Book Review of The Number - A Completely Different Way to Think About the Rest of Your Life
By Lee Eisenberg

Free Press, 268 pages, ISBN-13: 978-0-7432-7031-1

Putting Purpose Back Into The Financial Plan

For Investors, The 'Why' Should Be As Important As The 'How'

Millions of people in the Unites States, or globally for that matter, are going to fall well short of their retirement needs...and not just in terms of money. It's not a topic many of these people are interested in discussing, as it causes too much short term pain. However, the aversion to pain now sets up certain - and greater - pain later in life. Sadly, as Lee Eisenberg points out in his book The Number, it doesn't have to be that way. All that's needed is some attentive and honest thought about what one wants in life. In that light, this book is less about financial or investing 'how to', but more about life planning. The irony is, better life planning usually results in stronger financial positions once retirement begins.

What Do You Want From the Second Half of Life?

One of the most refreshing components of this book is rooted in the fact that Lee Eisenberg, although fully qualified to write on the subject, is not a financial planner or investment advisor. Free of all the technical jargon and formulaic approach one might find in the books stacked near this one in the library, the reader is talked to in plain English. It's easy to understand, and more importantly, gets straight to the point that most books and financial advisors can't. As most would guess, The Number is about realistically defining a specific dollar amount a retiree will need to save when he or she finally leaves the workforce. Yet, there are only about four pages that have anything to do with the calculation of that figure.

Why? While the book is about figuring out how much money you'll need, it's also much more than that. In fact, the specific dollar amount is secondary to the more burning issues every retiree will eventually face. Through dozens of case studies, and a lot of introspection, Eisenberg walks a reader through all the tough questions that should be asked before retiring...not after. Yes, at the end of the day, the amount of money you have determines what you can do in retirement, but at the end of the same day, no amount of money will actually make you happy. The Number could be considered groundwork for making sure both pieces of the puzzle are in place.

Which Type Of Person Are You

Eisenberg's work opens up pretty quickly, getting to the meat of the matter in first chapter when he describes four distinct personalities, one of which will apply to any reader who picks up the book. It's a clean grouping, and very thorough too. The title of the personality type is brief and to the point, while characteristics of each are given to help any reader identify which of the four he or she may be. Where The Number adds value, and where other books generally do not, is in the addition of a modus operandi and a planning profile.

Take the 'Plucker' for instance - the second of the four personality types. This group doesn't necessarily think through a retirement goal at all, but rather 'plucks' one randomly out of the air. Although other personality flaws of this group can vary from lazy to arrogant, the unwillingness to get specific with a plan is the common trait. The plucker's modus operandi is guessing. The planning profile is arbitrary, which runs a serious risk of being completely off target, since it's completely random. Eisenberg ultimately sums up this group as scatter-brained.

The three other groups have different but equally problematic flaws, and again, each is supplied with a summary description. The 'right-brained' class may be subject to over-fulfillment later in life, while 'left-brained' people risk losing sight of what's important in life - since they're so busy with processes and information. The 'brainless' type, despite Eisenberg's non-malicious description, does indeed appear to be at the most risk.

Although it may not immediately clear why The Number lays out this framework in the book, the four basic types of people are revisited with examples in later chapters. Each example adds another layer of depth to the personality type, and by the end of the book it should be easy for readers to determine which they are, and how they should handle their inner demons.

Debt Warp

Before diving into what the specific number is for each of us, Eisenberg boldly spells out some facts that may be the biggest reason most people will ultimately fail to reach their dollar goals - debt. He smartly adds, however, how we get there in the first place. It has very little to do with financial controls and budgeting. The culprit behind overspending is the attitude largely imposed upon us by our society.

He states peer pressure, on a societal scale, leads to what he labels 'Debt Warp' - a condition where values about avoiding debt are eroded by a barrage of consumption-encouragement. Most consumers may not even realize it since they're so desensitized to it...that's the problem. Magazines, television, retailers, restaurants, and others are inundating the public with easy ways to get fulfillment now, while the consequences are never even mentioned. Eventually, the consequence doesn't even register as part of the equation in the spender's head. Of course, there is no comparable message or encouragement to save or plan for the future.

