The Bank On Yourself Revolution. Pamela Yellen
because you’ve retired but your nest egg isn’t earning enough income for you, and you’d rather not take more risk with your money? See Chapter 10
• Fed up with feeling stressed about money in general? See Chapter 6—then read the whole book!
How Almost Anyone from Age Zero to Eighty-Five Can Benefit
No matter what age you are, from zero to eighty-five, Bank On Yourself can be a powerful financial tool. To get the most benefit, I suggest you read the whole book, even sections that you don’t think apply to you. But I also recommend that you focus on specific chapters depending on your age:
• If you’re in your twenties: You may be struggling with student debt, a tough job market, and salaries that don’t seem to leave room for savings. You may have seen your parents and grandparents struggle during the financial crisis and want to avoid making the mistakes they made. You need a strategy where you can start small and build it up. (See Chapter 6 for financial basics to get you started off on the right foot and Chapter 11 for an example of how starting small can end up being big.)
• If you’re in your thirties and forties: You might be growing a family, maintaining a home, and starting to think about how to pay for college. You may have incurred a lot of debt and feel like it’s all you can do to keep your head above water. You need a strategy that will help you turn the ship around and reduce your debt while growing money you’ll need for the kids’ college expenses and your own retirement. (Chapter 7 will show you how to become your own source of financing. See Chapter 8 for a smarter way to pay for college.)
And if you’re starting to get serious about saving for retirement, don’t miss Chapters 2 and 5.
• If you’re in your fifties and early sixties: You may be in your peak earnings years, but you also may have parents and kids you’re helping out financially. Yet it’s time to make serious headway on your retirement savings, and you need to plan to cover the enormous health-care costs you know are looming. You need a strategy that will enhance your retirement savings yet remain liquid for potential emergencies. (See Chapter 5 for ways to build a healthy retirement fund that lets you access your money whenever you need or want to—while it continues growing as though you hadn’t touched it.)
• If you’re in your late sixties, seventies, or eighties, or already retired: Your nest egg may have taken a severe hit in recent years, leaving you less than you had planned for. If your money is in CDs, savings and money market accounts, you’re probably concerned about the low returns you’re getting. You may be worried about the forced distributions (RMDs) you’re required to take from your retirement account. You also may be thinking about passing a financial legacy to your children and grandchildren. (See Chapter 10 for ways Bank On Yourself addresses the specific concerns of seniors.)
Who Bank On Yourself Isn’t Right For
Bank On Yourself is not a get-rich-quick scheme. It takes some patience and discipline. If you have those traits, it pays a lifetime of benefits. But if it takes pie-in-the-sky promises of 12 percent, 20 percent, or more in annual gains to get your attention, this book is not for you.
And if you regularly spend more than you make, wait until you’ve got that under control before looking at this strategy. (Chapter 6 has some helpful tips for gaining control of your money and spending.)
The Bank On Yourself strategy gives you a rare combination of guarantees, safety, liquidity, and control. Your money grows by a guaranteed and predictable amount every year, and that growth gets better every year you have it. Bank On Yourself is for those who want to grow their wealth consistently every day and have control of their money and finances.
This strategy is so safe and so consistent that it’s actually really pretty boring. If you need something sexier, try your hand at pork bellies or gold futures on the commodity exchange. Trust me, Bank On Yourself is not the stuff that makes for titillating cocktail party conversation.
If you’d like to find a financial strategy that doesn’t promise you the moon (but will deliver impressive results), and if you’re more interested in truth and pragmatism than blue-sky fantasies, then let me introduce you to someone who now thinks boring is pretty darn exciting.
When Boring Takes Your Breath Away
Dan Proskauer is vice president of technology engineering for a major health care company who holds three U.S. patents. He lives below his means and has significant savings discipline. Dan is a sophisticated investor, but after the two financial crashes of 2000 and 2008, he realized he had nothing to show for decades of saving and investing his hard-earned money and “doing all the right things.”
Dan is very analytical and has spent literally hundreds of hours investigating Bank On Yourself and, as he puts it, “The more I look at this, the better it looks.”
In late 2012, Dan sent me a chart showing how his family’s net worth has grown since he started his first Bank On Yourself plan three and a half years earlier, and how that growth compared to the previous ten years of rolling the dice in the Wall Street Casino.
When Dan saw this chart on his financial tracking software program, he said his jaw dropped so hard it left a dent on his keyboard. He told me the story this way when I interviewed him for my Bank On Yourself blog: “One chart I track shows me our family’s net worth, which is the value of our assets minus the value of any liabilities we have.
“I look at this chart every time I start up Quicken, or I at least glance at it, and I was thinking, ‘Man, this chart just hasn’t changed very much. It looks pretty much the same as it has for a long time.’ I was expecting to see some difference as we embarked on our journey with Bank On Yourself.
“So, just two weeks ago, it was bothering me so much I opened up the chart and took a closer look at it.” It turns out that two years previously, Dan had set the chart for a specific date range and forgot that he’d done that. So for two years it was just showing him the same data over and over again.
“When I removed that date restriction and saw the data from my whole record, I was stunned!
“When I compared what happened to the left of that arrow to the time we started to implement the Bank On Yourself method, the picture was completely different. After starting our Bank On Yourself plans, the volatility is largely gone. It’s a very smooth slope, and the slope is tremendously steeper—in a good way—than I ever expected. That just floored me.”
NET WORTH OVER TIME: EXCLUDING HOME/REAL ESTATE
High Expectations Exceeded
Dan continued, “When I saw this chart, I realized that my high expectations had been really exceeded. I felt a tremendous sense of accomplishment that I made this decision. Frankly, it’s working out far better than I could have expected. I feel really good about it, and I want to shout it from the rooftops!
“The other thing is, I go to sleep every night knowing I don’t have to worry about ‘What’s going to be the news out of Europe when I wake up in the morning? What’s going to be the news out of Asia?’ Or when I get up and go to work, ‘What’s going to happen during