The Savage Truth on Money — excerpts from Terry Savage’s new book

• Reprints

The book is available at bookstores, on Amazon.com, or personally autographed at TerrySavage.com.

Article Extras

Updated: September 28, 2011 12:19AM

For 23 years, financial expert Terry Savage has shared her wisdom with Chicago Sun-Times readers each week, explaining the complexities of personal finance with straightforward solutions and advice. Through the boom years and even through the Great Recession, her Savage Truths about money have shown the way to growth and security and steered readers away from too-good-to-be true strategies for easy money.

Her latest book, The Savage Truth on Money, Second Edition (Wiley & Sons, $16.95), is a testament to her vision. The second edition comes a decade after the first. In those 10 years, Americans suffered through the dot-com bust, the bursting of the housing bubble and the worst economy since the Great Depression. Terry’s “truths” about financial discipline and planning have withstood the crises and are now delivered with the perspective of what has happened, the new realities of the economy and inspiration for moving forward.

The book includes chapters on setting goals, managing money, investing and protecting assets, paying for college, retirement, long-term care insurance, wills and estate planning, and even a chapter on women and money. For each chapter, Terry shares a to-do list or “getting started” box to help you take action one step at a time.

The Savage Truth on Money is a guide for those just starting out — or starting over. For those facing up to financial faults and failures and those coming to terms with diminished retirement funds, shattered home values, reduced income or escalating debt, The Savage Truth on Money is a guide to rebuilding. For those just graduating or looking for their first job, it is a guide to basic money management. And for everyone waking up to the need to fund their own retirement — whether imminent or decades away — or anyone who wants to take control of their finances, Terry’s book will lead you onto the right path.

Below are excerpts from her book that will give you several samples of what she offers.

Polly Smith

From the preface to The Savage Truth on Money

“The first edition of The Savage Truth on Money was written before the dot-com bubble burst and before the real estate bubble burst. I write now just before the dollar bubble and the federal deficit bubble are about to burst. America now has a national debt that is more than $14 trillion! It’s a number that is impossible for the human mind to conceive and will be almost impossible to repay.

“We’ve learned that America is only a cog in a fragile global financial system. There is no longer a way to avoid the impact of one country’s profligacy, whether it be Greece and Ireland, or the United States and China. There are few places to hide. So you must remain alert when thinking about what to do with your money.

“That doesn’t mean you have to be an economic expert or a daily market trader. Quite the contrary; The Savage Truth on Money is designed to help you create a financial plan for your future — using all the resources of the Internet, the financial planning industry and your own good judgment based on sound principles and basic Truths.

“Whether you’re just starting out and are disillusioned about your prospects or you’ve watched your fortune go down the drain and wonder how you’ll manage your life, this is your roadmap to the future. By now, we’ve all learned the Truth about believing that ‘this time it’s different.’ The financial lessons of the past decade prove a simple Savage Truth: Human nature never changes.

“To be financially successful requires that we withstand the emotions that destroy financial plans and goals. We must understand the lessons of the market and then create plans that control our natural tendencies to be motivated by fear and greed. Perspective is critical. We can always see our mistakes in hindsight.

“Now it’s time to look forward, recognize the new realities and apply the Savage Truths to prosper in the Savage Future.”

The Savage Truth on Money and Emotions: Fear & Greed

“Decisions about money unleash these two powerful emotions, which are frequently the cause of financial downfall. Noticing the symptoms and gaining the courage to surmount these emotions is the first task in managing money. Lack of emotional control will negate all the benefits of good advice and good planning.

“Greed is understandably dangerous because it is the emotion that makes us take risks we cannot afford. Greed convinces us that we “need” instead of simply want to make that purchase. Greed urges us to spend for today instead of investing for tomorrow. It can distort investment decisions and blind us to long-term consequences and risks.

“Fear can be equally dangerous. Fear keeps us from taking appropriate risks or making changes to improve our lives. It paralyzes us and blinds us to opportunity. It’s as difficult to conquer a fear of money as it is to rein in overwhelming greed.”

