Contest is Over, Winner is Being Selected,  Thanks to Everyone who Entered and Everyone Who Helped Promote the Contest!

Ah, there’s nothing quite as fun as reading, is there?  I know that I am a hardcore bibliophile, and enjoy reading at every opportunity that is presented to me.  I’m guessing more than a few of my readers are the same; particularly given the high percentage of you that are fellow bloggers anyway, it just seems fitting that you’d enjoy reading some more personal finance books.  So, I’m giving some away.

As I did before, I’ll be giving away ten books to one lucky reader, allowing him or her to catch up on their own personal finance reading.  I’m going to simplify the means of entry this time around: all you have to do is leave a comment to win; none of that tweeting about the contest or sharing it in your own blog stuff.  (While I hope you’re willing to pass along information about this giveaway, I can see where it could lead to conflicting feelings, wondering whether it’s better to share the info and get another entry or two or keep the information to yourself and decrease the number of competitors.)  As to what to include in your comment, I’d like you to answer this question:

What’s the Best Personal Finance Book You’ve Ever Read?

I’ve read quite a few, myself, but I’m always on the hunt for more.  As with most things in life, one of the easiest ways to learn more about what good personal books are out there is to ask my friends and acquaintances to share some of their suggestions.  If you’re willing to share one or more of your favorites, I’ll give you a chance to win some of the books that I’ve read recently, including:

• The Wealth Cure - A look at the true nature of money in our lives, provided by Hill Harper of CSI:Miami (but don’t let that dissuade you; it’s really quite good).
• Get a Financial Life - A well-written guide to personal finance, aimed at a group that is sometimes neglected due to limited available funds: those people in their twenties and thirties.
• Gimme My Money Back - CNN’s Ali Velshi shares the story of the 2008 downturn, and provides plenty of ways for the average person to get back on track, financially.
• Boiled Down Money Goo - In spite of the odd, and perhaps a bit peculiar, title, this book does a pretty decent job of boiling down all those facts about money that you need to know into a simple to understand message (or, ‘goo’) for easy absorption.
• Trading in the Footsteps of Sherlock Holmes - If you are planning on doing more stock trading than buy and hold investing, you could do worse than looking to the deliberate style of Sherlock Holmes for your inspiration.
• The New Coffeehouse Investor – A guide to building up your investments while ignoring the typical Wall Street noise; it’s definitely a nice read for the starter investor.
• Be a Real Estate Millionaire – I know you’re probably suspicious of a book advertised on late night cable television (I was, too), but it’s actually a surprisingly solid introduction to real estate purchasing (if a bit too optimistic for my tastes).
• Jim Cramer’s Real Money - If you’ve ever admired Jim Cramer’s stock picking methods, either as a fan of his show or from his hedge fund work, here’s your chance to learn more about what makes him tick.
• Jim Cramer’s Mad Money - Speaking of fans of Jim Cramer’s show, if you want a view behind the scenes (and to learn some of the lessons that running the show has taught Cramer), here’s another book you’ll love.
• Rich Dad’s Plan for Financial Success (a collection of Rich Dad, Poor Dad; Rich Dad’s Cashflow Quadrant; and Rich Dad’s Guide to Investing) – Here are Robert Kiyosaki’s first three Rich Dad books, all bundled up in one nice, neat little package and ready to read.

Let’s be completely honest: most personal finance advice is not directed toward younger people. There are plenty of reasons for this, some good and some not so good. (Most personal finance magazines don’t write articles directed at young people, so most young people don’t read those magazines because they have no relevant information, and in turn the magazines don’t write articles for the young people who aren’t reading. It’s something of a Catch-22.) The end result is a tendency for younger people to ignore personal finance until much later in their life.

Get a Financial Life is one of the books that bucks the trend. Directed at people in their twenties and thirties, it covers a variety of personal finance information from many aspects of life. Does it provide enough information to help readers, well, get a financial life? Let’s read on to find out!

Summary

After a short introduction, Get a Financial Life opens with a ‘Crib Notes’ chapter, covering everything from insurance needs to preparing taxes in short thirteen page burst. Chapter two is about getting your personal life in financial order. It touches on everything from putting a price tag on your dreams to filling out a form to monitor where your money goes, and ends (as all the chapters do) with a ‘Financial Cramming’ section that summarizes the major points in the chapter on a page or so.

The third chapter covers debt, and how to repay it. Starting with one of the trickiest types of debt, credit card debt, it covers student loans, car loans, and home equity loans, providing information about each type and suggestions on how to handle the debt. Chapter four is all about banking, starting with finding a good checking account and ending with a variety of ways to save, from a standard savings account to Certificates of Deposit (or CDs, if you prefer).

