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- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Sprache: Englisch
The numerical and emotional aspects of planning for retirement This hands-on resource demystifies financial planning by giving the Enough number: an exact figure specific to personal goals, which can be a target number to aim for in retirement. It shows what changes will help to achieve the number, and offers an understanding of hidden motivations when it comes to spending money. It also provides an overview of the multitudes of investments available and provides conservative guidelines that will help make money, save taxes, and sleep at night. * Offers a clear understanding of the different attitudes toward money and includes strategies to achieve goals * Includes the tools needed to save for later and enjoy rewards today * Contains a method for tracking money to help get your finances where you want them to be * Covers the details of what it takes to work effectively with a financial advisor * Written by Diane McCurdy, a noted financial planner, speaker, author, and founder of McCurdy Financial Planning This hands-on guide walks you through a proven program that is designed to keep you on the right track to financial success.
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Seitenzahl: 355
Veröffentlichungsjahr: 2013
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Contents
Cover
Title Page
Copyright
Preface to the Third Edition
Acknowledgements
Introduction
Part One: What is Enough?
Chapter 1: Your Money and Your Life
How Did You Score?
Two Attitudes, One Family
Money Myths
Chapter 2: Where It Goes
Tracking Your Cash Flow
Chapter 3: What You Want
What Do You Want, Anyway?
Wish List Favourites
Yearly Goals
Chapter 4: What's Enough for You
The Magic Number
Crunching the Numbers
What Your Enough Number Means
Part Two: Getting Enough
Chapter 5: Getting on Track
Needs vs. Wants
Budgeting—I'll Try to Be Gentle
Chapter 6: Finding Financial Advice
Finding a Good Financial Advisor
Trust, Two Ways
Your Risk Profile
Chapter 7: How to Make Your Money Grow
Loaners
Owners
Owner Investments: The Basics
Some Rules for Investing
Chapter 8: Registered Plans
Registered Retirement Savings Plans
Registered Education Savings Plans (RESPs)
Tax-Free Savings Accounts (TFSAs)
Saving Outside the Government Plans
Chapter 9: Ages and Stages
Age 20–35
Age 35–50
Age 50–65 Plus
Chapter 10: Family Finances
Teaching Kids the Value of Money
The Money Challenge
Chapter 11: I've Got Enough (Now What?)
A Changing Concept of Retirement
Retirement: The Financial Side
Chapter 12: Estate Planning
What Happens if I Don't Have a Will?
Laying the Groundwork
What Happens to My Business?
How Do I Choose My Executor?
How to Save Tax and Probate on Your Estate
Chapter 13: Tips and Thoughts to Make It Work
Twenty Thoughts to Help You Stay on Track
Twenty Tips to Help You Save Money
Appendix: Financial Planning Professional Designations
Index
About the Author
Copyright © 2013 Diane McCurdy
All rights reserved. No part of this work covered by the copyright herein may be reproduced or used in any form or by any means—graphic, electronic or mechanical without the prior written permission of the publisher. Any request for photocopying, recording, taping or information storage and retrieval systems of any part of this book shall be directed in writing to The Canadian Copyright Licensing Agency (Access Copyright). For an Access Copyright license, visit www.accesscopyright.ca or call toll free 1–800–893–5777.
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The phrase How Much Is Enough? is trademarked in Canada.
Library and Archives Canada Cataloguing in Publication Data
McCurdy, Diane (Diane Lynn)
How much is enough? : balancing today's needs with tomorrow's retirement goals / Diane McCurdy. — Canadian ed.
Includes index.
ISBN 978-1-118-49363-2 (pbk); 978-1-118-49365-6 (ebk); 978-1-118-49366-3 (ebk); 978-1-118-49367-0 (ebk)
1. Finance, Personal. 2. Retirement income—Planning. I. Title.
HG179.M3245 2013 332.024'014 C2012-908215-5
Production Credits
Acquiring Editor: Karen Milner
Managing Editor: Alison Maclean
Production Editor: Lindsay Humphreys
Cover design: Adrian So
Interior text design: Pat Loi
Composition: Thomson Digital
John Wiley & Sons Canada, Ltd.
6045 Freemont Blvd.
Mississauga, Ontario
L5R 4J3
Preface to the Third Edition
Some people are musical, some can talk the birds out of the trees, some are born with the ability to make machines run. We all receive different God-given talents. Mine is handling money, and I'm very grateful for that gift.