The point is driven home by some of the stats found in the same chapter. For instance, the richest 1 percent of Americans carry 6 percent of the nation's debt. Simultaneously, the poorest 90 percent of Americans carry 70 of the total credit debt. That may sound relatively equitable, but you must also keep in mind that the richest 1 percent of Americans also control many times more than 6 percent of the total wealth. Excessive debt, mostly due to guilty pleasures, are keeping the number out of reach for most consumers. By the end of this chapter, Eisenberg will have your full attention.

Eye-Opening Stats

The Number makes proper use of statistics...for effect, rather than filler. When it enhances a point, the stats are added, but there's no gratuitous data to slow the reader down. And, the facts and figures are indeed powerful.

For instance, some may be surprised to know that 80 percent of all employees eligible to enroll in a work-sponsored retirement plan do indeed contribute...usually 5 to 6 percent of their pay. That degree of participation might even put into question Eisenberg's purpose for writing the book. However, the fact that most workers will still be unable to retire with enough assets despite a high degree of IRA participation is one of his key points. In other words, although many people are taking the right steps, there are still grave errors being committed, such as improper asset selection, extreme debt, and misplaced priorities.

Even harder-hitting is his comment that 1 out of 2 people question whether or not their retirement will be as comfortable as their working years, yet 4 out of 10 workers save absolutely nothing for retirement. Ironically, the same 1 out of 2 ratio is indeed how many retirees will have not saved enough. Along with this discussion he adds that the number of Americans saving for retirement has not increased in the last three years. Only 18 percent of workers have more than $100,000 in accessible retirement assets. The facts, by Eisenberg's design, could jolt a reader into recognizing his or her own denial.

Of course, debt statistics are also strategically placed throughout parts the book. The Federal Reserve's decision to lower interest rates in the early 2000's did make credit 'easy' to come by, exactly as intended. Eisenberg's research explains a grim result of cheap credit though. Between the year 2000 and now, automobile loans and credit card debt in the United States increased by 33 percent. Mortgage debt increased by 50 percent during this time.

While the statistics he provides are interesting, there are very few references to where the data specifically came from. It doesn't detract from the credibility of the book, as none of the facts should surprise even a semi-astute consumer who takes a step back to think about it. However, crediting the facts he used may have added a little more power to the punch. All the same, Eisenberg uses statistics meaningfully throughout the entire work.

Eisenberg's Uncertainty Principles

Like most great books, the author does take an opportunity to add something new that's uniquely his. In Eisenberg's case, he details the 'Eisenberg Uncertainty Principles'...which are actually the reasons most workers avoid planning for the future. These six principles are, in fact, the core components of his book. Or, as The Number states very directly, they are things we would change if we only knew how. One or more of all six themes are illustrated with examples and case studies as The Number progresses into later chapters. And as you might expect, by the final analysis, all readers will know exactly which principle(s) are holding them back from what should be a relatively happy time in their lives.

As an example, his first 'uncertainty principle' is the recognition that our society is focused almost entirely on instant gratification, with no social or cultural encouragement for anyone to make smart money decisions. If the idea sounds familiar, it should - it's part of the same idea presented in the 'Debt Warp' chapter. While some might view the dual presentation of the same idea as a redundancy, that's not quite the case. The first time uncontrolled debt is presented as a pitfall, it's as part of this framework of uncertainty principles. The Debt Warp chapter comes later in the book, where it is better detailed. Point being, the uncertainty principles aren't just a generic framework that never comes up again; Eisenberg truly does teach his six principles throughout the book as the key lessons.

Another one of his six uncertainty principles is the likely failure of current retirement income institutions. Why plan for anything, if the current plan includes an income source that may or may not look or pay the same in the future, if it even exists in the future? At best, it would still be a guessing game. Of course, Eisenberg addresses the premise over and over throughout the book, and in a rather direct manner. In essence, he encourages the reader not to count on those questionable sources of retirement funds, since they really might not be there when the time comes. Instead, he repeats that each person's financial destiny is in their own hands.

The other four principles are of the same scope, and have the same degree of impact on the way we each think about our own number. And to his credit, although he doesn't specifically label the examples so clearly in the latter part of the book, Eisenberg really does convincingly show his six uncertainty principles are at the heart of the failure-to-plan problem. The principles could be considered the unifying factor of the entire book.