Chapter five gets into investing, focusing on mutual funds and breaking them up into three broad categories: money market funds, bond funds, and stock funds. It stresses the importance of finding a good fund company and keeping inflation in mind while investing. The sixth chapter continues the theme, looking into retirement accounts and the importance of retirement saving (as well as what can happen if you don’t save enough to meet your needs).

The seventh chapter looks into renting or buying a place to live. For renters, there is advice on getting the best deal on rent and helping to ensure that you don’t have to deal with crazy or oppressive conditions from your landlord. For would-be buyers, there is plenty of information about the financial aspect of home-buying and mortgage financing, as well as how to get the best prices. Chapter eight covers insurance, insurance, insurance. From basic advice on shopping for any type of insurance, the chapter then covers a whole range of insurance types, including health, auto, disability, and life.

The ninth and final chapter is all about taxes: how to pay them, and how to minimize how much you need to pay. There is advice on how to fill out the forms and determine your tax rate, as well as advice on how to maximize your deductions and find a decent tax preparer, if you decide to go that route. The book ends with a long list of books for further reading.

Pros

The book is well-written, humorous and very informative. The chapters are generally fairly thorough, most doing a good job of covering their financial topic. There’s also a good amount of humor and congeniality in the writing style, making for a pretty entertaining read.

Cons

There are parts of the book where more depth could be helpful; the investing chapter doesn’t give more than a vague sense of a decent asset allocation, for example. The sheer amount of data in some of the chapters can be a bit overwhelming, or at least make it harder to sort out the most important data.

Overall

Get a Financial Life is a solid introduction to personal finance in all its glory. If you (or someone you know) want to get a decent start organizing their finances, it makes a good introductory guide, if a bit much to take in for some of the chapters.

If there is one financial problem that seems to bother more people in the United States, it’s debt, and the task of getting rid of it. As a nation, we seem to have more trouble handling debt than any other financial task, like investing or drawing down money for retirement. With so many potential customers, there is a pretty sizable market for advice on how to pay down your debt.

Pay It Down! by Jean Chatzky, as you might guess from the title, is one source of such advice.  It’s strictly a book on paying down debt; nothing in here about investing, planning for retirement, or other methods of making your money grow, this book is all about cutting down your debt.  So, is it good advice, or does the book leave something to be desired?  As always, let’s read on to find out!

Summary

Pay It Down opens with a promise, the promise that $10 a day is enough to pay down your debts (regardless of size) and get your financial ship in order. The introduction proper to the book then looks closer at credit card debt, the major type of debt discussed in the book.

The first chapter (or first step, as noted in the book) is about assessing the problem, determining where you stand with your debts, allowing you to break them into secured (backed by a tangible asset that can be seized if you don’t pay up; think car loans or mortgages) and unsecured (nothing tangible backing them up that can be easily seized; your credit cards are the prime example). Once you have a handle on the size of your debt, the short second step covers how to break your challenge into manageable steps, dividing the debt into the amount you have to pay each day to eliminate it completely in three to five years.

Step three is about your credit score, that three digit number that determines how much banks and other lenders will charge you to use their money. There is, as you might imagine, quite a bit of advice on how to improve it, cutting the amount of interest you have to pay and (hopefully) making it easier for you to get out of debt. The fourth step in this process is about tracking your spending, both the fixed categories (rent/mortgage, phone bills, insurance, etc.) and the variable ones (groceries, gasoline, dry cleaning, etc.). For the latter, Chatzky recommends keeping a small notepad with you and writing down all your out of pocket expenses, transferring them to a legal pad at the end of the day.

Once you know where you are spending money, the next four chapters look at how you can cut that spending. The fifth step starts the process, looking at how you can refinance your loans (with a good enough credit score) to cut down your monthly costs or transfer your credit debt to lower interest cards. The sixth chapter continues the process, looking at ways to consolidate your loans, mainly through home equity loans, lines of credit, or cash out refinancing of your home (all of which are likely to be harder to get in our current financial environment).

Step seven is a rather massive one, looking at all the spending categories from step four and seeing where it is possible to cut back while not hurting your life. Each spending category is listed according to priority, from High to Low, so you can get some help in deciding whether gasoline (high priority) is more important than, say, housekeeping (low priority). The eighth step looks at situation where even all that isn’t enough, looking at some of the hard choices, like moving to a lower cost area or putting your children in a public school. There’s also advice on selling some of your things to raise some more money or earning more through a second job.

