard founder John Bogle.
“When I asked Warren Buffett — what are the secrets to your wealth, he said it’s three things. He said, No. 1, it’s being born in America. No. 2 is good genes, so I live long enough, and No. 3, it’s compound interest. Compound interest — people have no idea the power that it really has.”
Robbins recounts a story of a UPS employee who never made more than $14,000 a year, but set aside 20% of every paycheck and put it into company stock. The man saw the value of his investments soar to more than $70 million by the time he was 90 years old, says Robbins, who also wrote Unlimited Power and Awaken the Giant Within.
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.”
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SOURCE: USA Today – Nanci Hellmich