Category Archives: retirement

The Greatest Risk of All

Risk is a funny thing.  We all seem to have a different idea of what things are risky.  When I took flying lessons, the Cessna 152 my instructor rented happened to be stressed for aerobatics.  I have never done anything quite as much fun as learning cloverleafs, barrel rolls, and loops.  Not once did I ever feel in danger.  Most people I talk to say they would have been petrified.

You know what scares me the most these days?  The idea that I might quit taking risks.  I have blown out a knee in a martial arts tournament at the age of 45, gone broke (twice), and gotten pounded in my first real estate deal.  I have accepted a job offer only to discover that the people who hired me were liars and thieves.  For heavens sake, Noel, would you just STOP IT?  Stay home for a while and make a cup of tea.  It’ll do you good.

No thanks.

My forays are nothing compared to many people.  Adventurers, great entrepreneurs, and free-spirited thinkers abound.  So do the timid–those whose idea of risk is renting a movie they may not like.  Staying huddled up in our jobs seems safe.  I have to admit that there have been times when I wanted to crawl under the bed, especially when that little voice said, “You idiot.  What on Earth made you think THAT was a good idea?”  It didn’t help that most of the people I knew agreed.

Ironically, being safe is the greatest risk of all.  Take some risks.  I don’t mean foolish risks–drunk driving is stupid no matter how you dress it up.  Car surfing, too.  (Watch Dr. G. Medical Examiner sometime on the Discovery Channel for a view into the aftermath of that kind of thing.)  Sinking all your money into an investment you do not understand also qualifies.

Flying upside down is dumb–unless you know what you are doing.  Then it is fun.  Know what else?  Flying upside down, stalling the plane out, and getting into a spin on purpose gets you ready for an emergency in which that happens for real.  Relying on a job as your sole means of income may seem safe, but that strategy may be the riskiest of all.  Get yourself in tight situations intentionally.  Make some mistakes “on purpose” and learn how to deal with them before you have to.  You’ll be glad you did.


Terry would probably agree to go ahead and cross over J


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Pension? What Pension?

I read something interesting yesterday in the Wall Street Journal.  Turns out that states are facing a $1 trillion gap between the money they have promised pensioners and the money they have set aside to pay them.  That does not count the massive investment losses they faced in the second half of 2008, from which they have not recovered.

Did I say “interesting?”  Let’s try “criminal.”  I, for one, have not believed states would be able to pay pensions for some time now.  Some third-grade math was all it took.  The zeros were a little hard to manage until I saw this neat little analogy on the national debt clock web site.  If you were to spend a dollar a second, it would take 12 days to spend a million dollars.  Now, how much time would it take to spend a trillion?  (I’ll wait for you while you calculate this.)

Back?  OK.  The first thing you found out was that your calculator does not work with that many digits.  If you are math-compulsive, you got out a piece of paper and started to work.  If not, you waited for my answer: 32,000.


In other words, don’t wait for that gap to be filled.  Ain’t gonna happen.  Here’s why.  If states start to go bankrupt, something that was unthinkable until now, the money obviously will not be there.  But the Feds!  They can save us!  After all, they can always honor their obligations–by printing more money.  There, my friends, is the real problem and a good reason to be worried about your retirement even if you are not a public employee.

Historically, printing more money has been the favored solution of governments when things go bad.  They say they won’t do that, but in the end they always do.  From Ancient Athens to Zimbabwe in 2008, the result is always the same–a swift and ugly currency crash wherein money becomes worthless overnight.  Zimbabwe’s inflation rate reached 98%…PER DAY.  That means it took slightly over 24 hours for prices to double.

There is only one solution at the national level, and that is for politicians to face up to the fact that they have promised way more than they can deliver and cut expenditures.  Whew, that was a good one.  I crack myself up every time I say it.

There are some things we can do, however.  It is sometimes said that the best attitude when going into battle is to pretend that you are already dead.  Do what I do and pretend that your retirement is already dead.  Figure out how to retire without it.  One person I heard of recently bought two haircut franchises even though she is years away from retirement.  Why?  Because people will probably buy haircuts even when they can’t afford luxuries.  And inflation?  Well, if we experience true hyperinflation, all bets are off, but she still stands a better chance than most because her prices will rise accordingly.  If none of this comes to pass, so much the better.  She will have her company retirement and her franchise income.

Learn to make money in a side business or invest in things that stand at least some chance of surviving the coming earthquake.  If you think the politicians will save you, I have a business deal I’d like to discuss with you…


Terry is constantly amazed at how little people learn from history.  He is also amazed at what he saw in New Orleans in 1976, but that’s another story.