Once you’re earning more money, the next step in the process (and the book) is how to pay down your debts intelligently, starting with the highest interest rate debt. There’s also advice on how to handle situations where you don’t have enough money to pay all your creditors. Speaking of which, step ten looks at how to handle things going wrong, from handling a shopping problem to dealing with creditors and avoiding foreclosure.

Step eleven is about staying ahead of the game, looking at ways of building an emergency fund (by putting an ‘eleventh’ dollar every time you save into savings). There’s also discussions of insurance and Health Savings Accounts, allowing you to make it through difficult times in your life. The book concludes with the Debt Diet, a guide to how to spend your money and how to pay off your debts, covering ways to stick to the advice given throughout the book as well as how to find further help if needed.

Pros

The Debt Diet is simple, easy to follow, and has lots of helpful advice. There is quite a bit of hand-holding, if you are at a complete loss at where to start. Overall, the advice is useful and a good approach to paying down your debt, particularly your credit card debt.

Cons

There is some dated advice within the book (at least the 2004 edition I’ve been reading), mainly regarding using your home equity to refinance your debts; which is not so easy to do nowadays (to put it mildly). The book is also pretty well limited to only paying down debt; if you are looking for help beyond that, you’ll need to look elsewhere.

Overall

Pay It Down! is a very solid guide to handling debt and hopefully eliminating it.  It helps to break down a seemingly impossible task into quite a few easily manageable tasks.  As long as you only need help with debt pay-off (at least, until the debt is gone), this is a solid book for you.

If you do much personal finance reading, and as you might guess from the fact that I spend a sizable portion of my free time writing a personal finance blog, I do, you come across the same names of commonly cited personal finance advisers again and again.  Names like Orman, Kiyosaki, and Ramsey start to line your shelf, appearing again and again.

David Bach also starts to show up multiple times.  I’ve already reviewed two of his books, and now I’m going back to one of his earlier books, Smart Couples Finish Rich.  Is it a worthy read, even after going through his later follow ups?  We’ll have to read on to find out!

Summary

Smart Couples Finish Rich starts with an introduction that recalls how David and his (then) wife Michelle had trouble organizing their finances when they first got married.  He notes that even though they were both financial professionals and very smart, neither of them had any knowledge about how to combine their finances as a couple.  His book is an attempt to provide that knowledge to other couples.

The rest of the book is broken up into nine steps to help couples get their money under control.  The first step looks at breaking some of the myths that surround couples and money.  From ‘if we love each other, we won’t fight about money’ to ‘it takes money to make money’, there’s several fallacies that take hits throughout the chapter.  The chapter ends with a quiz, to help determine how knowledgeable you both are about your finances.

Step two involves looking at the values that are important to you, to find out what role money should play in your life.  Bach recommends constructing Value Circles (TM), where each partner notes five values that are important to them, to help guide the rest of their financial goals.  The third step looks at putting those values into practice, creating financial goals to help meet their needs.  There’s also discussion of how to get your financial information in order, so you could have a better way to keep your things organized.

Step four looks at one of Bach’s most famous concepts, the Latte Factor(TM), specifically looking at couples.  The Latte Factor, in case you haven’t heard it, is the ability of a ‘small’ daily purchase (say, that morning coffee) to turn into a substantial sum if saved and invested throughout your life.  To find your Latte Factor, Bach recommends keeping track of your finances for seven days to see where you tend to spend too much (and no cheating by changing your financial habits).

The next three steps look at creating three baskets of savings and investments to meet your goals: the retirement basket, the security basket, and the dream basket.  Step five is about building the retirement basket, mainly by paying yourself first using pre-tax retirement accounts.  Bach focuses first on 401(k) plans and similar employer provided plans, but also covers IRAs (including Roth IRAs) and the retirement plans available to self-employed people.  The chapter ends with a series of steps to make the most of your retirement account(s) once started.

Step six looks at the security basket.  It starts by sharing tips on how to build up an emergency fund, from how much to save to where to put it.  There’s also discussions on creating wills (or setting up a living trust), getting health coverage, and building up other insurance policies.  The seventh step covers the dream basket, encouraging each couple to make a list of their five biggest dreams as well as how much they would cost.  There’s also quite a bit of information about the types of investments available for different time frames.

Step eight looks at mistakes that couples make with their money.  From taking a full 30 years to pay off a 30 year mortgage (Bach recommends making extra payments to pay off the mortgage earlier) to buying stocks on margin to not consulting with a financial adviser, there’s a lot of advice provided here in a variety of areas.

The ninth and final step in the book looks at a plan to increase your income, by building up your worth in your employer’s (or clients’, for the self-employed) eyes and then asking for a raise after numerous weeks of preparation.  The book ends with a reminder that as important as money is in life, it’s nothing compared to the love we have for our partners.

