CONTENTS

Intro: The Woes of Judy Could Someday Be Your Woes

Section 1: Building Assets

Chapter 1: Lots of People Want Your Assets

Chapter 2: Consumerism, Smart and Dumb

Chapter 3: Budgeting: The Dull Subject That Can Save Your Life

Chapter 4: Saving, Still an Essential Part of the MoneySense Strategy

Chapter 5: Investments Part 1: Taking Reasonable Risks to Achieve Wealth

Chapter 6: Investments, Part 2: Achieving Financial Independence by Beating Taxes, Inflation and Avaricious Mutual Fund Companies

Chapter 7: Getting Started: Using Thrift to Find Investment Money That’s All Around

Chapter 8: Investing Techniques for the Long-Term Investor: Patience Required

Chapter 9: Balance and Patience: How to Go from a Little to a Lot; How to Take the First Steps to Financial Independence

Chapter 10: Where to Invest and How

Chapter 11: Chasing the Hot Fund: How the Average Investor Fails

Section 2: Protecting the Financial Independence It Took You Years to Build

Chapter 1 Easy Credit: The Servant that One Day Could Become a Brutal Master

Chapter 2: A Road Out of Card Hell?

Chapter 3: Grey Charges Can Cost You a Bundle, Another Few Hundred Dollars Are Blowing by You—Why Don’t You Reach Over and Pick Them Up?

Chapter 4: Effective Pre-Retirement and Post Retirement Strategies: Some Retirement Accounts Are More Valuable than Others.

Chapter 5: The Wrong Way to Use Qualified Assets

Chapter 6: Don’t Overrely on Social Security

Chapter 7: Q&A with Social Security’s Chief Actuary Stephen Goss

Chapter 8: Why You Will Always Need Some Cash in Your Portfolio

Chapter 9: Financial Classics Are Important for Anyone, Anytime

Chapter 10: Do You Need an Advisor? How Do You Find One?

Chapter 11: Data Breaches: Destroying Your Good Work

Postscript:

Chapter 1: Investing in the Age of Biden. What Now?

Chapter 2: Principles for the Rest of Your Life

Appendix: Money Mischief: Economic Problems and the Inevitability of Tax Increases. The Right Way to Get Out of a Depression

Why read this book?

There’s lot of investment books around. Some are quite good.

This book can help save you from financial disaster in your youth and middle ages. It can also help you avoid having the last years of your life become the most miserable ones because you didn’t build or distribute your retirement assets effectively. If retired with adequate assets, it can help you use your assets in the most effective way. Read this book if you don’t want to become a Judy.

Who is Judy?

Judy is a friend. She is in her 60s and lives in an upper middle-class neighborhood in Queens in New York City. She is talented, speaks several languages and has an important job in a private institute. She makes a middle-class income and should be well off as she goes into her golden years.

However, she is anything but well off.

Judy, like millions of Americans today and probably millions more in the future, now faces considerable money woes and can’t retire. Still, it didn’t have to happen.
Recently, she asked me for advice because I have been a business journalist. She obviously thought my experience could solve her problem, yet there is a limited amount I or anyone can do. I wish she’d spoken to me twenty years ago.

What’s the problem?

I asked how her retirement assets were invested and she told me “I have no retirement assets. I have no financial assets.”

What?

Millions Depending on the Government

How did she propose to live the rest of her life? She told me that she had Social Security and she has her job. On average, Social Security is paying about $16,000 a year or so. Yet she lives in one of the most expensive cities in the world. And, by the way, since the city’s and the state’s finances have been mismanaged, it is likely that rising taxes will make it an even more expensive place. I hope Judy has some generous relatives or Publishers Clearinghouse is about to come to her door with a giant check.

Another potential problem for Judy is this flawed government program called Social Security. It has gone through periodic crises and is now facing another shortfall in the next decade or so owing to lawmakers kicking the can down the road: They, both Republicans and Democrats, have passed Social Security’s problems to the next generation. These problems could result in reduced payments in about a decade. More on that later in a chapter in which we will discuss Social Security.

