The Bank On Yourself Revolution. Pamela Yellen

was the biggest financial crisis in decades, yet how many people saw it coming? As Nobel Prize–winning physicist Neils Bohr reminded us, “Prediction is very difficult, especially if it’s about the future.”

      As I update this at the end of 2015, central banks around the world are still running their money printing presses 24/7, and government debt levels have hit unprecedented nosebleed territory. This is creating a level of debt that may mortgage our children’s and grandchildren’s future for decades. The Fed’s easy-money policies have forced money into riskier assets and created new bubbles.

      The stock market reached new highs, and over the past year it has experienced renewed volatility and gone nowhere. Investors have gone nowhere since 2000, when inflation and fees are taken into account. Home values are recovering (though still below their highs) and some real estate markets have become hot again, with investors and home buyers swarming all over anything that hits the market (déjà vu all over again?).

      Are things getting better? Or are we in the eye of the hurricane, the lull before the trailing edge of the storm whips through and lays us flat again?

      I don’t know—and neither does anyone else. And that’s the problem.

      Economic growth is sluggish, and many countries around the world remain vulnerable to economic collapse. The typical household nearing retirement has an average of only $111,000 in their combined retirement accounts, according to the latest Federal Reserve Survey of Consumer Finances. It’s estimated that will provide an income in retirement of only $500 per month, which won’t cover groceries, let alone health care, heating, transportation, and other necessities. And that $500 per month is likely to be a household’s only source of retirement income other than Social Security.

      Did They Fix What Was Broken in the Financial Markets?

      Are they still rigging the system?

      Banks were fined billions of dollars for rigging a key interest rate (Libor) in their favor, and regulators are now investigating them to determine if they’ve manipulated pricing in Treasuries around the dates of government auctions. It was also discovered that high-speed traders used a hidden facet of the Chicago Mercantile Exchange’s computer system to get an edge before other traders get the same information.¹

      In the last few years, no major market has been immune to being rigged—currencies, commodities, precious metals, foreign exchange rates, default swaps, stocks—you name it.

      They’ve passed a passel of new regulations in the past few years, but has anything really changed?

      Warren Buffett, who’s considered to be one of the most successful investors of all time, told CNBC, “We will have a bubble, and it will burst. It won’t be the same as the last one. That’s been the history. You don’t have one Internet bubble after another. You have [the] housing [bubble] after the Internet [bubble].”

      Eye of the storm or economic recovery? I don’t know (though I’d definitely land on the storm side of the debate because I just don’t see that they fixed what was broken). But in many ways, it just doesn’t matter.

      It doesn’t matter because the wealth-building strategy I’m writing about has survived and even thrived during every period of economic boom and bust for more than 160 years. Whether interest rates were high or low. During bull markets and crashes. Even during the Great Depression. Housing market that’s tanked or steaming hot. Dow Jones up or Dow Jones down.

      Whatever’s going on, there is a way to secure your family’s future, without being at the mercy of the economic climate that swirls around you, and without relying on banks and Wall Street.

      Warren Buffett, one of the most successful investors of all time, has on several occasions predicted another financial crisis that will shock the markets.

      What I Know About You

      Pardon me for being bold, but if you’ve picked up this book, I think I know a few things about you, things you and I have in common.

       • You’re not stupid. Your financial picture may not be as solid as you want it to be, but not because you didn’t pay attention. You listened to the experts and did what they told you to do. You probably consult a financial advisor, have a CPA do your taxes, and follow trends in the economy. Maybe you’ve educated yourself by reading books on personal finance or taking classes. You don’t just rely on hearsay, you want the facts. (Me, too.)

       • You’re not lazy. You work hard and earn every penny that comes your way. You’re not looking for a free ride and wouldn’t feel good if you got one. You’re proud that, by working hard and using your talents, you can earn a good living. You will do almost anything it takes to provide for your family and secure their future. (Yep, me, too.)

       • You’re not looking for a magic bullet. Okay, it would be nice if there were some genie in a bottle to grant you the financial well-being you want. (If you find one, feel free to give me a call.) But you’re not counting on it or even looking for it. (I’m not into fairytale finance either.)

      Did We Fix What Was Broken with Small Investors?

      Having missed out on much of the recent rally on Wall Street, individual investors are now starting to pour in again—in spite of the fact that, in the history of the S&P 500, there have only been four times that the market gained a larger percentage than the current one.³

      Small investors also have rediscovered margin debt (borrowing against their portfolios to buy more investments) at levels not seen since right before the last crash. Margin debt hit a peak right before the last two bear markets. “It’s a warning sign that the Federal Reserve’s easy-money policies are creating a bubble mentality among stock traders.”⁴

       • You are misguided. Say what? Yep, you’re misguided. You’ve been following that same conventional financial wisdom that isn’t working for anyone! You’re pouring as much as possible into your 401(k) or IRA—and seeing its value decline or remain stagnant. You may be trying to pay off your mortgage early—only to see that the worth of your house is less than what you still owe on it. You’re sinking money into a 529 college plan—only to worry that the market may tank again right when your child is ready to go to college.

       You’ve been misguided. (And so was I.) It sucks.

       • You are willing to see it differently. Okay, here’s where you either toss this book in the trash or you keep reading further. Are you willing to see it differently? Are you willing to absorb the stats, validate the research, do your homework, and see if maybe the conventional financial wisdom you’ve followed is flawed? Are you willing to entertain the possibility that there might be a solid, time-tested strategy that few financial gurus will acknowledge but that hundreds of thousands of people like you are using successfully? (I was willing, and so now I’m one of those hundreds of thousands!)

      I’ve Been There and Done That, Too

      I’m not stupid. I’m not lazy. I wasn’t looking for a magic bullet. But I was misguided. And I was willing to see it differently.

      My husband Larry and I had invested in all sorts of financial products and vehicles starting in 1987, but we had never come close to getting the returns we were told we should be able to get.

      At one point, we figured the problem must be us. You know how some people seem to be unlucky in love? Well, we seemed to be unlucky in investing. So we decided to hire an expert to manage our money for us. We ultimately hired three oh-so-pricey experts—and all three of them lost us money during what turned out to be the longest-running bull market in history!

      We picked ourselves up, dusted ourselves off, and continued searching. Since 1990, I’ve coached tens of thousands of financial advisors on how to build their businesses, so I had access to a multitude of financial vehicles. I ended up investigating