◆ Terry explains how to conquer the emotions that can be so disastrous, asking: “What good is a financial plan if you don’t have the self-discipline to stick with your decisions?” Then she goes on to explain how to find a financial planner, what you need to know about costs and fees, and how to listen to your own calm instincts.

The Savage Truth on Getting Control of Your Money

“Getting control over spending is the first step toward wealth and financial independence. For many people it is a larger hurdle than the second half of the formula: making money. Indeed, some people earn far more than others even dream of, but they still spend their lives in financial bondage. Creating financial independence starts with exerting control over your own cash flow.

“If you’re just starting out in your working life, the opportunity to set goals and make a plan is exciting. If you’re one of the millions of Americans who are buried in debt, it’s tough to contemplate your present situation, yet it must be done if you want to move forward. And if you’re starting over, it’s important to do things differently this time around.

“The first step is the hardest because it requires making the commitment to take charge of your financial life instead of being carried along by circumstances. It’s also the easiest because the first step is simply figuring out where you are right now.”

◆ In Chapter 2 on Money Management, Terry walks you through the steps to track and manage your money, from online bill payment to creating a budget, from Quicken to the free tracking system at Mint.com.

The Savage Truth on Investing in the Stock Market

“It’s easy to be overwhelmed by the world of the stock market. There are many ways to analyze the market and choose stocks. No one has the perfect answer to creating wealth in the stock market. But, in spite of all the ups and downs, the stock market has a terrific record for creating wealth if you give it a sensible chance.

“Instead of trying for perfection, accept the fact that you’ll make mistakes, and recognize that those mistakes are measured in dollars and cents, just as your success in the stock market will be measured in tangible terms. If you can overcome the emotional reaction to loss, you improve your chances of creating gains. Remember that the stock market is a reflection of America — its growth in the past and the opportunities for the future. No one has gone wrong — over the long run — in being bullish on America!”

◆ In Chapters 5 and 6, Terry takes you through the basics of understanding the market to more sophisticated investments ranging from mutual funds to ETFs, options to REITs, and currencies to precious metals.

The Savage Truth on
Student Loans

“A real education will always be well-rewarded in our Information Age. The wage differences between educated and lesser-educated Americans will grow even wider, as the world is willing to pay for knowledge and creativity. So yes, your education will repay you many times over — but only if you graduate into opportunity that is not overwhelmed with the demands of debt repayment.”

◆ In this chapter, Terry explains how to save for college, pay for college, understand student loans and their true costs, and how to deal with loan repayment after graduation.

The Savage Truth on Women and Money

“It’s a statistical fact: Not only do women live longer, but we need more money to provide for ourselves in those later years. For many years, I resisted the idea that women have special financial planning needs. Yet, the numbers force us all to recognize that women have not made significant gains in financial security over the past few decades. A 2010 report by the Society of Actuaries says four out of ten women over age 65 living alone depend on Social Security for virtually all of their income.”

◆ Whether it’s retirement income or issues of money in marriage, Terry offers sound financial advice aimed at women and their special financial planning needs.

The Savage Truth on Long-Term Care Insurance:

“Even Superman needed long-term care! The case of Christopher Reeve is a reminder that long-term care insurance is not just for older people. The time to start thinking about it is now. Will you care for your parents — and your in-laws—in their old age?

“Or let’s reverse the situation: Who will care for you in your later years. Think about it, because one way or another, we’re all going to be faced with this problem. If you’re all alone, the situation might be even more dire.”

◆ Terry explains long-term care insurance policies in this chapter, and how having even a small amount of coverage could qualify you for the best choices in care.

A final Savage Truth: The American Dream is not over

“Achieving financial security will require a fresh start and a new approach. If you’re willing to try, or try again, you can succeed. You need only to understand the basic Truths, which have not changed despite market volatility and economic uncertainty.

“America will survive and prosper — and so will you, if you plan, save, and invest. That’s the Savage Truth.”

Excerpted from The Savage Truth on Money, Second Edition by Terry Savage. Copyright 2011 by Terry Savage. Published by John Wiley & Sons. Used with permission.