Ten Simple Investing Rules

What money book would be complete without a list of ten things? For The Number, Eisenberg's 'Ten' are ten investing rules applicable to anyone looking to reach their target number in life. While the book is not intended to be an investing primer, the stock market is still one of the key necessities in being able to retire as well as one would like to.

Some of his ten modern commandments of investing are obvious, and far from novel. In fact, none of them are going to be a surprise, even to a non-investor. For instance, he suggests investors should mirror the patience of a nesting hen. Funny? A little, but more importantly, it's true. Another commandment is simply to avoid fees and commissions that are unnecessary as part of an effort to do something in the short run that is ultimately unhelpful in the long run.

Any investor knows, however, that following simple long-term rules is actually quite difficult to do when things don't work out as expected in the short-term. However, Eisenberg has a solution for that issue as well. Much like his six uncertainty principles that stifle life-planning, the four reasons he cites why investors can't stick to their own rules are also all inner demons.

As an example, his second stated cause for ignoring the ten investing commandments is just too many choices for consumers. When forced to pick between stocks or funds, between full-service or self-service, between aggressive or conservative styles, an investor can just get overwhelmed. The easiest choice of all of those may be to do nothing at all. Of course, doing so would violate several others of Eisenberg's principles - namely, the failure to plan at all. That, by the way, is yet another instance where one of his core six principles eventually comes back into focus, with each such reprisal of a principle drilling them further into the reader's head.

Downshifting

Although the concept of downshifting only has one chapter and some occasional allusions to it in the book, in reality, it may be Eisenberg's ultimate lesson. Downshifting, as described by the author, is the fundamental change or adjustment a person should make once they retire. It's a clever choice of words, but also an appropriate choice. While the general expectation for an under-funded retiree is a lower standard of living, The Number makes it clear that the so-called 'standard' is a construct created by others, and may have nothing to do with quality of life. Eisenberg further argues that in the second half of life, money isn't nearly as important as fulfillment...a duality that most workers and retirees struggle with constantly.

Yes, in most cases, a financial adjustment will need to be made to live on less. On the other hand, once out of the work force, the need for status will also diminish. Although not in this particular chapter, the book makes a powerful point about how we view time and what we see as priorities when people are closer to the end of their life than the beginning. Remember the 'if you only had a few months to live' exercise? Eisenberg poses the same question, but adds an unexpected twist to his version.

In any case, The Number provides a framework to help future retirees focus on the things they should be worried about later in life, as opposed to the things they were possibly worried about before they retired. To the author, the point of retiring is to be able to enjoy laughter, to enjoy friends, and to enjoy giving back. In other words, retirement may be the last chance some people have to enjoy life, and Eisenberg recognizes that money is not going to be enough in itself.

The Bottom Lines

The Number closes with ten clear final points, or more specifically, ten life tips. To call them a summary of the book would not be totally accurate, since some of the ideas are being presented for the first time. For instance, Eisenberg's Bottom Line #1 is to understand the difference between being focused and attentive on your number, and being obsessive-compulsive about your number. No amount of money in the world is worth that kind of sacrifice.

Bottom Line #5, on the other hand, isn't new at all. Here the author restates a point made a few times in earlier chapters. In simplest terms, knowledge may be power, but may not always mean more money. In the context laid out in the book's early discussion of personality types, these hyper-educated 'left-brainers' may actually know too much for their own good. How so? By acting on, and reacting to, every fragment of financial data available...to the point of shooting themselves in the foot. They are far from being the nesting hen Eisenberg recommends being in the fifth of his ten investing commandments.

Deliberately Different

If an investor is expecting to read The Number as a 'how to' resource, and magically calculate the precise dollar amount he or she will need to retire, they're in for a surprise, albeit a pleasant one. Lee Eisenberg's book is one of the few out there that deals with the more important 'why' issues. In many respects, it should be a first read for a new investor. However, most new investors are not yet thinking in the frame of mind Eisenberg is - although they should be. The Number is an easy-to-read work, delivered in a believable voice from an author who has no hidden agenda. Even moderately experienced investors, as well as anyone who has yet to really map out a total life and money plan, would enjoy this fresh look called The Number.