Chapter Excerpt

DO YOU FEEL LIKE YOU'RE IN A fog when it comes to your finances?

Awhile back when we were visiting San Francisco, we woke up to one of the murkiest fogs we had ever seen. We had been hoping to enjoy the view of the bay from our downtown hotel, but the mists were so thick, we were lucky to see down the street. By afternoon, however, something wonderful happened. The fog had lifted, and we could see the deep blue bay shining in the sunlight.

In the same way, many young men and women in their early twenties who are smart, capable, and well-educated may not have clarity about their financial vision until they reach their thirties or forties.

This book is designed to help lift that fog right now so you can see your way clearly—so you can buy your first house, start accumulating assets, and get past the mist that clouds your financial future. You don't have to wait thirty years?with the principles this book teaches, you can be on your way toward a net worth of $1 million by the time you are in your thirties.

My sons, Emron and Aaron, have applied these principles in their twenties and are already seeing success. As explained in the preface, they have learned these powerful strategies from myself and my wonderful wife of thirty-four years, Sharee. They now have clients nationwide whom they advise for asset optimization, equity management, and wealth empowerment. They are part of my instructional staff, which teaches advanced curriculum monthly at the Missed Fortune University^TM. They have written and designed sophisticated asset optimization software used by hundreds of financial advisors nationwide.

My sons are living, personal examples of the Missed Fortune^TM concepts. They have not been given anything except the proper education. Starting from scratch with relatively no financial assets and beginning incomes of $30,000 a year at the age of twenty-two, they have used the strategies that will be disclosed in this book to each accumulate assets totaling more than $1.5 million by the ages of twenty-six (Aaron) and twenty-eight (Emron). And their individual financial net worth (the worth of everything they own minus what they owe) just surpassed the $1 million mark.

In addition to their active income from monthly earnings, they each enjoy passive income in excess of $3,500 a month and portfolio income in excess of $1,000 per month from their personal investments. Their assets are increasing in value about $70,000 per year. By age thirty, their money at work should be earning more than they do at work.

As you are about to see, throughout this book I offer my "fatherly advice" to readers, just as I did to my sons. In addition Emron and Aaron will speak directly to you, often using insights from their own experiences to demonstrate how you can accomplish similar dynamic results with your own money. Together we'll take realworld examples drawn from Emron, Aaron, and their friends* to illustrate how you, too, can stop feeling confused, isolated, or powerless about wealth.

* We have changed their names to protect their privacy and in some cases created composite examples based on several people.

What Obstacles Are Facing You as You Start Out?

One time Emron was talking to his friend Michael about money. He could tell Michael wasn't quite following along, even though they weren't discussing anything too deep?just the basics of personal finance like budgeting, savings, credit cards, debt, and home buying. But then Emron realized it wasn't entirely Michael's fault.

There was a good reason why Michael didn't have a grasp of the fundamentals. While many American high schools offer advanced calculus and honors classes in various subjects, very few give students a chance to learn simple financial literacy. In fact, only fourteen states require schools to offer a consumer education program that includes personal finance. Not surprisingly, the result is that, according to one report, "high school seniors' basic financial literacy is declining."?

? Studies by the National Endowment for Financial Education, http://www.extension.umn.edu/youth&money/.

Meanwhile, young people don't get enough practical training at home?the same report says 30 percent "rarely or never discuss saving and investing" with their parents. Even those who do may think that their parents, the Baby Boomers, are out of step with the financial realities of today compared with their own early adulthood. And as I wrote in my book The Last Chance Millionaire, Boomers themselves have made numerous blunders in managing their money. Is it any wonder that you lack self-confidence in dealing with money, or feel financially illiterate, despite your education?

We're not talking about a small group. There are approximately 100 million Americans between the ages of sixteen and thirty-five. You are entering or have just recently entered the workforce. You are learning how to earn an income, yet you may be among the many who do not know how to save or accumulate wealth. You lack both knowledge and confidence to move ahead. The average net worth of an individual under age thirty-five is approximately $15,000. If home equity is excluded from that, the average is less than $5,000.

Is it any wonder that seven out of ten young adults polled recently said they don't earn enough to lead the kind of life they want to lead? Or that almost seven in ten say that growing rich is their most important goal in life?*

* "A Portrait of "Generation Next," Pew Research Center, Jan. 9, 2007.

The world you're maturing in can be a scary place. "Even before the events of 9/11, terrorism had already become a national phenomenon in the 90s with the Oklahoma City, World Trade Center, and Atlanta Summer Olympics bombings. School shootings in suburban and rural America exacerbated the fears," summarizes one study of this group, which is often called "Generation Y" or "Generation Next." "Designer drugs, violence-packed video games, sexually charged advertising, TV, music, and movies bombarded their everyday lives and still do."?

? from http://www.rainmakerthinking.com/mix2007.doc.

Nevertheless, young adults today have enough of their own special skills to make Boomers envious. They are more mobile than most of their parents were, more willing to take risks, more interested in global social issues, and more comfortable with technology?as any parents whose children have fixed their computers and set up their entertainment centers can tell you.

Whether you are either deeply worried or not worried enough about your financial situation, you are likely aware there are plenty of tools available to deal with money; it's a question of choosing the best ones and learning how to use them.

Can You Identify with These Feelings?

Are you confused because, despite a college education, you believe you are financially illiterate?

Do you feel trapped because of the way your parents brought you up to think about money?

Are you hesitant to make long-term decisions about money or employers?

Are you fearful that there will always be too much month left at the end of your money?

That's why we've written this book. We want you to consider it as the starter's guide to understanding basic concepts and strategies in order to attain financial security early in life.

Are You Feeling Confused about Your Finances?

Even if you have had a good high school and/or college education, you may be confused when faced with everyday money matters. Many young people feel they are trapped in circumstances caused by their family, upbringing, or environment.

Emron's friend Adam felt he would always be held down by his family's blue-collar mentality. He graduated from college and got a job teaching English at a high school in Denver, but he believed he would never be able to climb the salary ladder or reach a better standard of living than his parents. After Adam got married and his wife was expecting a baby, he was still afraid to listen to Emron's advice. "We need more money to do what you're telling us to do," said Adam.

Another friend, Joshua, was also confused about finances, even though his background was the opposite of Adam's. Joshua came from a wealthy family and was studying to be a lawyer, like his father. But he had no sense of how to establish his own credit or how to live within his means. While he was attending law school, Josh's parents paid the rent on a small apartment and handed Josh a handsome monthly allowance. "It's just until I get a job and start earning big bucks," he said. Joshua would use money from his allowance to pay credit card debt on his latest toys, such as a giant plasma-screen TV.

Often parents are understandably so eager to help their children that they may inadvertently hurt them. While parents' generosity is well-intentioned, it's what I call "giving your kids a fish instead of teaching them how to fish." College is an ideal time to begin learning how to earn and put money to work, rather than just studying and playing.

Do You Feel Powerless about Your Finances?

We know that debt hangs over the heads of many young adults just like that San Francisco fog. Studies indicate that nearly twothirds graduate from college with thousands of dollars owed in student loans. One of our key convictions is that debt is not always bad—in fact, certain kinds of debt can be your friend, not your foe. It's what kind of debt you have, and how you handle it.

As they start their working lives, too many young adults think they must pay off their student loans before they do anything else. Some are so concerned about those loans that they make the wrong choices. In a recent USA Today survey, 22 percent said they accepted a "job they otherwise wouldn't have because they needed more money to pay off student-loan debt"; 29 percent put off or chose "not to pursue more education"; 26 percent have put off buying a home. And a smaller percentage even postponed marriage and having kids.*

* Mindy Fetterman and Barbara Hansen, "Young People Struggle to Deal with Kiss of Debt," USAtoday.com, Nov. 20, 2006.

That's like driving a car with the parking brake on. With a "pay off every loan as fast as you can" mentality, you wind up struggling to make ends meet—unless someone teaches you the secrets of debt management.

We are about to show you:

• How to create true net worth, using assets as well as liabilities
• How to look at debt in a new, enlightened way
• What kind of debt costs you dearly, versus debt that actually helps your money grow
• How you can get ahead, regardless of your loans

Perhaps like many young adults, the threat of being in debt hangs over your head like a sword. You may feel powerless to do anything about where you dwell besides rent, because you don't know how to buy a house. Maybe you wonder how you will ever save enough for a down payment. It's possible the idea of a mortgage seems more than you can handle. A big part of our task in this book is to clear up this haze of myths and misconceptions so you can see how sunny this early part of your adult life can be.

Do You Feel Isolated?

The transition from the "learning years" to the "earning years" may not always be easy. Once young adults enter the workforce, they may still feel broke all the time. They have many doubts about how to manage a paycheck. Perhaps you feel that your first job, which only pays you $30,000 to $40,000 a year, is too meager to let you accumulate much. (The median income for families headed by people aged twenty to twenty-nine was just under $28,000 in 2004, according to Federal Reserve statistics.)

Then you feel futile as you watch a big chunk of your paycheck going to pay rent on your first apartment. I'm sure you know peers who have become members of the "boomerang" generation by moving back home with their Baby Boomer parents.

Ryan, a friend of Aaron's, lived with his parents in Irvine, California, while he was getting his MBA in finance. Then he got married, and he and his bride moved into a small student housing apartment near campus. Once he had his advanced degree, he got a good entry-level job with a firm in Irvine. The young couple finally rented their own place, but it wasn't cheap. They paid $1,200 a month in rent. Dad was always accommodating—he gave Ryan a check every month to cover part of the rent.

Aaron wished his friends could feel more independent and "in motion" about their finances. So he explained that Ryan could just as easily find a house in a less expensive but nice area, and that he could put that same $1,200 into house payments?a move that would help his current financial picture and perhaps brighten the future, since just a small increase in home prices would boost his equity. Aaron pointed out that it really was possible, since he had already bought his own house and was even building a $250,000 cabin with Emron.

Ryan's dad, who like most Boomers had only heard of conventional financial planning strategies, was skeptical. He warned Aaron that he would end up being up to his eyeballs in debt and cautioned him against being irresponsible.

That was two years ago. Today, Ryan is still tossing his $1,200 down the "black hole" known as rent each month (which earns him nothing). He has bought a snazzy used Mustang for himself and is shelling out $300 a month on his car loan, which is not tax-deductible.

Contrast that to Aaron, who followed unconventional but proven strategies. With a home and a cabin that have both gone up in value, he has been able to add $200,000 to his net worth, thanks to appreciation in the two properties. And he benefits from one of the best tax deductions this country has to offer: home mortgage interest.

Ryan's dad is no longer worried about Aaron. In fact, he's said he's pretty amazed.

Are You Ready to Hear Some Powerful Advice?

In this book we will boil down complex financial issues by using a powerful method of teaching concepts grouped in threes. The lesson you can learn from Ryan's story? That there are three kinds of people in the world:

1. People who make things happen
2. People who watch things happen
3. People who wonder what happened

In this chapter, we have outlined why young people often feel:

1. Confused
2. Isolated
3. Powerless

At this point, you might ask yourself, "Am I too proud to ask for advice about money?" Or do you figure you'll watch your friends?the blind leading the blind?and just "try to keep up with the Joneses"?

That's like trying to drive with your car stuck in neutral. Your foot is on the gas, but you don't seem to be going anywhere. This book will help you get moving:

• We are about to teach you that even if you are just starting out in life, you can make your money earn as much as you do.
• We will guide you in managing your income, controlling your debts, and buying your first house.
• This book will teach you how to save and invest safely, without risking your own money, using what we call the three marvels of wealth accumulation.
• Once you understand these three concepts, you'll be able to shift into a higher gear, put your paycheck to work for you instead of your landlord, and buy your first house . . . and then your second.
• We'll also show you how to understand and avoid unnecessary taxes, and identify which employer-offered savings plans are best to participate in.
• We will show you how to put your finances on cruise control?how to find money and create more money by using the strategies explained in the Missed Fortune book series?so you don't miss out on your fortune early in life.

Are You Willing to Learn a New Approach to Wealth?

With the help of this book, you can gain the crucial knowledge you need to manage your money, build good credit, and get a proper mortgage. We can teach you how to put money into safe investments, save money in a tax-favored environment, and create a retirement plan that makes you rich—not Uncle Sam.

It will give a fresh, contrarian approach to managing debt and using safe, positive leverage to attain a million-dollar net worth within as short as ten years. If you start as early as age twenty-two, the interest earnings on your nest egg can be sufficient enough by age thirty to meet your basic living expenses, and by age thirty-two your investments can be generating more income than you do by working. This book will take conflicting information you are bombarded with and filter it so you can separate myth from reality.

Are You Able to Take the Challenge?

Ours is not the same-old, same-old tired financial advice. We won't discourage you by suggesting that you sock away five dollars a day for forty years. And we're not going to bury you in charts and tables and worksheets. We will try to keep this simple so you can get a solid grip on the principles without losing them in a forest of calculations. Please realize, however, that this book is not for "idiots," nor do we consider you "dummies." We recognize that you are adults and can jot down numbers when necessary.

We do ask that, for now, you accept our ground rules:

1. Keep an open mind about our strategies, even if some sound very different from the ones your parents or others have followed.
2. Listen to our arguments all the way through because they may come as a huge change from the oftenrepeated clichés financial advisors talk about on radio and TV.
3. Have faith that by the time you come to the last chapter, you will understand how you can look forward to a future of wealth.

In return, we promise to honor you and your peers as smart, vibrant, entrepreneurial young people who have three hundred horses under that hood and are on the brink of zooming down the highway of life. We don't want you to miss the exit ramp that leads to lifelong wealth, even if you don't have the job, home, or spouse of your dreams yet. This book will help you avoid continuing down the same old highway and direct you to the exit ramp that leads to lifelong wealth and financial independence. Even if you feel you've missed out or made mistakes, you can take the next exit, flip a U-turn, and go back to the junction where the highway leads to a thriving future of financial independence.

No matter what you have done until now, you can find the ramp marked "Financial Independence." It is great to be young and open to change. Now's the perfect time to readjust your attitude, leave your worries about debt back in the parking lot, and commit to turning in the right direction.

Our advice will help you whether you are currently attending college, just graduating from college, are a newlywed, or are still single. In fact, this could also be a great handbook for parents who want to teach their children responsibility and accountability for the proper management of money and other resources.

Start your engines, and get ready to be empowered with the knowledge to become a millionaire by your thirties.

• Most people in their thirties only have a net worth of $15,000; but you can attain a net worth of $1 million in as little as ten years or less.
• By your mid-thirties, you can have your money generating more income than you do by working.
• Don't let your lack of knowledge stand in the way of fresh financial advice?be open to new and contrarian ideas about money.
• This book will take conflicting information you are bombarded with and filter it so you can separate myth from reality.
• This book will give you new direction to clear up confusion about money. It will give you new hope and confidence so you will not feel isolated. And it will empower you with new capability so you will not feel powerless.
• Understand that not all debt is bad?preferred debt can make you wealthy.

Copyright © 2008 by Douglas Andrew, Aaron Andrew, and Emron Andrew