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Start a Business NOW

There is one book you must read if you worry even a little about today’s economy.  The title is Empty Nest Egg: Why You Must Start Your Own Business NOW.  Yes, it’s my book, but if it weren’t, I would still recommend it.  Here’s why.

First, having a business to supplement your income is just plain common sense.  We all know that “things” happen.  Loss of a job, relocation of a spouse, and the child that arrived off-schedule make life interesting and scary.  Extra money never hurts.

Second, we may not have jobs if things don’t turn around soon.  You would think mine–being a university professor–would be about as stable as you can get.  Not so.  The State of Illinois is furloughing employees on some campuses to make up a budget shortfall.  I read recently that we rank second only to California in terms of how badly we have screwed up our budget.  Yours Truly is busy hoping for the best and planning for the worst.  You should too.

Third, there will come a point at which we are either no longer able or no longer willing to work.  My grandmother is 99 years old.  She is truly astonishing, getting around better than many 60-year-olds.  I kind of doubt she could get a job, though.  I remember her when she was my age, and it is a little unnerving to think how fast the intervening time has passed.  Retirement will hit us before we know it.

In my view, a time of reckoning is upon us all.  As a nation, we have chosen to pretend that we can spend without restraint, make the rest of the world behave, and protect everyone from everything.  The bill is coming due and our collectively disastrous decisions will come back to haunt us.  For those who continue to think a J-O-B is their only means of income, life may take a nasty turn.  For those who see the coming disruptions as an opportunity to prosper by starting a business, life may get much better.


Terry practices what he preaches.  After he found out about the furloughs, he checked to see if Chippendales was hiring.  No such luck, so he writes books and teaches people how to start businesses in addition to being a professor.

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Destination You

So if social networking leads people to you, what then?  In a sense, the destination is always you.  No matter whether you sell dog food or surgical instruments, you and your values are a part of the exchange.  The first step in creating a second income is to ask yourself what benefit you bring to others that they cannot easily get elsewhere.

A local business here where I live is a great example.  Some time ago, I talked about the lady who founded Specs Around Town.  Tired of being unable to find eyeglass frames she liked, she starting selling them by appointment, visiting customers in their homes.  Who’d have thought it?  After a while, she earned enough business to open a boutique, though she still makes “house calls.”

You just can’t find a better example of zeroing in on something unique and personal to build a business around.  Her frustration helped launch a thriving business.  That prompts the rest of us to ask ourselves, “What can I do to help other people?”  Wish there were more sugar-free recipes?  Start a web site/blog discussing that topic, then write a recipe book.  Think there are not enough clothes tailored for people with disabilities?  Make some and start going to people’s homes to sell them.

The world needs you–your solutions, your ideas, your contributions.  Figure out how to start pulling people in to your gravitational field and making their lives better.  You will add to your own wealth and make the world a better place just by being you.


Terry thinks you can do it.  Prove him right.

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Diversify Your Knowledge, Not Just Your Stocks

Unemployment is its highest in 25 years.  Some say the picture is much worse and is being masked by changes in the way unemployment is measured.  No matter where each of us is on the political spectrum, or whom we blame, we have to agree that times are tough and getting tougher.

Financial advisors almost universally recommend a “diversified” portfolio of paper investments: stocks, bonds, and mutual funds.  Before I go on, let me remind the reader that I am neither a certified financial advisor nor do I play one on TV.  I encourage people to learn more so they can make up their own minds.  This traditional advice may have had some merits at one time.  A few people probably made it just fine with such a plan.  Times are different now, and there are a number of reason to expand your thinking.

First, paper assets such as stocks can bonk.  “Bonk” is a technical term for what happened last fall.  Stocks fell as much as 40%  People who thought they were diversified got clobbered as their entire portfolios dwindled to a fraction of their former worth.

Second, the “value” of the stock market and other similar investments is partly an illusion.  When we put our money into such instruments, we are usually planning to use the money later.  If that money only buys a fraction of what it did before, the fact that the market is “up” is true, but useless.

Third, and this may be the clinker, the market depends on levels of buying and selling.  Since people who are retiring usually get their spending money out of the market by selling their stocks, the value of those stocks can be depressed when the number of sellers increases.  We are about to face a massive amount of selling for that very reason.  Baby Boomers will soon be retiring in droves.

This leaves us with a problem.  How can each of us build a more stable kind of wealth–the kind that at least buffers the vagaries of the stock market?



Learn all you can now about building supplementary income.  You will find that true diversification involves non-paper assets like real estate and precious metals.  You will learn why having a side business can help you build real, lasting value.  And, you will see that with some discipline and desire, you can survive the coming storm.