When something comes so easily, it's easy to think that it's perfectly obvious to everyone else as well, but as a financial planner I've learned that this is far from true. Over the years, I've worked with many wonderful people for whom personal finance has been a mystery or a challenge, and they have taught me so much about the human side of money management. I learned early on that you can't just tell people what to do and they'll go off and do it. You have to find the thing that motivates them to help themselves. And as I tried out different things with different people, I eventually developed the concept on which this book is based: that people have one of four built-in emotional approaches to money, and that their particular approach should be factored into their financial planning.
Since the first edition of How Much Is Enough? was published in 2001, the world has changed—and not necessarily for the better. We lost our sense of security in 2008 when the financial institutions of the world seemed to be crumbling around us. All of a sudden, many people who thought they were comfortable weren't feeling so comfy anymore.
If you were panicking in 2008, you were in good company. Economies were shaken to the core, not just in the United States and Canada, but worldwide. Everybody was worried. And what about financial planning in this climate? How could you possibly start a program or fix your personal finances with the banks and markets imploding around us? How could you ever have Enough to retire on? Did the same rules even apply?
Fortunately, Canada remained relatively stable through these tough times. But there are risks to this stability, too. We feel very proud that our country has a stable banking system, our housing market maintained overall strength and our dollar remained relatively strong. What is surprising is that in 2012, Canadians took on more personal debt than Americans. Perhaps we felt flush because our country was doing relatively well as a whole. But it's an ominous trend.
If you find your line of credit is creeping up on you or you're paying interest on out-of-control credit card debt, you may be on a slippery slope. This new edition is here to help you, with the sound principles found in earlier editions and a new focus on the risk factors in today's economy. Maybe you're on track but considering a change in lifestyle (like a vacation home, downsizing the house or travelling for a few months each year). There's advice here for you as well. If you're caring for your parents, your children and your children's children, and you're wondering how to manage your finances in light of all these demands, this book can help. If your kids go on wild spending sprees and you're aghast at their lack of financial responsibility, you'll find the solutions here. In fact, a whole new chapter on family finances has been added. And if you're starting your planning nice and early and want to get it right from the start, the tools you need are here.
The world has changed and so has how we think about our money. This new edition addresses these new fears and concepts. It is also a treasure chest of tried and proven techniques that are certain to be effective for you going forward.
What has really changed since 2001 is our ability to believe that we can have Enough. Can you still save what you need to retire on? How on earth will it be possible?
Breathe.
By following the simple, effective program in this book, you and your family can live your lives with joy, enthusiasm and peace of mind, knowing that you have enough for today and enough for your future. No matter what age or stage you're at, it's never too late. Now more than ever, good planning is essential. But with the right tools and a plan that fits your lifestyle, you can reach your dreams and goals. You will indeed have Enough.
Acknowledgements
I believe that anything we ever accomplish, we don't accomplish alone; it's always in conjunction with others. And that belief is powerfully reinforced when one is writing a book. These are the particular others who helped me bring this book to life.
Paul Sullivan has been incredibly wonderful. Right from the beginning, he kept me motivated and on the right track. Taking time from his thriving business, Sullivan Media, he kindly gave his time and energy. His encouragement, direction and great editorial judgement made the book possible.
Elizabeth Wilson was able to capture and record all of the things I believed would be lost in a stream of half-finished thoughts, enthusiasms and verbal meanderings. She did this all tirelessly and cheerfully. Elizabeth possesses a magic butterfly net that amazes me.
My colleague Don Pooley was a great resource and gave some excellent additional suggestions. He's a man on the leading edge of technology.
Mike Wilcox has always been an inspiration, encouraging me to do my best and giving me opportunities to grow and learn. John Nicola always shares all he knows about the business, and he challenges me every step of the way. A great big thank you to John Smith, one of the most brilliant minds in the investment field. One of the unsung heros of the financial services industry is Joe Dickstein. He has quietly motivated, supported and inspired hundreds of advisors across Canada. Thank you so much, Joe!
I'd like to acknowledge my colleagues with the Million Dollar Round Table and the wonderful conferences they put on.
The Women's Presidents Organization is an incredible group of business women that, almost by default, transcends business issues. The depth of knowledge, dedication and caring to be found in this group is astounding.