For now, let’s say that Social Security is important to you whether you are young or old. If young, you will find, as I did in my 20s and 30s, that it is your biggest tax. It is an outrageously high tax when you are making a small salary and trying to work your way up. If elderly or approaching retirement, there is another potential problem.

If you are depending on getting from this popular but flawed government retirement program, your plans could blow up. One should be aware that Social Security has problems that must be resolved by Congress and the president. These days they never seem in a mood to settle big picture problems because they are too busy carving up each other.

What are the woes of America’s crown jewel government retirement plan?

Social Security’s trustees are warning that the program, unless something changes, will have to cut payments by some 20 percent in the next decade or so.

What happens when Social Security goes through a crisis as has happened several times before since the program began in 1935?

Previously, Social Security changes have always meant lower payments and higher taxes. Usually both. People are hurt whether they are paying into the system or receiving money from the system.

That is probably what is going to happen again although most politicians are not going to mention these unpleasant subjects, especially in any election year. That’s when many of our pols will say or do anything to get your vote, most especially overpromising.

I tell Judy there are only a few things she can do, but that working a longtime will probably be in her future. That is assuming that something like the Coronavirus doesn’t take her job.

Protect Your Earnings

Judy’s problem is her prime earning years are gone. If she had a regular savings/investing plan in her 30s, 40s and 50s, if she had saved just a bit in her prime years—say 10 percent and some of that 10 percent could have been partly covered by tax breaks and possibly employer retirement plan matches—she would likely have few money worries now. But she, along with millions of other Americans, didn’t.

They trusted the government would take care of them.

Big mistake.

By the way, as a young man I knew many of these people. They were people who, no matter how generous a retirement matching plan they had at work, insisted they couldn’t take home one cent less than their entire pay. They never contributed to retirement plans at work or set up own retirement plan outside of work. That’s even through IRAs were available since the 1980s. And the latter retirement account usually contained big tax breaks for those who are smart enough to use them each year. Here is another Judy problem: These tax breaks are usually available each yar. However, say over 10 years of not contributing to these accounts, you can’t go back and get them. They’re gone.

A lot of young and middle-aged people are following the Judy Road so please read on. I want to put all of my readers on a better road. (And, by the way, if you are in retirement and trying to manage your assets as effectively as possible, there’s also a chapter for you later in the book).

Judy didn’t take basic money management steps that could have helped her. No one explained the investment basics to her such as the wonders of compounding and how inflation can make life miserable even for people who think they are comfortable. These are points MoneySense will explore.

By the way, why are there lots of Judys, many of whom are quite smart in other areas? It’s partly because this kind of basic money education isn’t taught at most high schools or even universities. In our schools today there’s always a lot of time available for political correctness, hate your country history, gender studies and other idiotic courses that don’t help anyone who wants to achieve the best thing that money can buy: financial independence; the freedom to stop riding the egregious E-train or driving the gruesome Grand Central Parkway.

How do tens of millions of Americans eventually get stuck on the Judy Road?
Most states don’t even require one investment course in order to graduate from high school. Many young people get college degrees without learning a thing about money management.

Shouldn’t they? Shouldn’t everyone?

This is as ridiculous to living in a foreign country but insisting you won’t learn a word of the language. For tens of millions of Americans money management is virtually an obscure foreign language. They’re handicapping themselves. Yet isn’t money management at least as important as learning math or an important language such as Spanish or French or Chinese or Russian?

So now Judy can’t get back those prime earning years. In achieving financial independence, as in so many other goals in life, it’s good to get started early because the goal isn’t impossible but it can be a bit difficult. A person usually gets only one chance to accomplish something and that is it. You’re only young once. You only have your prime earning for a short period and that is it. C’est la vie.

That is why so many conscientious parents, worried about what is going on at many failure factories called the local public school, look for alternative education options for their kids, whether it is charter or private or home-schooling. Their kids will only have one chance to get a good education. Time could run out on them as it has for Judy’s goal of a comfortable retirement.

What should one do? What are some other dangers facing those who want to take control of their finances. More in our next installment.

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Gregory Bresiger
Gregory Bresiger

Gregory Bresiger is an independent financial journalist from Queens, New York. His articles have appeared in publications such as Financial Planner Magazine and The New York Post.