The 9 Steps to Financial Freedom (2 page)

Look back over the past fifteen years and the one constant is change. Our personal lives, as well as the world we step out into each day, may bear very little resemblance to where we were, who we were, and what we thought back then. Change isn’t just inevitable, the degree of evolution can at times be breathtaking.

And yet if there is one profound lesson I have learned over these past years, it is that deep down what you want from your life, and what you may be struggling to make of your life, has not changed at all. I didn’t have a cable television show fifteen years ago, nor were you and I able to converse through Twitter. But the same questions I field today on my show, or when you send me a tweet or e-mail that I field on my iPhone and iPad—talk about two very big changes!—are exactly the same questions my clients and I were working through together fifteen years ago when I was a certified financial planner and wrote this book.

To be sure, the investment vehicles or events that propel you to seek out my advice are very different. Back then we were just beginning to get comfortable with mutual funds; now we have next-generation exchange-traded funds. Back then many of you came to me for advice on how best to handle a pension distribution. Today very few of you working in the private sector have a pension; your retirement is instead going to rely on how well (and how much) you manage to save in your 401(k) and IRA accounts. Back then we had yet to experience the Internet bubble and the real estate bubble. And I doubt that any of us could have envisioned fifteen years ago the magnitude of the financial crisis that began in 2008 and will be reverberating through our lives for years to come.

But for all that change, you are still striving for the same elusive goal that brought so many to
The 9 Steps to Financial Freedom
all those years ago: You want to stop worrying about money. You want to know deep down in every molecule of your being that you are going to be okay—that you and your loved ones will not be weighed down by the pressure and anxiety of not having enough, or not being in control of your money.

Those are the very issues that compelled me to first write
The 9 Steps to Financial Freedom
. And though I have gone on to write eight more books in the intervening years, each of them overflowing with detailed financial advice, it is remarkable how
The 9 Steps to Financial Freedom
continues to resonate for me, both personally and as the touchstone for all the advice I give today.

What I first introduced to millions of you back in 1997—what was considered so revolutionary at the time—has never been more relevant. To master your money requires first mastering your fears. And then, as now, there is no shortage of ways that your fears are holding you back from achieving financial security. If anything, I think we can agree that many of the events of the past fifteen years have in fact made us even more fearful. That is why I am so glad you have come to discover, or perhaps rediscover, this book. Yes, it is fifteen years old, yet the lessons in these pages are absolutely timeless and incredibly timely. And rest assured, the version you have before you has been updated to include the latest financial data and regulations in effect as of 2012.

It is so very interesting to me that the field of behavioral finance has become so popular and respected in the years since
The 9 Steps to Financial Freedom
was first published. When I wrote this book there were some people who thought I was a bit
out there
to suggest that our emotions play a central role in how we handle money. Now we are so appreciative of the work behavioral economists have shared with us, helping us to understand exactly how our emotions—many of them fear-driven—can cause us to make improper or costly financial decisions. The emotional component to financial planning has certainly gone mainstream since
The 9 Steps to Financial Freedom
was first published.

But why is it that what I shared and taught years ago still needs to be learned today? For all the people who have come to me with stories of great triumph and success in taking control of their money, I am all too aware that many still struggle. I think part of the problem is that what transpired over the past fifteen years made it excruciatingly hard for many of you to figure out the right and honest path. In fact, so many products and the ethos of the time practically goaded you into making wrong choices. Why live within your means when there was a seemingly endless supply of credit cards willing to offer you ever-bigger credit limits? Why save for tomorrow, when you could take out a home equity line of credit today to pay for anything your heart desired? Why save more from every paycheck when you figured you could save less because big market gains would do the hard work? Maybe some of you remember that the average annualized return for the S&P 500 in the decade of the ’90s was 18 percent, nearly double the long-term historical rate of return. But so many people just assumed that 18 percent was what they could count on going forward. Only to watch the same benchmark stock index basically gain close to nothing in the first ten years of the twenty-first century. And who needed to save up for a home down payment when there was an all-too-eager lender ready to give you a mortgage with no down payment, nor any responsible consideration of whether you had sufficient income and savings to honestly afford the mortgage payments?

Lots of bad choices, lots of bad temptations. And thus, not surprisingly, still lots of fear. Maybe even more than in 1997.

But that’s why I am so excited you have this book in front of you right now. Often we need to be scared to take action. And if you are here because you are scared or fearful or just frustrated that your financial life—and therefore all aspects of your life—are not as you wish they were, the nine steps that I share with you are the foundation of everything you ever need to “learn” to become more financially secure. Dig deep to explore the emotional underpinnings of how you treat money, how you think about money, how you save money, and, yes, how you spend money, and you will unravel the mysteries of why you are holding yourself back. Yes, you.

There is no question the past fifteen years have been very challenging—poor stock market returns, a few too many bubbles, and then the financial crisis. But please listen to me: There will always be challenges. We don’t know what will go wrong next, but we have to be smart enough to recognize that bad things will indeed happen. That is not meant to be depressing. Anything but. For when you can accept the inevitability of there being downs along with ups, you become more willing to prepare yourself for being able to best weather the next down. And the one after that. And the one after that.

