It’s been more than a year since I last reviewed a book. It’s not that I haven’t been reading. Just that these reviews (examples here and here) generally take quite a lot of effort and I have realised that few books are actually worth that effort.
However, recently, I finally managed to pick up Tony Robbins’ Money: Master The Game at the library and after reading the entirety of the book, I realise that this is a must-read for a beginner.
Firstly, if you don’t know who Tony Robbins is, he’s actually a multi-millionaire. A quick google seemed to suggest that he’s worth almost half a billion bucks! He made his name being a success and self-help coach and his clients include big-names like former US President Bill Clinton, actors like Hugh Jackman and sportswomen like Serena Williams.
So, the big question is, why did he write such a book?
It’s probably not to sell more books, earn more money. In fact, I truly believe he is trying his best to help the man on the street to manage money better by illustrating 7 Simple Steps To Financial Freedom.
Besides helping me to make Financial Security My First Long Term Financial Goal, here’s 7 of the most important lessons I gleaned from the book:
1. Fees Are Money-Sucking Monsters
If you had $10,000 invested and assuming a 8% annualised return over 30 years, the money would grow to $80,000 if you had to pay a 1% annual fee for the fund you are invested in.
If the fees are higher at 3%, you would only end up with slightly more than $40,000 at the end of that 3 decades.
Paying a fee higher by 2% could result in your wealth effectively being halved!
The problem with unit trusts is that most of them charge high fees, dangling a carrot that their over-performance would justify their higher fees. But most rarely beat the market, and even when they do match the performance, the fee difference is literally killing you.
Moral of the story? Stick to low-fee index funds or ETFs.
2. What Does Money Mean To You?
Some of us need it more for certainty and comfort. Probably a couple of millions should get most people security and comfort.
But what if you tie money to growth or even significance?
Tony gave the example of Adolfe Merckle, a billionaire who committed suicide during the height of the Global Financial Recession almost a decade ago. This was a guy who probably attached his own identity to his wealth and the loss a few billions was too painful to bear even when he still had 9 billion left.
So yes, do find out your main purpose of accumulating money.
3. Earn More, Save More
Many critics of Tony Robbins often point out that many of his writing or theories are often drenched in motivational big wins, stuff that are beyond most of the average people.
But in his book, he mentioned about bread-and-butter stuff about how you can reduce so much of your interest payments by pre-paying your monthly mortgage. This is a step I know many other local financial bloggers are doing to reduce their home loan payments from 30 years to 15 years.
And when he says earn more, it’s a manageable $500 a month. By monetizing a hobby or adding more value to your skills, that $500 might be more achievable than you think.
4. Make Saving Less Painful
You need to start somewhere. And committing to save a portion of your salary is a must. You could even start off with a meagre 5% of the paycheck.
It might not make a big difference at the start if you’re earning $3,000 a month since 5% is just $150 a month and over a year, that adds up to less than $2,000. But what if you commit to save 30% of your increment?
You will still get to enjoy the bulk of your increment. And in 5 to 10 years’ time when you’re earning a salary of $6,000, you would be saving close to 20% of your salary and socking away more than $1,000 a month!
This is essentially Bernartzi and Thaler’s Save More Tomorrow plan that helps most people to get past their bias of valuing the present more than the future and failing to save.
5. The All Seasons Strategy
This is what Tony distilled from Ray Dalio, one of the best investors in the world and whom our local bigwigs like GIC and Temasek Holdings often turn to for advice.
The All Seasons Strategy promises low volatility, low down-side risks, and decent upsides. A back-test over the last 30 years showed that there were only 4 down years with an average loss of just 2% and the worst down year was just around 5%.
And yes, a decent overall annualised return of just under 10%!
Some of the components that make up the All Seasons Strategy might be hard to replicate in Singapore. And a great alternative is the Singapore Permanent Portfolio. I truly believe that with rebalancing, it should deliver a long-run real return of 5%.
6. Annuities Can Be Great! (Sequence of Return Risk)
Our generation could well be living beyond our 90s. And yes, we need the wealth to last us till then.
But did you know that if you retire at 65 and assuming you live till 95, the sequence of return could well determine if your money could last you for 30 years of drawdown?
If there’s a bad recession during your early years of retirement, you could jolly well have to come back to the workforce by your mid 80s, as the drawdowns could mean that your portfolio might not have the capital to bounce back up during the latter recovery.
And that’s where an annuity comes in. So yes, maximize your CPF accounts before you turn 65 so that you can have a greater peace of mind during your retirement. It is the annuity with the highest return in our country. A guaranteed payout of $1,500 a month is certainly not to be sniffed at.
7. How The Best Invest Their Money
Find out how the best such as Carl Icahn, David Swensen and John Bogle invest their money and their advice to common folks like us in the book.
I definitely enjoyed this section!
I will be honest. There’s a perfectly good chance I would be buying this book to keep in my own personal library. It’s definitely in the list of 10 or even 5 books I would recommend to someone just starting out and who wants proficiency in managing his personal finances.