In my own industry, I am grateful to meet with a wonderful group of women three times a year. Thank you to my women's study group: Susan St. Amand, Monette Malewski, Terry Zavitz, Lynn Wintraub, Anne-Marie Girard-Ploffe and Sandy Pollack. Thanks also to Susan St. Amand for her valuable contributions on the subject of charitable giving.
Nan Zimdars, along with her friend Buddy, are always willing to help. Her creativity is an inspiration to me.
Don and Judith Bedford put a lot of effort into the toughest chapter.
Nobody could want a better friend or mentor than Ewen Stewart, who has believed in me from the start of my career. If all of us could have one person who believed in us like that, then we would be extremely fortunate.
Frank Harcourt taught me never to discount anything without looking at it first—one of the most important pieces of advice I have ever received.
Jack Newton and Howard Dawson served as wonderful examples and helped me grow.
Betty Cooper was a great teacher.
My first banker, Ed Williams of the Toronto Dominion Bank, gave me my first loan back in the days when women couldn't get loans.
My two sisters, Heidy Black and Dorothy Walker, put me to work when I was six. Today, some people would call that child labour. They say they were teaching me entrepreneurial skills. I agree with them.
I would be remiss not to mention the rest of the McCurdy clan: Rudi, Edward, Alan, Jim, Bruce and one more sister, Frances.
All my good friends made the road smoother. David and Doreen Godwin contributed in different ways. He brought my office and me up to speed on technology in record time; without his help I could never have finished the book. Walks and talks with Doreen kept my head clear and allowed me to face whatever the day threw my way. Another vote of confidence and encouragement came from my friends Sally and Michael Wright. Dorothy and George Petley are almost like second parents—the sweetest, most wonderful people. Triss Bubbs, Charlotte Hall, Pamela Martin, Maria Leone, Margaret Ramsdale, Ruth Schmalz, Monica Beck, Linda Annis, Barbara Mowat, Terri Knill, Roy McGuire, Carolyn Cross, Leslie Meingast, Eva Sun and Lesley Lerner are dear and supportive friends.
The office always runs smoothly because of Roberta Domae, Mary Maciorowski (my best friend since childhood) and Farideh Mohsenabadi, with extra help from Brandon Epp, who made all the charts and graphs in this edition of the book possible. This group makes my life considerably easier through their fine work and engaging personalities.
This new edition would not have been possible without the amazing Liberty Craig, who took on a tough, time-constrained project with grace and no end of skill. In retrospect, we worked on the update 24/7 thanks to our wildly different body clocks. Thanks for your dedication and adroitness, Liberty.
At Wiley, Karen Milner encouraged me to do a third edition and went to the mat to publish the book in record time. Her faith, and the calm efficiency of the other people who gave the book its final shape, spurred me on.
To all of my friends and family who don't seem to mind dealing with a total workaholic (I just think I'm enjoying myself): thanks for being so patient.
And finally, Gordon Gutrath is a very special someone: constant, encouraging and full of love and support always. He's a gentle and generous soul who gives my life balance.
The greatest contributors to this book are my clients. I thank them from the bottom of my heart. It is because of them that I have been motivated to put together this program. My greatest satisfaction comes in helping people gain control of their financial lives by finding their Enough Number. I'm one of the fortunate few who has liked and enjoyed every client that has walked through my door. I thank you all!
Introduction
Enough—it's what we all want. But do you even know what enough is? For you, not for the facelift models on the tropical beach in the retirement commercial, or the guy down the street with three sports cars and two vacation homes.
Nobody is typical. By discovering what you really want, you can make sure you get it, now and in your retirement.
You're already asking, do I have to give something up? Yes. You have to give up not knowing where you are financially and being terrified that you'll run out of money. In exchange you'll gain control. You'll know what's important to you, and you'll get it. You'll know you have Enough. That's peace of mind.
How many times have I heard a client say, “Diane, I feel so good by the time I leave your office”? You'd think I ran a spa. But I'm a financial planner, and in over twenty-five years in this profession, I have seen thousands of clients smile with relief when they see their money working for them. It doesn't take long.
