Medicated Money

Friday, June 02, 2006

Book This - The Number

What is your Number? Why should you care? If you have no idea what the answer is to either of these questions, you are in the majority of most Americans.

We just finished a book by Lee Eisenberg called ‘The Number: A Completely Different Way to Think About The Rest Of Your Life.’ In continuing with our reviews of financial books, we sat down and discuss the good, the bad, and the ugly of 'The Number!'

The premise of the book is to discuss reaching the ultimate goal, financial freedom, which is the driving force for many personal finance bloggers and their readers. In the end, it comes down to one simple question that everyone must answer: How much money does one need to secure a retirement that is appropriately called ‘the golden years?’

The author is intended to answer this and many other questions in his search for 'the Number!' The author has many good points discovered through conversations with the financial experts that give him a creditable soapbox to voice his points. However, Eisenberg seems fixated on discussing the financial issues of Baby Boomers and the imminent tribulations that they will face in their so-called retirement years. Eisenberg misses the boat for those readers that are not Baby Boomers trying to get back into the game, but rather those Generation X’ers & Y’ers trying to prevent those very catastrophes that are being shown on the nightly news.

Overall, I would give this book 3 out of 5 stars. The positives are that Eisenberg discusses with financial experts the most common financial traps that keep people from obtaining their Number. They also discuss many that are uncommon that will still sabotage one from reaching their Number. Yet, he spends too much time on how so many from the Baby Boomers generation are lost in the financial woods, even more time on how they got there, and then how they might be able to find the road out. The problem is that we have heard it all before and there is no magical wand that will fix the problem, especially this book.

I would not recommend the book to those looking for a discussion on reaching the number for financial freedom. I would say it is a good read for a lesson in financial history, especially for many Baby Boomers to compare their financial decisions to others from their generation.

Overall, they say that the Baby Boomer's drive the financial market, and this book gives the feel that Mr. Eisenberg is just trying to tap into that.


  • This books premise that there is one number is I think spot on - I have not read the book but the author has come to the same conclusion as myself independently.

    I see the number as the annual income in todays money needed to make end meet for a year ie the total amount you as satisfied to live on in retirement - that is assuming the house is paid for / that the kids, if any, have left the nest / that the car is only for fun travel / plus an extra holiday a year / food etc - on average - in a year -

    Now if you can decide on this figure to with in 10% - say for me it is £10000/year, then add 10% to it for good measure you have the key number - say £11000/year in retirement.

    The next bit is to decide at what age you will be happy to suddenly live on half that figure - for me it is 85 & decide your max life expectancy - for me it is 90.

    So if I decide to retire early at 55 I need to be able to live till 85 (30 years) on £11000 a year & a further 5 years to 90 on £5500 a year (at todays value of the UK pound).

    Thats a total of 330000 + 27500 = £357500 that I minimally need to retire at 55!! -

    That a shocking large amount for such a little annual income! I think I may be retiring at 60 after all! That will mean 5 years more income to save with & now I will only have to save for 275000 (11000 X 25 years) + 27500 = £302500

    Hope this gives you some idea of the numbers game.

    I use microsoft money to automatically download via the internet my statement from the one card bank account I use - I use this card to buy everything & to get a small amount of cash for small payments.

    I then quickly allocate each payment to 7 basic categories - food, car, house, energy, cash/small items etc - and at the end of the year I have a very accurate idea of my annual spending amount - I usually will have to add some additional amounts to this - eg if I did not buy a car this year & if the car lasts on average 9 years before I buy a new one - then the average cost of the current car / 9 has to be added to the annual spend figure.

    Of-course if there are two of you, you can share many costs & also potentially there may be two incomes - as you are young there are also many future costs before you retire - but then you can earn during this time. I guess the cost of living is high.

    On the positive side the more you gain the skill of keep your cost of living under control the less you need in retirement -

    As your annual real cost of living now is reduced so your projected cost of living in retirement can be reduced & also the more money you have left each year to save for this same retirement etc - I think the real trick of financial awareness / successful planning is in this last sentance - add to this is the fact that earlier you save the riskier can be the early investments (you have time to earn money make up any loses) & the higher the amount of compound interest (annual interest on interest already gained) that can be gained.

    There are two ways to save money, one is to spend less - the other is to earn more (but beware that expenditure tends to rise to meet income).

    I am not a financial advisor - just a regular person & this is not advice as such but just chat & comment so take it with a pinch of salt & a lot of caution & get advice from a professional advisor perhaps to check over your financial plans. ie don't blame me if thing don't work out financially!!!.

    Hope this helps - sorry my figures are all in UK pounds - but you can always convert them to dollars if you want - anyway they are only for example.

    By Anonymous ldavinci, at 5:52 PM, June 02, 2006  

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