Personal finance

The best personal finance book you’ll read this year – Orlando Sentinel

If you only read one financial book this year, read “Money Magic: An Economist’s Secrets to More Money, Less Risk and a Better Life” (Little, Brown Spark) by famed economist Laurence Kotlikoff, who also co-est the author of the definitive Social Security book, “Get What’s Yours.” Kotlikoff has the extraordinary ability to make complicated financial matters understandable – and to demystify the lures of Wall Street and the financial planning community.

Kotlikoff is a financial benefactor, and he’s done his best work in the all-new “Money Magic.” Let me give you some of the highlights in the hope that you’ll want to read his concise and personal explanations of how the financial world really works. This book will create “Aha!” moments for readers of all ages.

For example, have you ever wanted to tell your child or grandchild that it is foolish to go into debt to get a degree in a field that will never be able to repay the debt plus interest? It’s just common sense, of course. But no one wants to ruin their children’s dreams of a career in the fine arts or tell them that entry-level public relations jobs won’t help pay off student loans.

Kotlikoff shows you how to get the facts on careers that have increased earning potential based on changing demographics like aging. To avoid being outsourced to a robot or outsourced in the next economic cycle, he advises turning to the growing healthcare sector – or even becoming an undertaker! (You’ll get used to his fact-based sense of humor!) He correctly notes that plumbers will always be in demand.

Here’s another chapter that may not seem politically correct but makes tremendous financial sense. Read his arguments in the chapter entitled “Marry for Money”. This chapter is too much fun to be spoiled by description. Let me just say that I knew I had heard this advice before – from my grandmother!

The chapter entitled “Get House Rich” explains the long-term impact of deciding where you will live – and how the money you don’t spend on housing can be put to good use for your future financial security. Creative ideas to make sure you understand the true cost of your housing decisions can change your perspective – from getting home with mom and helping her save money on repairs (while still saving on rent) to choosing accommodation away from fashionable but expensive cities. Spending less on housing now can dramatically increase your standard of living over your lifetime.

Of course, there is a concise yet detailed chapter on Social Security “gotchas,” and the importance of waiting as long as possible for benefits. For anyone who’s ever argued that they “want their Social Security now,” here are the factual and mathematical reasons to wait. And there are important tips for the complicated decisions spouses can make to maximize their lifetime benefits.

Not only does Kotlikoff denounce Social Security for its mistakes in advising those who come to them for advice, but he calls one aspect of Social Security a “scam.” It looks like Social Security called people who are waiting for the maximum benefits at age 70 and offered them a few months of payments up front, just to start just before age 70. This tempting offer costs a permanent loss of benefits of 6.7% over the rest of your life!

Note: If you want to get correct answers about your Social Security decisions before you make a lifelong costly mistake, Kotlikoff’s website MaximizeMySocialSecurity.com has useful and accurate decision-making software that you can access for $40.

Kotlikoff’s real target is the financial planning industry. It reveals the costs and motivations of Wall Street, which is now trying to accumulate assets and collect fees. Otherwise, why would a planning firm advise you to take Social Security early (forever limiting the value of your biggest retirement asset) while taking your working capital to “make it grow”?

If you’re ready to make your own smart planning decisions, Kotlikoff has another website, Maxifiplanner.comwith tools for individuals or professionals.

From mortgages to student loans, from calculating the real cost of divorce to understanding the real risk of stocks, “Money Magic” has the answers.

And the amazing thing is that it’s not magic at all. It’s just the smartly explained reality of the economics behind your most important financial decisions. And that’s the wild truth.

(Terry Savage is a Registered Investment Advisor and the author of four bestselling books, including “The Savage Truth on Money”. Terry answers questions on his blog at TerrySavage.com.)