These are the same people who arrive at my office with sweaty palms and shifty eyes. Successful professionals—doctors, architects, media people, entrepreneurs—are embarrassed to admit that “I don't understand all that financial stuff,” or “I'm so far behind I'll never catch up.” If they're so successful in the rest of their lives, why are they no good at managing their money?
Their previous experience with financial planning or advice hasn't filled them with confidence, either. They say that it seems so all-consuming and feel that in order to succeed they must alter their lives completely and start thinking and acting like Donald Trump, or at least Tony Robbins—totally driven to amass wealth the way ordinary people breathe. Or, even worse, they get conned into believing that someone else will do it all for them. And someone else often does—losing a lot of their money and then handing them the bill. No wonder these clients are nervous.
Very few people have the ambition or are in the circumstances to achieve the exalted goals promised by so much financial advice. They end up feeling inadequate and giving up, falling back into their old habits—at least those that are familiar. Money management ends up suffering the fate of all those other doomed resolutions, like losing thirty pounds or quitting smoking.
So when people walk into my office, they often have an expectation that they're going to fail again. But at least they've decided it's time to do something. You too? What motivated you to pick up this book?
Finances out of control?Wondering where it all goes?Doing okay but not sure it's enough?Been met with a personal financial crisis and need to start over?Used to save more but can't find the money anymore?Confused about all the financial information out there?Started a lot of financial programs but never stayed on one?Slowing down and wanting to develop an exit plan?Wanting to get on track?Just beginning and wanting to do it right from the start?Wherever you are now, whatever age or stage, I will give you the tools to get what you want and achieve financial freedom. Together we'll develop a unique, evolving program based on your situation and goals. And it won't just prepare you for retirement; it will reward you along the way.
Part One
If you're going to be successful, it won't be because everybody else thinks you are; it'll be because you've set your own goals and taken real, practical steps to make them happen. The wealthiest people aren't those who own the most stuff; they're the ones who manage their lifestyle best. This little idea works when so many big ideas fail.
You won't be doing anything extraordinary. You'll know who you are, what you want and how much you need to achieve it. You will be doing the right things on a regular basis. That's it. It ain't sexy. It doesn't make good dinner party conversation (“I deposited $100 in my RRSP today. . . .” Yawn.). But it works for client after client, time after time. In Part One I'll take you through four simple steps to financial freedom.
Your Financial Attitude
You have a built-in attitude toward money that controls the way you spend. It's as much a part of your outlook on the world as your sense of humour, and it doesn't change. With this program you'll find out what that attitude is. Once you've identified your type, you'll know where you're likeliest to run off the rails, and you'll gain some insight into why other people use money the way they do. This financial program has been designed to work with your financial attitude, rather than to try to change it.
Your Cash Flow
You'll keep track of everything you spend for at least a month. Does the thought of that send icy prickles down your spine? That's normal. But it's essential to find out where your money goes. Don't put it off waiting for a “typical” month. There's no such thing. And don't try to change your spending habits so that they live up to some imaginary standard. If you lie to yourself in this step, the others won't work. What is your salary, and how much of it do you keep? Can you reasonably expect it to go up or should you count on it staying the same? After you've finished, check what you spent against what you made.
Your Assets and Liabilities
You'll total up all of your assets: your RRSPs, savings, insurance policies, real estate and all investments. Then total your liabilities: mortgage, credit card bills, car payments, loans—anything you owe. Assets minus liabilities will give you your current net worth.
Your Wish List
Besides a reliable retirement income, what do you want? A mint-condition 1969 Mercedes 280 SL Roadster? A year off in Micronesia? A wall-sized home theatre? A set of 400-threads-per-inch Egyptian cotton bedding? Make a wish list and then sort it in order of priority. Don't judge yourself. This program is designed to make sure you have your luxuries along the way as you build up your retirement stockpile. Without those, you won't stick with the program, so these rewards are very personal choices.
In Chapter 4, you'll put all that information together and find your Enough Number. With a snapshot of your current financial status, you can project how much money you'll need to retire on and how much you have to save to get it. Looking at your cash flow, you can see how much you need to live on now and how much you can realistically put away each month. By comparing your cash flow to your wish list, you can see where your money is really going and compare that to where you want it to go. If you're fortunate enough that you have money left over, or you're already on a savings program, you'll know how much money you have to play with. If not, you'll have to sift through your spending to find the money you'll invest in yourself.
