Introduction 1 About This Book 1 Foolish Assumptions 2 Icons Used in This Book 2 Where to Go from Here 3 Chapter 1: Developing a Wealth Mindset 5 Focusing on Abundance 5 Avoiding a scarcity mindset 6 Balancing spending and saving 7 Remembering that wealth is about more than numbers 10 Developing a Wealth Mindset Toward Debt 11 Avoiding bad debt 11 Assessing good debt: Can you get too much? 12 Kicking a credit card habit 13 Chapter 2: Practicing Mindful Spending 15 Keeping Lifestyle Inflation in Check 15 Thinking like a saver 16 Living within your means 17 Turning your back on consumer credit 18 Repaying your debt 19 Avoiding the "More Money, More Stuff" Trap 20 Housing expenses 21 Lowering your energy costs 22 Trimming your taxes 23 Keeping an eye on insurance premiums 23 Managing medical expenses 24 Spending less on cars and transportation 25 Considering kid-related expenses 26 Saving on food and dining 26 Reducing phone bills 26 Shopping for technology 27 Finding affordable recreation and entertainment 27 Reducing clothing expenses 27 Paying for hair care and other personal-care services 28 Reducing health club expenses 28 Table of Contents iii Buying gifts 29 Charitable contributions 29 Vacations 29 Paring down professional expenses 30 Costly addictions 30 Gambling 30 Budgeting: Yes, You Need a Financial Plan 31 Chapter 3: Exploring Winning Investment Strategies 33 Compound Interest: The Eighth Wonder of the World 33 Understanding the primary investments 34 Shunning gambling and "get rich quick" vehicles 36 Understanding investment returns 37 Leaving you with some final advice 38 Exploring Bonds and Other Lending Investments 39 Deciding between individual bonds and bond funds 39 Obtaining bond prices 40 Purchasing Treasuries 40 Shopping for other individual bonds 41 Considering other lending investments 42 Investing in Mutual Funds and Exchange-Traded Funds 43 Exploring various fund types 45 Deciphering your fund''s performance 52 Creating your fund portfolio with asset allocation 53 Chapter 4: Managing Risk Like a Pro 57 Understanding Investment Risks 57 Comparing the risks of stocks and bonds 58 Focusing on the risks you can control 59 Diversifying Your Investments 60 Sticking with your allocations: Don''t trade 61 Investing lump sums via dollar-cost averaging 61 Buying and Selling Stocks 63 Defining "The Market" 63 Buying stocks via mutual funds and exchange-traded funds 66 Using hedge funds and privately managed funds 68 Selecting individual stocks yourself 68 Spotting the right times to buy and sell 70 Avoiding problematic stock-buying practices 70 Proven investment strategies 72 Chapter 5: Investing in a Small Business 75 Owning a Small Business 75 The reasons to own 76 The reasons not to own 77 Starting Your Own Small Business 79 You as the sole owner 79 Sharing ownership 80 Deciding between sole and shared ownership 81 Going public: Cashing in 83 Determining your start-up cash needs 83 Buying an Existing Business 85 Understanding why to buy a business 85 Knowing when you shouldn''t buy 87 Chapter 6: Raking in Profits from Real Estate 89 Homeownership: Building Equity One Brick at a Time 90 Weighing the pros and cons of ownership 91 Knowing when to buy 92 Recouping transaction costs 93 Deciding how much to spend 95 Determining your down payment 95 Selecting your property type 97 Building Wealth through Real Estate Investing 99 Recognizing the drawbacks of real estate investing 102 Comparing real estate to other investments 104 Considering REITs (Real Estate Investment Trusts) 109 Distinguishing between public and private REITs 110 Taking a look at performance 111 Investing in REIT funds 111 Chapter 7: Cutting Your Taxes (Keeping More of What You Earn) 113 Reducing Taxes on Work Income 114 Contributing to retirement investment plans 114 Using health savings accounts 115 Shifting some income 116 Increasing Your Deductions 116 Choosing standard or itemized deductions 116 Purchasing real estate 117 Trading consumer debt for mortgage debt 117 Contributing to charities 118 Remembering auto registration fees and state insurance 119 Deducting self-employment expenses 119 Enlisting education tax breaks 120 Making Tax-Wise Personal Finance Decisions 121 Taming your taxes in non-retirement accounts 122 Avoiding taxing mistakes 125 Hiring a tax professional 130 Chapter 8: Planning Financial Independence 135 Grasping the Keys to Successful Retirement Planning 135 Saving drives wealth 136 Keeping your balance 136 Understanding that planning is a process 137 Figuring Out When You Can Stop Punching the Clock 138 Knowing How Much You Really Need for Retirement 139 Eyeing the components of your retirement plan 140 Crunching the numbers 142 Making the numbers work 144 Dealing with excess money 144 Chariots of Freedom: Your Retirement Accounts 145 Getting the Most from Your Retirement Accounts 148 Prioritizing retirement contributions 148 Setting up a retirement account 149 Allocating money with employer-selected options 149 Allocating money in plans you design 154 Chapter 9: Leaving a Legacy 159 Understanding Estate Planning 159 Studying some strategies before starting your estate plan 163 Why everyone needs a will 167 Avoiding probate through living trusts 168 Power of attorney: Appointing your financial sidekick 169 Answering Key Questions to Gather Critical Information 170 Decreasing Your Estate Taxes 172 Using trusts to reduce estate taxes 174 Giving charitable gifts 179 Chapter 10: Ten Keys to Successful Fund Investing 181 Minimizing Costs 181 Evaluating Historic Performance 182 Sticking with Experience 183 Considering Index Funds 183 Steering Clear of Leveraged and Inverse Exchange- Traded Funds 184 Reading Prospectuses and Annual Reports 185 Assessing Fund Manager and Fund Family Reputations 186 Rating Tax Friendliness 186 Determining Your Needs and Goals 187 Tuning Out the Noise 188 Index 189.