— Terry writes this blog because he loves you.  Well, maybe “love” is too strong a word, but he’s pretty sure he likes you.  At least he likes you well enough to encourage you to learn more about your finances.  Terry has not been on Oprah yet, but if he were, he would tell you to visit to learn out how to start your own business.

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The Coming Storm

What do you do when a storm is coming? If you are tired of hiding in the nearest ditch as the winds howl overhead, you might think about building a shelter while the sun is shining.

The sun is shining right now, believe it or not. For all the turmoil in financial, housing, auto, and insurance markets, business is pretty much moving along as always. By turning on the cash spigot, the Federal Reserve has pushed back the clouds–for a time.

The storm that is brewing has not been tamed, however. This morning, we hear that the deficit reached a record $1.6 trillion for the year ending Sept. 30. Over the next ten years, our national debt will increase by $9 trillion. All this assumes that the health care program now under consideration will not add to the deficit. Mmmmmmm…yeah.

When will all this come crashing down? And when it does, where does that leave you and me? No one can tell for sure whether our economic world will end in fire or ice. Death by fire, hyperinflation, seems the most likely to me. However, to to paraphrase Robert Frost, death by deflation will suffice.

Our economic world revolves around billions, perhaps trillions, of transactions that occur every minute around the globe. We have bread at the bakery only because our local baker can predict the near future. It makes no sense to buy dough to make bread if the price of bread can rise or fall radically in a matter of days. It is impossible to hire employees not knowing whether their wages will even buy a pair of socks next week.

The shelter we all need is between our ears. Those who learn to be entrepreneurs while there is time will survive, even prosper, as the economy melts or freezes. The rest will likely succumb to the elements. Whether we see an inflationary or a deflationary storm, a few basic things can determine which camp you fall into.

First, get interested in your finances. Many of us were raised soon enough after the 60’s to inherit a disdain for material things. We view with suspicion those who focus on wealth, thinking them shallow and self-centered. Horsefeathers. Money is one human value among many, but one without which the others soon dry and wither.

Second, pay off any unproductive debt. Unproductive debt is the kind that costs you money but does not make you any. For example, that car you bought during the Cash for Clunkers program is unproductive debt. And don’t try to tell me it will save you money over your old car. Run the numbers and see. Credit cards fall into this category as well, unless they were used to finance a business or other investment that makes more than you are paying in interest. By the way, read your statements closely. Banks are doubling and tripling interest rates, even on people with perfect credit. Productive debt can become unproductive debt overnight.

Third, expand your investment horizons. The lazy person’s retirement strategy–chuck money into a retirement account and forget about it–does not work any more. Learn which investments hold up better during hard economic times. Find out why holding only stocks, bonds, and mutual funds is extremely risky.

Fourth, make more money and keep more of what you make. I don’t look for the government to back off on spending. Instead, I expect them to raise taxes to unprecedented levels as they try in vain to save the economy. What are the easiest taxes to get? That’s right. Your salary and mine. Having an extra source of income from a business allows you to shield a larger portion of income from taxation.

When darkness covers the land, it is going to require every bit of wisdom and fortitude we can muster. No matter what happens, though, we human beings need each other. Smart people who learn now will be able to look around the rubble and see limitless opportunities. Others will wallow in self-pity wondering what happened. Which one do you want to be?

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The New Retirement Strategy

I for one am not enthused about the idea of retiring. I have seen what happens to these folks. Going from being productive and needed to sedentary and ignored is not good for the soul or the body.

Of course, I love what I do. Not everyone does. If I were still driving for UPS, I would probably crave the peace and quiet of retirement to the mayhem of high-pressure package delivery. In that dismal scenario, I would be facing at least two or three decades of life without a job. What would I do?

What would YOU do?

Let’s assume you are confident that you have a good retirement plan, and then please allow me to screw that all up for you. You have worked a long time to build up enough wealth to live reasonably well without working. Love your job or hate it, you look forward to not having to show up.

As you start to pull money out of your retirement fund, a funny thing happens. Everyone else does too. In fact, at age seventy-and-one-half, all of us are required to start withdrawing. The government wants all those taxes you wisely avoided in earlier years. Somewhere around the year 2017, the numbers get screwy. We baby boomers (I am in my Year of the Bicycle–same as the number of playing cards in a deck) will be retiring in droves.

What does this portend? Nothing good, as far as I can tell. Our current woes will look like a fender-bender compared to the spin, crash, and burn of the not-so-distant future. Hang on, though. There is a solution.