There. You've solved the number one financial challenge of your life. Your Enough Number will pay off doubly, because now that you have a plan, not only can you give yourself a comfortable retirement, you can enjoy peace of mind immediately.
That's the program. It will take you perhaps a day to get started, then an hour or so per month to maintain it. It has worked for all the people who have followed it and it will work for you. Even if you've left things too long, you'll be better off if you start now—and you'll feel better about your future.
Part Two
In Part Two, you'll learn about how to determine your Enough Number and work through the four key ways of getting there.
Start Saving
Because you've been keeping track of your spending, you can see exactly where your money has been going. Somewhere in there is the answer to your question, “Where am I going to find the money to save?” When you know what you want, you can see what's keeping you from getting it and stop spending on things that don't mean as much to you. If you're in debt you'll probably have to deny yourself in the short term to achieve what you want in the longer term, but keep remembering, any money you spend in interest is money you can't spend on yourself.
Get Financial Advice
I strongly recommend that you get your own financial advisor because there are so many confusing options available now. A financial advisor can look at your entire financial picture and show you how to maximize your savings and investments in a way that doesn't keep you awake nights. Somewhere between Canada Savings Bonds and gold futures, you'll find your comfort level. I'll also give you some general money-making strategies that will help your assets grow.
Invest Wisely
It's so easy to get caught up in market trends and frenzies. But you can do better—and will sleep better—investing for the long term. If that's entirely too boring for you, go ahead and use some of your extra on chasing The Next Big Thing, but protect your principal. I'll show you how to balance your risk level (how much you crave or avoid risk) with your risk tolerance (how much risk your portfolio can stand).
Benefit from RRSPs, RESPs and TFSAs
Every year you can shelter 18 percent of your income from tax in an RRSP until you start using the money. That's a wonderful incentive to save, and the penalties for raiding your RRSP are so steep that it's a forced savings plan as well as a tax shelter. RESPs are a great way for parents to shelter after-tax money for their kids' education—and get a grant on top of it. As you get closer to having your Enough Number, TFSAs are a third option that can help you invest and earn tax-free money. I'll show you how you can get the greatest benefit from all three of these programs.
Educate Your Family
All your careful planning could go to pot if you leave your life savings or the family business to your children—who immediately blow it! I'll show you how to help your kids financially without hindering their ability to earn, save and understand money. These proven techniques have helped numerous clients navigate the sticky issue of teaching kids the value of money.
Plan Your Exit Strategy
Once you get there, then what? The final chapter deals with your own final chapter: how to get the most out of your retirement income and how to handle the money you want to leave behind. You need to set both in motion early.
Do you notice how time seems to go by faster and faster? Take control of your money now. If you don't, by the time you turn around, five years will have gone by, and you'll wish you had. Start your Enough program now and by the next time you wonder where the days and weeks have gone, compound interest will have worked its magic and you'll be pleasantly surprised at how your money has worked for you. Keep at it and on your next momentous birthday (thirty-nine again?), you'll be enjoying one or two of the items on your wish list. And when that morning comes when you don't have to get up and go to work, you'll know you have Enough.
Part One
What Is Enough?
In over twenty-five years as a financial planner, I've learned one major fact about human behaviour: people don't change easily. They'll only change if they really want something.
1
Your Money and Your Life
I yam what I yam and that's all that I yam.
—Popeye the Sailor Man
Money doesn't come cheap. It's wound up with our emotions in ways we seldom notice. We trade our time and energy for it, keep score with it, build with it, control others with it and indulge ourselves with it. Then we fantasize about having more. Some people's self-esteem rides on how much of it they have—or how much of it they can make others think they have. Some have trouble parting with it—if they spend it on something, it's no longer there helping them sleep at night! Some people believe they need money to buy the affection or respect of others. Others use it to protect themselves from pain, or to cause pain to others. People have lingering feelings of shame because as kids they had so much less, or more, than others. There are those who consider themselves bad people if they care about money at all. Money is power. Money is glamour. Money is happiness . . .
I've got news for you. Money is just a tool. All that other stuff is what we put into it: fear, greed, envy, pride, anger, respect—that comes from us.