Pros

Bach’s writing style is easy to follow, with a relaxed tone and no unnecessary financial terms (and the necessary ones are fully explained).  The book is filled with great ideas and other concepts, even moreso than his later books.  The emphasis on communicating with your partner makes the book much more valuable to anyone in a long-term relationship.

Cons

One of the biggest problems with Bach’s books is they tend to be repetitive; if you’ve read The Automatic Millionaire, many of the same concepts are covered (the Latte Factor, automating your investments, etc.), not providing you with much more information.  If you are not (yet) in a long-term, stable relationship, the emphasis on working with your partner is likely to be frustrating, at least.

Overall

Smart Couples Finish Rich is a very solid, well-organized book that should help couples get on a more solid financial footing and get on the same page, money-wise.  If you’ve read some of Bach’s other books, there’s much in here that is going to sound familiar.  That said, if you are part of a couple, this book will definitely have some unique points for you to consider.

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If there is one certainty in the financial world, it’s that things can get tricky quickly. There are thousands of stocks, thousands more mutual funds, and tens of thousands of sources of advice on which are the best for you. With all this information out there, how do you decide how best to manage your money?
The New Coffeehouse Investor tries to give an answer, providing a way to ‘build wealth, ignore Wall Street, and get on with your life’. It’s certainly a pretty bold claim. Does the book manage to meet that claim, or does it fall short? As always, let’s read on to find out.

Summary

The New Coffeehouse Investor starts out with an introduction including the story of Bob, an investor during the tech boom with a hefty amount of technology stocks, who watched his net worth plunge during the tech bubble bust. It then introduces some of the basic principles of building wealth (don’t put all your eggs in one basket, there is no such thing as a free lunch, and save for a rainy day).

The first chapter covers the three basics principles of smart investing, namely proper asset allocation, achieving the stock market average, and the importance of saving. There’s also some discussion of one of the book’s recurring points, ignoring Wall Street propaganda during your investing. Chapter two looks more at the concept of risk, a major consideration for any investor. There is discussion of the importance of looking at inflation risk (that in the future things will be more expensive) rather than stock market risk (that our investments will decline in value in the short term).

Chapter three looks at how to approximate the stock market average with your investments. The basic concept, using indexes to meet your needs, is a pretty sound one, illustrated with an interesting mental game called ‘Outfox the Box’. The fourth chapter goes into more depth on creating a common stock portfolio, mainly focusing on which types of index funds to include within your stock portfolio.

The fifth chapter, interestingly titled ‘My Favorite Piece of Pie’ looks at the power of compound interest, and its power to greatly boost your investments’ value (particularly if you reinvest dividends consistently). Chapter six talks about the importance of saving, so you have some money available to invest. There’s even a worksheet to help you figure out an appropriate amount that you should save in order to meet your retirement goals.

Chapter seven looks at fees associated with investing, noting how by keeping the fees on your investments to a minimum, it is possible to end up with hundreds of thousands of dollars more at retirement than you would have with even moderately higher fees. Chapter eight tries to reinforce some of the lessons of the prior chapters, in particular the importance of not falling for the desire to seek better returns by putting all your money in the latest hot stock funds.

The ninth chapter looks at how situations change over time, and the importance of monitoring your investments as time goes on and making the needed adjustments. There’s also discussion of monitoring your ‘burn rate’, the amount you spend to maintain your lifestyle (and a term taken from aircraft terminology, given that the author’s younger brother is a pilot).

Chapter ten looks at the rising trend of Wall Street creating more and more variations on index funds, from ETFs to specialized index funds that invest only in particular regions, business markets, or other factors. The main thrust of the chapter is the need to stick with your investment plan, and not getting drawn in by all these new types of investments. At least, not getting drawn in with too much of your portfolio; chapter eleven relaxes things a bit, providing advice on how to attempt to ‘beat the market’ with a small (5-15%, at most) portion of your portfolio.

Chapter twelve rounds out the book, reviewing the principles covered at the start of the book, and providing further encouragement to those who stick with the principles of the Coffee House Investor. The book ends with an appendix including several index funds that meet the qualifications listed in the book.

Pros

The New Coffeehouse Investor is a fairly simple, straightforward guide to investing and organizing your money to be able to do so. The book is interesting and quite an easy read, particularly when the author is discussing some of his mountain climbing experiences. The advice is definitely solid for the individual investor.

Cons

The idea of investing in index funds and not trying to beat the market is a fairly common one nowadays (at least, if you spend much time reading the typical personal finance blog); chances are, you’ve heard these suggestions before, even if you don’t follow them yourself. The book is also a bit on the simplistic side, although given its focus on keeping investing simple, this might be more of a pro than a con.