First, let’s figure out what the real problem is. We work now to have money now and also to have money later. Having money later assumes that there is a place we can put it. Were we to put cash in a safe for thirty years, we would withdraw it to find it has much less purchasing power than when we put it in. In fact, at only 2% inflation, it would lose half of its purchasing power during that time.

If we were to put it in stocks, bonds, and mutual funds, the usual instruments of employment-based plans, we might beat inflation by a little. Then again, maybe not. Last year saw millions of people clobbered by the drop in the stock market. If millions of people start selling stocks in a few years, the price of stocks will go down–a lot.

So, back to what you are going to do when you retire. How about running your own business? Having a business will do two things. First, it will keep you out of the bars and pool halls. Second, it may just be the answer to your financial security.

Be smart, though. If you wait until you retire to start thinking about your business, it will take way too long to realize a significant income. Start now. My online course on New Business Fundamentals ( takes you through all the steps you need to take to start a part-time or full-time business.

Remember, we all need something meaningful to do no matter how old we are. Having a business you love to do will not only bolster your standard of living in your retirement years–it may just make them golden instead of rusty.

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Health Care and Your Right to Life

Never underestimate the foolishness of anyone in a hurry. Get 535 people in a hurry at the same time, and it’s Katie Bar the Door. That is what is happening to our health care in this country.

We all want to know we can go to the doctor when we need to. We also want to be able to extend our lives by undergoing a surgical procedure or taking medicine. The problem is, we still want it to cost what it did when a doctor could carry all his/her tools in a black leather bag.

The miraculous advance of medicine allows us to improve and extend our lives in ways we could not have imagined a few years ago. Instead of medicine being something that is practiced between an individual and one doctor, it is now practiced between an individual and the thousands of people whose skills are brought to bear on complex diseases. Think about an MRI machine and the almost unimaginable amount of knowledge that had to be brought together in one place for it to work.

In other words, we should expect that health care will cost more than it once did, just as a car with air conditioning and leather seats costs more than the vinyl benched oven-on-wheels we used to drive. Unfortunately, instead of letting bright and industrious people work on solutions to the problem of high health care costs, we have a government hard at work to destroy it.

Government will meddle and tinker, tinker and meddle, until they give us the equivalent of Social Security and Medicare. Hopelessly over-promised, national health care will, sooner rather than later, go broke.

What then?

They will ration care. Of course, no one will call it rationing. Instead, they will find yet another way to put lipstick on a pig and parade it around like a supermodel. Yet even in the midst of this, there is hope. As the public system crumbles, the irrepressible creative instincts of young men and women will be brought to bear on the practice of medicine. Bright people who want to use their talents to help others will find ways to offer care to the sick when they need it, not months down Waiting List Road.

This is already happening in Canada. Technically, most private care in Canada is illegal. This means that citizens cannot go outside the system by using private doctors. Fortunately, this law is rarely enforced. As a result, a host of private practices have sprung up, giving those who can pay the option of bypassing the waiting lists and suboptimal medical choices represented by the public system.

If we in the U.S. move toward a universal health care system, do not expect our government to learn anything from Canada’s recent lessons. Expect instead that they will attempt to outlaw private practice. They will do so because as the public system breaks down, more doctors will move out of it in favor of serving the needs of the sick privately.

This is where the health care battle line should be drawn. The right to preserve and enhance our life and our health is as fundamental as the right to self-defense or free speech. Being forced to die or live as a cripple because one’s care is not “cost-effective” enough for public funding, and then being denied the right to seek a private physician’s services is an assault on any sane person’s notion of freedom.

Allowed to flourish, the creative power of the human mind will bring forth new cures, new medical services, and longer, more enjoyable lives for all. New insurance structures, medical care cooperatives, and charities will emerge, providing care for those who truly cannot afford care. Instead of fighting and scratching for a limited resource, we can all contribute to creating more.

It is beginning to look like some form of government-run health care is inevitable. It won’t be pretty, but it will be survivable unless they outlaw private care. If they do, consider it the equivalent of censorship or illegal search and seizure. It’s your right, don’t let them take it.

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Property: The Forgotten Freedom

I think of freedom in straightforward terms. Any individual should be free to do as he/she likes as long as it does not demonstrably impinge on the same rights in others. This idea is not new, of course, but it is largely misunderstood, especially with regard to property.

Were we all composed of pure spirit, with no need to feed, clothe, or shelter ourselves, property rights would be meaningless. Since we are mere flesh and blood, each individual needs to have control of certain things to survive. The reason is simple–most things we need are created, not found.