When Sue dragged Graham in to see me she was convinced that their finances were out of control. “How are we going to save any money when he keeps giving it all away?” she groaned. Neither she nor Graham had any idea how much they would need to retire on, so she wanted to put away every cent, just to be safe. As far as Graham was concerned, they had lots of money—certainly far more than either of them had grown up with—and as the son of a minister, he had always felt compelled to help others. That was why he had become a doctor. The money that went with the job gave his benevolent impulses new expression. As well as the charities and foreign foster children he supported, he had even been known to help out patients who were hard up.
Sue couldn't stand it. To her, having money meant just that: having it. She had grown up with even less than Graham, and she wanted to protect herself against ever being that poor again. After paying the monthly household expenses for a family of four with a mortgaged house, she wanted to save and invest anything that was left. Graham wanted to “give it all away.” This conflict about money became an ongoing tug-of-war that threatened to end their marriage.
That first visit from Sue and Graham brought home to me the two important points that underlie this book. First, only when you know how much is Enough can you feel confident that you're on track and know what you have left to enjoy. Second, money is an emotional subject. People have deep-rooted attitudes about money, and their own attitudes have to be taken into account if any financial program is going to work for them. Let's start with the second point.
For Sue the only real security was money in the bank, and even with the pile of money that the couple had built up, she was anxious that it still wasn't Enough. That nagging thought made her resent Graham for what she saw as his lavishing money on strangers. But for him it seemed a shameful waste to have money sitting around in a bank account when any number of people and agencies were crying out for help.
When the two of them argued about money, neither realized that they were arguing about something far more profound than facts and figures. Neither one understood that the other's way of handling money reflected a deep emotional need, and to deny that need was to make the other feel insecure and unloved. When I met these two, my first job was to help them understand that—and understand each other.
In my work, I see four common attitudes toward money. None of them is right or wrong, better or worse than the others, but each can lead to trouble if it's not balanced. A person's ingrained attitude to money is not going to change, so it's essential to build a financial program around how each person feels about this pervasive fact of life. Let's begin by finding out what your attitude, or “type,” is. For each question in The Attitude Quiz, below, write down the letter of the answer that most closely corresponds to your own point of view for each question. At the end you'll see what type you are, and where your personal pitfalls lie.
The Attitude Quiz
How Did You Score?
What does money mean to you? It's helpful to know because any of these attitudes taken to the extreme can sabotage your dreams. Find out by adding up the A's, B's, C's and D's you have: the category in which you have the highest score is your type. You probably won't be one type exclusively, but one attitude will likely prevail. Once you know which type or combination of types you are, you'll have a better idea of why you spend money in certain ways, and you'll also be able to see patterns in your wish list, once you get to that part.
A) Spender
Motto: You only live once.
Dead giveaways: new car, latest gadgets, vacations paid by credit card
Spenders are very current. If you want something, ask one. They'll know where to get it, how to get it and probably the best deal on it. They're forward thinking, fun to be around and often the envy of their friends. These are the fabled Joneses. If you walk into a house that has the best and the latest of everything, especially when the owners don't use it all, you're in a Spender's house. Spenders like money for the things it buys. They'd rather have something concrete than something abstract like savings. It doesn't have to be an object. It might be courses, or travel or restaurant dining. Spenders also tend to see shopping as a form of entertainment.
Danger zones: Spenders get into trouble when they spend everything they have—or more. Of the four types, they have the hardest time saving money. If you're a Spender and don't pay off your credit card bills every month or have a permanent line-of-credit debt, you could be on a slippery slope.
Attitude adjustment: Once Spenders buy into taking savings and expenses right off the top and having all the rest to spend, they're on their way.
Famous Spender: Elton John. This man is probably the world's champion shopper. In 2000, he admitted that he'd been spending over $2 million per month for the previous two years—a total of more than $50 million in two short years. In one trip to Versace in Milan he spent $600,000. That was a leap even for him—$600,000 is usually the monthly total on his credit cards. But it wasn't his personal best. He's reputed to have spent $1.1 million in one day. Two truckloads of personal possessions accompany him everywhere he goes, no matter how short the trip. It's a good thing for him that the world's airwaves are clogged with oldies stations playing his songs and paying him a couple of cents in royalties every time they do, but even with that river of money coming to him, he once came within eight weeks of going broke.
B) Builder
Motto: Make it so.