Overall

The New Coffeehouse Investor is a solid beginner’s investment book. It’s quite interesting and provides plenty of good investment advice. If you’re already investing passively in a mixture of index funds, chances are there isn’t much new here for you, but for it could be the perfect book for that cousin of yours who just won’t stop talking about his latest hot stock tip.

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Sometimes I feel I am far out of the loop when it comes to pop culture; even the most common references seem to just slide right on by me.  For example, if I say the name ‘Hill Harper‘, I imagine that most people would instantly think of the actor from CSI:Miami (amongst other places).  After all, it’s an incredibly popular show, and he has been an integral part of it.

But when I was asked to review his new book The Wealth Cure, I had no idea who he was (even now, I can’t recall seeing him in any of his roles).  Still, even without knowing who he was, the book itself looked quite interesting.  Would my lack of fandom increase my impartiality, or prevent me from fully understanding what Mr. Harper was talking about?  As always, the only way to know is to read on and find out.

Summary

The Wealth Cure opens with an introduction, discussing the importance of money in our modern lives, as well as the even greater importance of keeping money in its.  The rest of the book is broken into five sections, with names that bring to mind medical situations (fitting, given the author’s most famous role).  The first part, The Diagnosis, looks at some situations that can be indicative of money problems.  It starts with a story of Harper going out with one of his friends and seeing how easily it is to spend much more than you intend.  It also sets up some of the other major themes of the books, as well as introducing some of the author’s friends who appear throughout the book.

The second part of the book is entitled Treatment Options, and it starts to look at ways of changing your relationship with money to achieve true wealth.  It shares Harper’s reaction to a diagnosis of thyroid cancer, and how it caused him to re-examine his approach to life. There’s also the introduction of the concept of the Wealth Factor, the aspects of your life outside of money that will make you happy.

Part three is Compliance, which is all about sticking with the treatment plan you just developed.  It has advice on how to spend well, and how to keep your money in check.  There are sections on credit cards, credit scores, housing, and cars.  There’s even a section on planning out your monthly spending.

The fourth part is about maintaining your health and wealth; the former being vital to enjoying the latter to the fullest.  There are sections about the importance of being willing to sacrifice in the short term in order to achieve your goals (as well as the story of one of Harper’s associates who has done just that to open her own jewelry business).  There are sections noting the importance of being willing to take a leap to achieve your goals, as well as advice on reclaiming your childhood confidence and hopefulness.  It also notes the importance of keeping money in perspective in your life’s journey.

The fifth and final part of the book is about Masterminding, thriving and surviving in life.  There’s more information about the importance of investing in yourself.  There are also a few tips on protecting your assets, from having life insurance and a will to building up an emergency fund.  There’s also advice on giving of yourself, mainly with time and effort.  Lastly, there are comments on Mastermind Circles, groups formed with the goal of helping the members build up their finances and monetary standing.  The book end with a conclusion sharing Harper’s wealth factors, and an epilogue noting that his thyroid surgery was a success (always a good thing).

Pros

The book is very well paced and quite well written, emphasizing the true nature of wealth in our lives.  It shares some very thought-provoking moments (particularly in regards to the nature of African-American history and perspective in the world; there are some facts shared that I had never heard before, including about the history of Pullman porters).  The book is very encouraging, urging people to better their financial states.

Cons

There’s not much in the way of step by step instructions; even the areas the books does cover, from life insurance to wills, there isn’t much in the way of specific advice.  The personal stories in the book are also sometimes a bit hard to follow; it can be tough to keep all of Harper’s friends straight as he discusses how their lives progress.

Overall

The Wealth Cure is a very inspirational and interesting book, with quite a bit of solid encouragement.  The overall tone is that of a good and concerned person trying to talk some sense into a financially irresponsible friend.  While it is a bit light on step by step financial instructions, it is a very encouraging book.

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The financial downturn in 2008 and the continuing less than cheery financial situation has been horrible for most people.  High unemployment, fears about losing the job (or increasingly, jobs) you do have, and money troubles abound.  This dismal environment has been good for one group, though: personal finance writers sharing ways to rebuild your monetary standing.  There’s been a veritable boom of personal finance books focusing on how to recover from the downturn, from just about every personal finance writer out there.

Such is the case for Gimme My Money Back.  Ali Velshi of CNN fame shares some methods for recovering from the downturn, as well as general tips for money management.  Are the suggestion new,  relevant and helpful, or pretty much par for the course, personal finance-wise?  As always, let’s read on and find out!