With the possible exception of air and sunshine, every material thing we need comes about because some individual, often in cooperation with others, has the ability, will, and desire to turn a beneficial idea into reality. Fortunately, the human race has also discovered that trading with others results in more material goods for oneself.

Who owns such wonderful things? In my view, the creator. From spear tip to computer chip, the rightful owner is the person who created it. If he/she contracted with others to create it, that contract defines who owns what fraction of its value.

Some people in society are more capable than others at producing certain things. No one wants to hear me sing opera or see me dance for Chippendale’s. Yet I do not begrudge the vocalists or 20-somethings with six-pack abs their due. Neither should they begrudge me my ability to write a book or teach a class.

Inevitably, some people on the whole are able to create more value than others. They own more things as a result of their benefiting others more. They are better off than others because they are better to others. It is their ability that enables others to benefit from the things they cannot create themselves. The more benefit they provide, the more they prosper.

This is disturbing to those who are less willing or less capable. In the name of “fairness,” they seek to take from the creators and give to those they deem more deserving. The most obvious example is the thief, motivated at a primal level to take by force what he/she either cannot or will not create.

Some people make a profession of taking from the creators and giving to others. They are called politicians. In addition to getting to pat themselves on the back for doing so much good for society, they get a generous cut themselves. Lacking the forthrightness of a thief, they mask their willingness to take from others by force in byzantine tax codes and arcane regulations.

What would our society look like if we were to refuse to allow either thieves or their governmental counterparts to take what each of us has created? Those disposed to believe in the fairy tale of a benevolent and fair government imagine hordes of the poor wandering the countryside, victims of arrogance and callousness of the elite. I see something quite different–the blossoming of a new human spirit.

When people are able to trade freely, they are able to tap their potential for creating value for others. Virtually all human beings have some capacity for doing so. In return, the less capable benefit from the more capable in two ways. First, goods and services are cheaper because capable people compete to provide them without fear of having a large portion confiscated by government. Second, the truly incapable, such as the severely handicapped, benefit from the benevolence of the wealthy. Humanity, for all its tendencies toward wanton cruelty and unjustified violence, has also shown a tremendous capacity for kindness and charity.

This Independence Day, we will all remember the precious rights our ancestors earned for us. Along with your ferocity in protecting your freedom of speech and religion, kindle a fierceness in protecting your property. You earned it, now fight to keep it.

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The Time Value of Money

We often hear the phrase “the time value of money,” but what does that actually mean? Fundamentally, it means that money now is “worth more” than money later. For example, if I were to put $100 in a savings account at 1% interest, I would have $101 (not including compounding) at the end of a year. How can that be? How does money get more valuable?

It doesn’t. The money itself, when there is no inflation or deflation, retains its original value. In order for there to be any return to money invested, it must be put to work. The only way money can be put to work is by using it to help transform one thing into another thing that is more valuable.

For example, if I take $100 to buy 100 plain wooden blocks and some paint, then invest my time painting the blocks for decorative purposes, I can sell them for, say, $120. The “extra” $20 is the result of my ingenuity and effort. I take cash, some raw materials, and my time and combine them to create value that did not exist before.

If I have an idea for creating such a product, but do not have enough cash on hand to purchase the plain blocks and paint, I cannot create value. A banker or someone else that lends money might recognize my idea as valuable and offer to lend me the money. Say I borrow $100 and agree to pay the lender $105 at the end of a year. I still make $15 on the enterprise. The bank also made money–$5.

This brings us back to our original example–the 1% return on a savings account. For nothing more than the trouble of depositing money in the bank, it pays me 1% It can do so only because it then takes my money and loans it out for 5% It can do that only because someone is willing and able to take that money and create more than 5% value with it.

Now, who makes the most money? We can figure this out by reasoning that a bank will never make money if it lends it out for less than it pays depositors. So the owner of the savings account necessarily makes less money than the bank. What about the business owner? If he/she makes less than the interest rate paid to the bank, that business is a losing proposition. In other words, the business has to make a 5% return just to break even.

This is of course a drastically simplified description of rates of return. The point is that the business owner has the greatest potential of making money. Note that I said potential. Business ownership entails risk, but it is essential for there to be a return on that $100 at all.

Whenever we invest our money, it provides us a return. Behind that return, there is a business, or multiple businesses, actually doing the work of creating value. If the investment is stable and strong, it can be a good strategy for providing for the future. It will never match the potential of a self-owned business, though, because too many other people take their cut first.

Wouldn’t you rather get the biggest cut on at least some of your income? I would, and I’ll bet you would too. Don’t wait, start learning now.

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