Dead giveaways: midnight oil, own business, expensive collections, big projects
For Builders, money is a tool. They use it—and sometimes risk it—to turn their plans and dreams into reality. The joy is in the creating. The self-made millionaire is the most obvious example of this type, but Builders might also work at mindless jobs and pour all their money and energy into restoring cars or collecting antique glass. Most entrepreneurs, corporate leaders and ardent hobbyists are builders. These people make fantastic mentors (if they have the time). They may or may not have all the trappings of success, even if they can afford them.
Danger zones: Builders can get into trouble when they're so intent on building that they miscalculate the risks involved or fail to leave themselves a margin of error. The entrepreneur who keeps expanding the business without creating a cushion in case of failure, the collector who spends the mortgage money on a case of '96 Mouton Rothschild, the freelance consultant who invests in enough technology to run the navy and spends more time checking out what it can do than getting work—these are Builders who could be headed for trouble. There can also be a tendency to start projects and not finish them. Often that leads to selling things at a loss, maybe from the last burning fascination, in order to get on with the Next Big Thing.
Attitude adjustment: Developing a portfolio is a building activity. Once Builders get interested in using their creativity here, they're on the escalator.
Famous Builder: Donald Trump. After building a hotel and casino empire in the 1970s and 80s, by 1989, Donald Trump was declaring bankruptcy on a huge project and was in danger of personal bankruptcy. In 1992, he went bankrupt on another development project. His financial crisis was widely publicized, and the world watched as his personal debt hit the $900 million mark and his business debt a staggering $3.5 billion. Yet he worked to pay these debts and to amass even greater wealth, continuing his roller coaster ride all the way. He rebuilt his empire through a number of initiatives, including the NBC reality TV show The Apprentice. In 2009, he declared business bankruptcy yet again. However, by 2011, Mr. Trump's personal wealth was valued at approximately $3 billion.
C) Giver
Motto: 'Tis better to give than to receive.
Dead giveaways: mail from charities, well-dressed grandchildren, endless committee meetings
The rest of us probably couldn't get along without Givers. These are the volunteers, donors to charity and friends-indeed. Givers feel good taking care of other people. They buy gifts for friends that they would never buy for themselves. They deny themselves so they can leave something for their children. They put time, energy and money into what they believe in. For some of them, having money is almost a sin, and the only proper thing to do with it is give it away. But for most, there's just a lot of pleasure in making other people happy or doing good.
Danger zones: Givers can get into trouble when they ignore their own needs. Tempting as it may be to help your kids buy their first homes, if you're doing it at the expense of your own retirement income, you could end up a burden to them in the long run. You might also be creating dependent children who never find out how to take care of money because there's always more where that came from.
Attitude adjustment: Once Givers understand that by taking care of themselves they're better able to take care of others, they'll happily get with the program.
Famous Giver: Michael Jackson. The King of Pop is widely known as the most successful entertainer of all time. What many people do not know is that he was also one of the most prominent philanthropists of all time. MJ (at the time of writing) holds the world record for having supported more charities than any other pop star. Through his foundation and through personal giving, Michal Jackson donated more than $300 million to charity. In 1985, together with Lionel Richie, he wrote the charity single “We Are the World,” which raised millions of dollars for famine relief in Africa. Despite his incredible success and wealth, Jackson died with approximately $300 million in personal debt.
D) Saver
Motto: A bird in the hand is worth two in the bush.
Dead giveaways: bag lunches, outdated electronics, warm socks and heavy sweaters to avoid heating bills
Without the savers of this world, who would the rest borrow from? Savers can amass quite a lot and yet still have an enviable quality of life on a tiny salary. Or they can just get to where everybody else wants to be that much sooner. Other types can't quite figure out how they do it. Savers are very good at spotting money-wasting activities and avoiding them—some to the point that other people consider them cheap. These are not impulsive people, and they're often very organized. Savers can have a bit of trouble parting with their money. Some are good investors, but some don't want to risk anything and prefer cash. For peace of mind, they need savings as a cushion.
Danger zones: Savers can be too conservative with their investments, so their money doesn't grow as much as it could. Far worse, they sometimes postpone enjoying their money until it's too late and they can't do the things they've always wanted. Saving becomes an end in itself, rather than just a means to an end.
Attitude adjustment: Once Savers have their Enough Number and know that they can meet their security needs while still enjoying themselves along the way, they start to feel a bit freer about spending.
Famous Saver:
