Book Review: Essential Money

28 Nov

Posted in books by Roger No Comments

There are a few books in my personal finance library that I rely on much more than the others. Sometimes, it’s because they provide information on a relatively obscure part of the personal finance universe, one for which I have few, if any other references. Other times, it’s because the book provides a unique and different perspective that I like to have at my disposal. In a few rate cases, though, I keep a book close at hand because it is just so full of good information about money and investing that I don’t want to risk misplacing it.

Essential Money by Peter Sander is one of those last types of books, the ones which I’ve come back to time and time again. I’ve found it to cover a wide range of material, and to do so quite competently. But will you feel the same way if you read it? Well, to find out, let’s look under the cover…

Summary

Essential Money has twenty-four chapters, covering almost every aspect of personal finance that you could want to learn about. Although there aren’t any explicit groupings of chapters, they are arranged roughly according to subject. The first four chapters cover the preliminaries of getting your financial situation under control, including taking a look at your personal finances, keeping track of your assets and liabilities, and learning a bit about personal finance math (this last chapter is especially full of good tables and equations to help calculate your personal financial situation).

The next few chapters cover some of the basics of budgeting and saving. There’s a chapter on budgeting, another on how to spend your money (including six things to avoid buying), and a look at choosing the right bank for your needs. There’s also a chapter on credit, pointing out how to get (and keep) a good credit score.

As you’d probably expect from a book attempting to cover the essentials of money, there’s quite a few chapters devoted to investing. Stocks, bonds, and mutual funds are covered in several chapters, after a brief introduction covering the various resources available for the would-be investor. This section finishes with chapters on real estate investments in general and owning your own home in particular.

The next few chapters are a bit of a hodgepodge; they cover a variety of important topics, but there are few connecting threads, mainly planning for the future and other longer-term goals. There’s a chapter on risk management and insurance (with a bit on annuities thrown in for good measure), a few chapters on taxes, and a chapter on college planning. There are a few chapters on planning for retirement and a chapter on creating an estate plan.

The book finishes on preparing for life transtions, from marriage and having children to (knock on wood) divorce and losing your job, as well as creating your financial plan. The final chapter covers the basics of building a long term financial plan, from setting you goals (which involve both a time frame and a measurable criteria to determine when it is met) to getting professional planning help if you need it.

Pros

-A Wide Range of Topics: Look back over the summary; there’s dozens of financial issues that are included in this book. There are few basic issues in the financial world that aren’t included somewhere in this book, and it makes a good introduction to most of them. (The subtitle of the book is ‘Everything You Need to Manage Your Personal Finances Wisely’, after all.)

-Lots of Tables and Equations: Alright, this might only be a plus for the math nerds like me, but there are lots of mathematical calculations included in the book, covering a variety of topics. I’ve even included cribbed a few of them for my blog when the need arose. Add in example financial worksheets in the appendix, and you’ll have most of the tools you need to track and control your financial planning.

-Informative, Not Compulsive: Many personal finance books are written by people who want you to follow their financial plan (and only their plan). This is not one of those books; after presenting you with the information and tools, Sander basically allows you to use them as you desire to reach your goal. If you are a good self-starter, this might be the personal finance book for you.

Cons

-Lack of Depth: Look over the summary once more (this is the last time, I promise). As you might surmise, with such a large number of topics, the amount of page space that can be devoted to each topic is fairly short. If you are looking for information beyond the basics for any of the topics mentioned, you will need to find another resource.

-Missing Information: This is something of a symptom of the previous problem; with so little space and so many topics to cover, somethings are going to be missing. However, the specific topics that aren’t covered sometimes make little sense (for example, the mutual fund chapter doesn’t cover index funds, but does include ETFs). Getting a complete picture of all the options you have will require additional research beyond this book.

-Overwhelming Data: You might think with subjects not being covered (or at least, not covered completely), that it would be hard to get overwhelmed. But with all the information available, as well as short length of space, Sander has a tendency to throw everything (and the kitchen sink) into some of his descriptions and lists of advice. If you’re starting from scratch with your financial education, you might find yourself trying to remember too much, too quickly while reading this book.

Overall

As I said at the beginning, I like this book and refer to it frequently. The best way to treat Essential Money is as a reference book, like a dictionary or encyclopedia (or a school text book), rather than something to read through cover to cover. If you are just getting started on managing your personal finances, it makes a decent book to read for background information, although other books might be more helpful in building your own financial plan.

Related Posts