Summary

Gimme My Money Back starts with a summary of how we got to this point financially, a guide to what happened during 2008 and the years leading up to it to leave us in this position.  It emphasizes how the failure of the credit market complicated the situation.  The second chapter goes into more depth on the function and importance of credit in the modern world, showing how it makes the financial world work and the importance  keeping credit flowing.

The third chapter covers the basics of putting your financial house in order, from paying down credit card debt to taking advantage of retirement accounts for your investments.  Chapter four provides some basics on the types of investments out there, from stocks and bonds to international investments and commodities.  This leads into chapter five, which provides some basic advice on investing success, from the relationship between risk and return to diversification and methods of optimizing your account (maximizing your your return for a given level of risk).

The sixth chapter covers one method of achieving diversification, by taking advantage of mutual funds and ETFs that hold many different investments within a given class.  There’s quite a bit of discussion on how to evaluate different funds, as well as what sort of funds are available within given asset classes.  There’s also sections on the advantages of index funds, and when you should consider selling your investments.

Chapter seven looks at building a portfolio of your own from various types of mutual funds.  It provides several model portfolios, and a short quiz to help figure out which is best in your circumstance.  It also has some advice on when is the most appropriate time to contact professional financial planning help.  Chapter eight looks at retirement, providing ten tips on having a well-financed retired life.  Chapter nine finishes off the book, providing encouragement to stay with your investments, regardless of how the 2008 downturn may have battered them.

Pros

As with many books that attempt to explain the basics of personal finance, this book is simple, short, and easy to follow.  It covers the basics of investing pretty well, and provides reasonable advice on how to set up an reasonable investment account.

Cons

The book tries to cover a very wide array of material in a very small space, and as a result, sometimes doesn’t cover its subjects very deeply.  (This issue is complicated by Velshi’s occasional off the cuff comments referencing, say, hedge fund activities without much context, making it sometimes hard to know what is important and what isn’t.)

Overall

Gimme My Money Back is a pretty standard entry-level personal finance book, albeit one with a larger emphasis on explaining the 2008 downturn than most.  It does provide a decent introduction to investing and other personal finance concepts, but as you might guess with a book that covers everything from the financial downturn to commodities investing, doesn’t provide much depth.  Still, not a bad place to start your investment reading.

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There’s an old expression you probably know well, ‘Don’t judge a book by its cover’.  It’s usually meant to be applied to humans, not books, and argues that just because someone looks a certain way, doesn’t mean they necessarily have particular traits.  While good advice for people, when it comes to actual books, there’s a lot you can learn from the cover, and even from just the title.  For example, even without reading it (or knowing for certain that it exists), I can tell you that ’365 Even Dirtier Jokes’ isn’t a good book to give to an elementary school kid.

Thus, when I picked up Getting Loaded, I thought I had a pretty good idea about what would be covered.  After all, with a subtitle like ‘Make a Million…While You’re Still Young Enough to Enjoy It’, how could it be anything but a get-rich-quick style book?  Imagine my surprise when it turned out that ‘young enough to enjoy it’ meant in your sixties.  So, the book threw me for a bit of a loop, but was it actually any good?  Let’s read on and find out!

Summary

Getting Loaded starts with a preface, where the author Peter Bielagus shares his inspiration that, by taking advantage of his youth, he could become rich by the time he was ready to retire with minimal effort.  There’s then a short introduction, covering some of the icons used throughout the book, as well as sharing the power of compound interest in boosting your wealth over time.

The rest of the book consists of fifty ‘secrets’, short pieces of advice on what you should be doing with your money, each with a guide on how to put the secret to work.  These secrets are grouped into six sections, each covering a different aspect of personal finance, and starting with a section on getting your personal finance situation under control.  There are secrets covering how to set goals for yourself, figure out your net worth, and how to organize your portfolio.  There’s also a few secrets on getting help, from a mentor and potentially a financial adviser.

The second section of the book looks at how to manage your spending and credit.  It starts by asking you to track your spending, and find areas where you don’t care about your spending to try to cut down.  It then gets into credit cards, providing some advice on how to find a better deal (and handle the debt you already have).  The section finishes with advice on being a more savvy shopper, including the idea of forming a consumer buying pool (grouping together with friends or neighbors to have more leverage on major purchases, such as cars) and the power of negotiating.

Next, the book starts to cover more particular areas where you can look for savings.  Starting with ways to save when it becomes tax time, the next several secrets cover all the places you can save.  From buying insurance to protect your assets, to cutting down on the costs of cars and college, to going green as a way of saving energy and money (which is a bit ahead of its time, considering that the book was published in 2003), there’s plenty of areas to find savings.  The section ends by providing some places to go with all your new found savings, recommending a money market account over a typical savings account (and telling you to avoid CDs as savings tools).

