Financial Security For Dummies

Eric Tyson is the only author to have four of his books on Business Week’s business book bestseller list simultaneously. He has written six national bestsellers in the personal finance field and has appeared on NBC’s Today Show, ABC, CNBC, PBS’s Nightly Business Report, and CNN. His books include Personal Finance For Dummies, Investing For Dummies, and Home Buying Kit For Dummies.

Introduction 1

About This Book 1

Foolish Assumptions 2

Icons Used in This Book 2

Beyond the Book 3

Where to Go from Here 3

Part 1: Understanding Financial Security 5     

Chapter 1: Navigating the (Bumpy) Road to Financial Independence 7

Reaching for Financial Security 8

Defining what you value 8

Assessing where you are 10

Grasping financial lingo and trends 11

Trying not to avoid money 11

Making use of insurance: A necessary evil 12

Coping with Crises 13

Everyone faces challenges, obstacles, and setbacks 13

Common crisis 14

Making Decisions Based on Changing Circumstances 15

Chapter 2: Understanding Capitalism and Economic Downturns 17

Understanding Our Economic System 18

Capitalism strengths and criticism 18

History of growth and downturns 22

Touring Past Crises: What Happened and Why 25

Why pilot training has relevance for your tour 25

The Panic of 1907 26

The Great Depression 27

World War II 29

Arab oil embargo and Watergate/Nixon’s resignation 29

9/11 terrorist attacks and recession 30

2008 financial crisis 31

2020 COVID-19 Pandemic 32

Mistakes Made and Lessons to Carry With You 35

Chapter 3: Coping with Personal Crises 39

When a Crisis Comes Calling 40

Losing your job or a significant source of income 40

Facing a medical crisis 43

Caring for elderly parents unexpectedly 44

Splitting from your spouse 46

Coping with the death of a spouse 47

Dealing with a natural disaster 48

Success Plans for Personal Crises and Life Changes 49

Keeping your big picture in mind 50

Considering a comprehensive checklist 50

Part 2: Crisis Mode: Accessing Safety Nets and Emergency Measures 53

Chapter 4: Your Safety Nets 55

Taking Stock of Your Resources 55

Surveying your accessible money and spending options 56

Finding assistance from family 57

Ensuring adequate insurance coverage 58

Surveying Societal Safety Nets 59

Health insurance subsidies 59

Unemployment insurance benefits 63

Federal refundable tax credits 64

Help with housing 65

For more information on safety net programs 66

Chapter 5: Digging Out and Forging Ahead 67

Turning Your Eye toward Recovery 67

Knowing how long it will take to regain stable financial footing 68

Coping with frustration and moving on 69

Thinking (and Researching) Before Making Financial Moves 70

Wise financial actions to take 70

Boneheaded financial actions to avoid 70

Leaning on an Expert for Help 71

Knowing how experts can help 72

Being careful in a time of need 72

Finding financial advisors and planners 72

Being aware of budget counselors 75

Investing in investment managers 76

Looking into real estate agents 77

Making note of tax preparers and advisors 79

Dealing with insurance agents 80

Tuning in to attorneys 80

Minding Your Media Intake 80

Example 1: The COVID-19 pandemic 81

Example 2: The 2008 Financial Crisis 83

Example 3: Corporations not paying income taxes 85

Lessons learned and keys to remember 86

Part 3: Being a Smart Consumer of Economic Information 87

Chapter 6: So Many Numbers! Making Sense of Economic Reports 89

Keeping Economic Reports in Perspective 90

Reports are a (small) snapshot in time 90

Beware annualized numbers 91

Take a long-term view of the numbers 92

Sleuthing Through Economic Reports 93

Employment/jobs reports 93

Gross Domestic Product 95

Consumer confidence 96

Corporate profits 97

Consumer prices (also known as inflation) 99

The reports you can mostly ignore 100

Interpreting Media Coverage of Economic Data 102

Understanding the short-term and provocative focus 102

Keeping an eye out for biases 102

Example 1: The COVID-19 pandemic 103

Example 2: The 2008 financial crisis 105

Chapter 7: Says Who? Weighing “Experts’” Advice 109

Understanding Why Particular Pundits Get Attention 110

Important things to know about the “news” media 110

Getting media attention is a competitive business 112

Controversial points of view often attract 112

Political partisans can be hazardous to your wealth 114

Uncovering Gurus’ Agendas 118

Figuring out what they’re really selling 118

Checking out their qualifications and track records 119

Deciding Whether Hiring an Advisor is the Right Choice 120

Chapter 8: Following Financial Markets 121

Understanding Stocks and Bonds 122

Making Informed Investing Decisions 123

Connecting corporate profits to stock prices 124

Looking at financial market efficiency 125

Focusing on interest rates, inflation, and the Federal Reserve 126

Challenging Financial Markets During Changing Times 129

What really moves financial markets (in the short term) 130

Why market timing is so hard to do 131

Part 4: Keeping Your Personal Finance House in Order 133

Chapter 9: Getting on the Right Road with Spending and Saving 135

Getting a Handle on Your Spending 136

Differentiating necessities from luxuries 136

Reducing your expenditures 137

Setting and following a budget 143

Some final spending reminders 144

Saving: Necessary Rocket Fuel 145

Understanding compounded returns 146

Considering your short- and long-term personal and financial goals 146

Noting the power of tax-deferred retirement accounts 149

Upping Your Income 151

Lowering Your Tax Bill 152

Knowing your income tax rate 152

Using your income tax rate 153

Taxing issues regarding children 156

Making quarterly tax filing requirements 157

Ouch! Dealing with Major Medical Bills 158

Reviewing your billing statements for accuracy 158

Negotiating with providers or an insurance company 158

Chapter 10: Investing Wisely and Securely 161

Checking Out All the Places You Can Invest Your Money 161

Noting how investment types differ from one another 162

Understanding the major investments 164

Building wealth with stocks 165

Locating money through real estate 171

Turning to small business options 174

Searching for safe money investments 175

Cultivating Good Investing Habits 176

Understanding fees 177

Managing monitoring and trading your investments 178

Keeping your emotions from following market trends 180

Dealing with investment setbacks 181

Developing a Personal Investing Plan 182

Taxing situations 183

Assessing your current portfolio 183

Allocating those assets 185

Selecting the Best Mutual Funds and Exchange-Traded Funds (ETFs) 188

Investing in stock and bond funds 189

Minding the ABCs of ETFs 191

Seizing Investment Opportunities During Tough Times 191

Cashing in on reduced stock and real estate prices 192

Mustering the courage to buy when more people are selling 193

Chapter 11: Getting and Maintaining Proper Insurance 195

Being Prepared: A Quick Lesson on Insurance 196

Don’t sweat the small losses 196

Define a small loss 197

Insurance not to buy 198

Insurance worth purchasing 199

Protecting Your Health 199

Reviewing your current health insurance 200

Saving tax dollars with health savings accounts 201

Maximizing your personal health 202

Securing Your Income-Earning Ability 204

Long-term disability insurance 204

Life insurance 207

Insurance on Your Assets 209

Insuring your home 210

Auto insurance 213

Excess liability insurance 217

Will, Trusts, and Estate Planning 217

Starting with a will 217

Preparing other useful legal documents 218

Considering your preparation options 219

Protecting Yourself from Identity Theft and Fraud 219

Part 5: Prepping for Future Armageddon 223

Chapter 12: What Pundits Scare People About 225

Fearmongers Have Been Scaring Folks for Generations 226

Case study: Peter Schiff has been scaring investors for generations 227

Understanding what pundits are trying to sell you 231

Seeing why fearmongers’ predictions are often wrong 232

Surveying the Leading Worries Being Pitched Today 233

Excessive government debts 233

High inflation and worthless currencies 237

Anarchy and the breakdown of society 238

Chapter 13: Preparing Yourself for Unexpected Future Crises 241

What Possible Future Crises Should You Be Prepared For? 242

Dangers of excessive dependence upon technology and internet 243

Hazards of faster and inaccurate “news” flow 243

Spreading socialism 245

Climate change (also known as global warming) 245

Power grid failures and resource shortages 247

Solvency of Social Security 248

Preparing Financially and Otherwise for New Future Crises 249

Part 6: The Part of Tens 251

Chapter 14: Tens Ways to Improve Your Personal Safety 253

Combine Your Instincts with Proven Strategies 253

What You Don’t Know Can Hurt You 254

Do Unto Others As You Would Have Others Do Unto You 254

Err on the Side of Caution 255

There’s (Some) Safety in Numbers, But There May be a Weak Link 255

If It Looks Too Good to Be True, It Probably is 255

Don’t Assume “Lightning Never Strikes Twice” 256

Don’t Judge a Book by Its Cover 257

Trust Your Instincts 257

Share Your Concerns with Someone You Trust 257

Chapter 15: Ten Ways to Address Over-Saving 259

Understanding the Over-Saver Mindset 259

Balancing Spending and Saving 261

Keeping Money Accumulation in Proper Perspective 261

Giving Yourself Permission to Spend More 262

Doing Some Retirement Analysis 262

Getting Smart about Investing Your Money 262

Going On a News Diet 262

Treating Yourself to Something Special 263

Buying More Gifts for the People You Love 263

Going Easy When It Comes to Everyday Expenses 263

Index 265