The nine steps are what will help you move forward toward a life where you can once and for all stop worrying. There is so much advice available on how to invest and save, but none of that advice is worth anything if you don’t first start by facing and overcoming the very fears that are impacting your financial life.

If you are ready to take that journey, I will be right by your side. The nine steps will not in themselves transform your life. Rather, they will give you the insights and tools that will help you take the actions that will allow you to achieve true financial freedom. Freedom from worry.

I applaud you for being ready to take the next step into that better life.

S
UZE

January 2012

W
HAT DO YOU
want from your money? College tuition for your kids? A bigger house and a new car? Security when you retire?

Wouldn’t it be great simply to have enough money so you don’t have to worry?

The “enough money” part of that equation is easy. By the time you finish this book you will understand everything you need to know about managing and protecting your money and making it grow. The “so you don’t have to worry” part is much more complex. It actually has nothing to do with how much money you have or how little. You can balance your checkbook until you’re blue in the face, you can move money every day between your
mutual funds and exchange-traded funds, you can double your life insurance, you can buy lottery tickets—and none of it will do you any good until you get beyond the worry and fear. The fear of money, the fear of not having enough, the fear of having enough, the fear of taking action, the fear of inaction.

There isn’t a part of our lives that money doesn’t touch—it affects our relationships, the way we go about our everyday activities, our ability to make dreams reality, everything. Most of us, I think, have a core of anxiety that we carry around with us, though we may not admit it to ourselves. That is part of money’s power over us.

From years as a financial planner I have learned that true financial freedom doesn’t depend on how much money you have. Financial freedom is when you have power over your fears and anxieties instead of the other way around. That’s why, in this book, we’ll address first the fears, then the finances.

Whatever their circumstances—in debt, working, downsized, afraid of becoming downsized, retired, having just inherited money, having just lost money—my clients invariably arrived with a handful of financial papers and a heart full of anxieties. Like most Certified Financial Planner
^®
professionals, I started my practice to help other people with their money, but as time went on, I realized that it was far more than their money (or lack of it) that needed attention. Clients arrived expecting me to ask to see their papers. Instead I asked them first to share their fears.

It’s never too soon to begin, and it’s never too late, no matter how the bottom-line numbers read today on your particular handful of financial papers. This book presents a nine-step process that will take you back into the past, when your attitudes about money were born and began to grow. It will help you face the present honestly and clear the way for you to create a future you will love.

I know it works. As you read this book you will meet others who have taken the steps toward financial freedom—and finally made possible the lives they dreamed about.

You will also see that if I could do it against all odds, so can you. When I was very young I had already learned that the reason my parents seemed so unhappy wasn’t that they didn’t love each other; it was that they never had quite enough money even to pay the bills. In our house money meant tension, worry, and sorrow. When I was about thirteen my dad owned his own business, a tiny chicken shack where he sold take-out chicken, ribs, hamburgers, hot dogs, and fries. One day the oil that the chicken was fried in caught fire. In a few minutes the whole place exploded in flames. My dad bolted from the store before the flames could engulf him. This was when my mom and I happened to arrive on the scene, and we all stood outside watching the fire burn away my dad’s business.

All of a sudden my dad realized that he had left his money in the metal cash register inside the building, and I watched in disbelief as he ran back into the inferno, in the split second before anyone could stop him. He tried and tried to open the metal register, but the intense heat had already sealed the drawer shut. Knowing that every penny he had was locked in front of him, about to go up into flames, he literally picked up the scalding metal box and carried it outside. When he threw the register on the ground, the skin on his arms and chest came with it.

He had escaped the fire safely once, untouched. Then he voluntarily risked his life and was severely injured. The money was that important. That was when I learned that money is obviously more important than life itself.

From that point on, earning money, lots of money, not only became what drove me professionally, but also became my emotional priority. Money became, for me, not the means to a life rich in all kinds of ways; money became my singular goal.

Years later this kid from the South Side of Chicago was a broker with a huge investment firm. I was rich, richer than I could have imagined. And I realized I was profoundly unhappy; the money hadn’t bought or brought me happiness. So if money wasn’t the key to happiness, what was? It was then that I began a quest, which has taken me deep into the meaning of life—and the meaning of money.

I don’t know if I have discovered the meaning of life, but I have learned a great deal about what money can and cannot do. And it can do a lot. Your money will work for you, and you will always have enough—more than enough—when you give it energy, time, and understanding. I have come to think that money is very much like a person, and it will respond when you treat it as you would a cherished friend—never fearing it, pushing it away, pretending it doesn’t exist, or turning away from its needs, never clutching it so hard that it hurts. Sometimes it’s fatter, sometimes it’s skinnier, sometimes it doesn’t feel so good and needs special nurturing. But if you tend it like the living entity it is, then it will flourish, grow, take care of you for as long as you need it, and look after the loved ones you leave behind.