Matthew Paulson’s book, “The Ten-Year Turnaround: Transform Your personal Finances and Achieve Financial Freedom in the Next Ten Years“, discusses strategies to achieve a financial “turnaround” within a decade. The book promotes financial freedom (i.e. replacing one’s income from a job with income generated by investments), however readers will not find step-by-step instructions to achieve it within ten years. Instead, the author starts out by telling the story of his own financial turnaround, which involved starting several businesses. He then covers topics ranging from asking for a raise, to starting a business, to basic investing principles.
Paulson recommends to come up with a “Dream Spending Plan”, which consists of a list of your basic monthly expenses, as well as a few “extras” such as travel and eating out. The annual amount must then be multiplied by 20, which adds up to $2,500,000 in the example provided in the book. Reaching that sum would require investing $6,225 a month for 15 years at 10% interest (the book doesn’t mention that you would have to save almost $13,000 a month to reach that same amount in only ten years). Putting aside the fact that earning 10% per year might be too optimistic, most Americans would not be able to afford this level of saving. The author is quick to acknowledge this, adding that developing useful skills, starting a part-time business, and becoming an expert salary negotiator will allow one to achieve this level of saving. It is clear from reading the book that the author made the bulk of his money through his businesses. In fact, he states that “entrepreneurship is the best path to becoming a multimillionaire.” Unfortunately, the chapter that deals with starting a business is probably the weakest in the book. It is too short and mainly offers generalities such as “choose a business that matches your interests” and “use your unfair advantages”. Readers are then directed to buy one of Paulson’s other books to learn more.
This book would be a great start for anyone wanting to learn more about personal finance (i.e. paying off debt, creating a monthly spending plan, and basic investing concepts). The investing part talks about the dangers of letting emotions control one’s investment decisions, investing fees and expenses, as well as tax advantaged investment vehicles (such as 401(k)s and Roth IRAs). Paulson has done a great job simplifying the information for anyone new to the stock market. Readers interested in trying to beat the S&P 500 will be especially interested in the dividend growth discussion, which consists in investing in individual stocks that have a strong history of paying (and raising) dividends over long periods of time (these companies are part of the S&P 500 Dividend Aristocrats index).
Overall, this is a good book for beginners. One disappointment is the apparent disconnect between the promise made on the book cover (i.e. “achieve financial freedom in the next ten years”) and the lack of clear instructions on how readers are supposed to achieve it within such a short period of time, other than the recommendation to start a business (which is easier said than done). Also, the book’s assumption of achieving a 9% or 10% average market return is probably unrealistic in the current market. Finally, the book’s assumption (in chapter one) that one can withdraw 5% of one’s total portfolio per year in retirement is flat out dangerous. Even a 4% withdrawal rate runs up to a 30% risk of running out of money within 30 years, based on historical market returns.
How practical is the information in the book?
Inveduco rating: C+
Although the book contains a decent amount of practical information pertaining to financial basics (i.e. debt management, building your credit, investment fees, etc.), a lot of the advice in the book is pretty general, such as “take massive action”, “start a business”, etc. The section on starting a business is the most disappointing in the book. Even though it is clear from reading the introduction that the author made the bulk of his wealth through his businesses, the discussion on starting a business is one of the shortest sections in the book. By far, the most detailed section is the one that deals with personal finances (chapters 5 through 8). Ironically, Paulson writes: “If you just want to get your personal finances in slightly better shape, you should probably go read a book by Dave Ramsey or Clark Howard.”
How sound is the advice in the book?
Inveduco rating: B+
The chapters that deal with personal finance and investing contain good information. As mentioned above, the expected rate of return (9% to 10%) is too aggressive and could lead readers to not save enough to reach their financial goals. (Inveduco recommends to assume a 7% return rate for most investors.)
Does the book live up to its claims?
Inveduco rating: C-
The book’s cover claims to teach readers how to “achieve financial freedom in the next ten years”. The investment principles covered in the book –although accurate- will not allow the average individual to achieve financial independence within such a short period of time. Also, the section on how to start a business is too general to be useful for most would-be entrepreneurs.
Inveduco rating: C
If you are new to investing or if you know the basics but are not investing seriously yet, reading this book would be a good place to start. Remember to use conservative market return in your retirement calculations. The investing steps, however, will not allow you to retire in ten years if you earn an average salary. If your goal is to achieve financial independence by starting a business, you will likely be disappointed with this book, as the information for entrepreneurs is basic and not very practical.