Section four is fairly short, basically providing a guide to places to stash away your money where it will be safe and has the opportunity to grow.  There’s a secret stressing the importance of saving for your own retirement, as well as the importance of paying yourself first.  There is also a discussion of employer sponsored retirement plans (your 401(k)s and 403(b)s) and individual retirement accounts.

Once you know how to invest, section five is all about what to invest in.  It starts with a few secrets on how to evaluate investments and match them with your goals, as well as how to avoid paying too much attention to all the talk about the broader economy that you will hear in your investment career.  There’s some discussion about how the stock market really works, along with suggestions that mutual funds, and index funds in particular, are probably your best bet for the bulk of your investments.  There are some discussions of bonds, and recommendations to stick with Treasuries for your (limited) bond investments.  Just in case you were still planning on individual stock investments, there are a few section covering the ways to evaluate those investments.  There’s also a secret stressing of the advantages of dollar cost averaging.

The remaining few sections of part five cover some of the more esoteric investments you might encounter and tells how to wrap everything together.  Bielagus recommends avoiding options, commodities, and short selling as investments, given the difficulty in doing well with them.  He also suggests forgetting everything else, be it gold, artwork, annuities or lottery tickets.  There is a section on when you should sell your investments, and then a section that wraps up everything covered on how to invest into a few neat packages.

The sixth part of the book covers some of the other financial issues in life, aimed mainly at the somewhat older readers.  There is a secret covering how to start your own business, one recommending getting your own house (followed by one covering the ins and outs of mortgages), and one covering the finer details of life insurance.  The final secret in the book talks about drafting a will and setting up a revocable trust to protect your loved ones and avoid probate.  The book ends with a final reminder to only worry about what you can control, and not to be overly concerned about what you can’t.

Pros

In contrast to my admittedly highly mistaken first impression, Getting Loaded is a surprisingly well-thought out and rational book.  The advice is pretty sound for the average twenty-something, and will get you to one million if followed, just as the subtitle promises.  It’s also a pretty humorous and well-written book, one of the (very) few personal finance guides I’ve read that made me chuckle as I was going through it.

Cons

As with just about any personal finance book, some of the advice might raise a few eyebrows (I’m particularly leery of the suggestions to avoid all bonds other than Treasuries), although the bulk of the advice is rock solid.  Also, much of the humor comes from pop culture references from the late nineties (as mentioned, it was published in 2003), so if you give this to a current college-age person, expect much of the humor to miss its mark.  Similarly, all the references to current IRA contribution limits and other issues are no longer valid, giving the book a somewhat dated feel at times.

Overall

Getting Loaded is a genuine surprise.  It’s quite thorough and very helpful personal finance guide that also manages to be really funny and entertaining.  If you’re in your mid to late twenties and want an all in one guide to getting your finances in order, this makes a pretty solid book to do the job.  If there were a more up to date version available, I’d probably suggest this book to all young people, as it does make a pretty solid introduction to just about all things personal finance related.

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As you might have guessed from my frequent book reviews and my tendency to refer to myself a ‘geek’, I like books.  I don’t, however, enjoy paying the prices that are frequently charged for books; at fifteen dollars for a paperback or a whopping thirty dollars (or sometimes even more) for a new hardback, I’d barely have the opportunity to read anything, let alone indulge my passion as often as I’d like.  Luckily, there are methods to cut down the costs of books, some of which I’ve shared already.

One of those methods was taking advantage of a fairly new website, PaperBackSwap.com .  I’ve been using it myself over the past several weeks, and thought that now was as good a time as any to share my experiences with the site.  Is it a worthwhile way to keep your book costs down, while still being able to read as much as you’d like, whenever you’d like?  Let’s find out!

How It Works

The basic idea behind PaperBackSwap is, well, the ability to trade paperbacks with others from around the country (sorry, no non-U.S. residents yet, even you book-loving Canadians).  You can create an account and post books you’ve read and are willing to send on their site.  If anyone wants the books, they can request them after they’ve been posted (or, if they are part of someone’s ‘Wish List’, they will be automatically requested upon posting).

At that point, you can print out two sheets of paper that provide the postal information for sending the book, as well as some information about yourself for the recipient.  You send the book via the US Postal Service (at their ‘Media Mail’ rates; typically between two and three dollars per book), and when it arrives, the recipient confirms the arrival, and you have a credit added to your account, enabling you to request books of your own.  (You get two credits for posting at least ten books you are willing to ship when you first sign up, so you can start requesting right away.)

Requesting a book works pretty simply as well: you search for a book you would like, enter the request, and when it is accepted by the next person on the list who is willing to part with the book, it gets sent out to you posthaste.  You can have the book in your hands as soon as the Postal Service delivers it; my experience, both sending and receiving books, is that the elapsed time from when the book is sent to when it arrives should be less than one week.

Pros

It’s Inexpensive: In case you missed it, it costs less than three dollars to send a book to another PaperBackSwap member, and it costs you nothing out of pocket to get a book from another person.  Compared to the cost of new books, or even most used books, it’s practically a steal.  (If you don’t have books that anyone else wants to swap, you can buy more credits, as well; the cost, at around $3 per credit, is still much less expensive than even most used books at bookstores.)

It’s Social: Much like discussing your book selections with fellow library goers or bookstore attendees, you are able to chat with your fellow PaperBackSwap members, whether to thank them for sending the book or to ask for further recommendations.  You’re also able to hit the forums or otherwise converse with other members, adding an air of social mingling to what might otherwise be a rather dry book-related website.

You Can Clear Off Your Bookshelf…: Perhaps the biggest advantage, at least for those of us with so many books we almost need to rent another apartment to store them, is that you can take advantage of this site to help clear out some space.  You’ll also be able to help out other bibliophiles AND benefit further by getting new (or new to you, at least) books in return.  (Which admittedly will leave you with even more books to find space for, but that’s another issue.)

Cons

…Assuming Anyone Wants Them: There is a catch to relying on PaperBackSwap to clear off your bookshelf, though: you can only send out books when they are requested by others.  If nobody wants your old books, you can end up posting them and having them sit there, waiting patiently for someone to stumble upon them.  (Which does happen; in the few short weeks I’ve been an active member, I’ve had two books I thought would never be requested end up being requested by other members.  Go figure.)

Popular Books are Near Impossible to Get: Flip side of the last point: if you’re trying to get your hands on a fairly new, fairly popular book, you can find yourself waiting at the end of a long, LONG line.   As PaperBackSwap gives each member 200 ‘wishes’ for their wish lists, it’s easy for dozens, hundreds, even thousands of people to request the newest books; add in how few people are willing to part with, say, a copy of The Hunger Games, and you’d probably get a hold of the book months or years faster by hitting your local bookstore or Amazon.com.  (Which, by the way, I would highly recommend; The Hunger Games is a fantastic book.)

There’s No Guarantee of the Quality of the Books Received: While PaperBackSwap has a policy that only books in good condition should be shipped, there is the possibility there are stray marks or other damage done to the book that you aren’t aware of.  One of the two books I’ve received so far had some drawing in it, which was a bit disconcerting.  While you can report damaged books upon arrival, just be aware that you are essentially buying them sight unseen, so if you absolutely have to have a spotless book, you should probably buy one from the bookstore.

Overall

PaperBackSwap.com is a very interesting site, and a pretty interesting concept.  I’m a fairly enthusiastic member, and I would, in general, recommend it to just about anyone.  Just keep in mind my caveats, and don’t expect to clear out your bookshelf of decade old tomes or get every book on the New York Times Best Seller List sent out to you tomorrow.

P.S.: If you do decide to join, please feel free to list me (amateurfinancier) as your referrer; not only can I pick up an extra credit if you do, but I’ll be able to get that much closer to passing Trent Hamm as the top referrer.

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There is a lot to say about money and how to manage it.  There’s a reason that there are dozens of money related magazines, hundreds of websites, and thousands of books all devoted to money management or some aspect thereof.  With all of that information out there, it would take years to get a handle on it (trust me; I’ve been reading and writing about money for over two and half years now, and I’m still learning more every day).  What we need is a book that gets down to the very basics in a simple and understandable manner.

Enter BOILED DOWN MONEY GOO.  This book, despite the odd title, attempts to get to the very basics of money and money management (that is, to ‘boil down’ money topics to the essential ‘goo’).  I was asked to read through and review it by the authors, and how could you resist reviewing a book with a title like that?  It attempts to provide the basics of money management in many different fields.  Does it serve as a great guide to money, or just a meaningless collection of goo?  Let’s find out!

Summary

Boiled Down Money Goo starts with a story of how co-author Daniel Minteer was deeply in debt when he first met and married his wife (and co-author) Deborah, and how they managed to pay off all their debt and build up their savings in the course of just seven years, quite an accomplishment for anyone.

The rest of the book is divided into 62 points that the authors want to convey (well, 61 points and a summary), grouped together according to theme.  The first group, appropriately enough, is about debt and how to avoid it, from the perils of plastic to the ways pay day loan companies, banks, and credit card companies will attempt to obtain more of your money.  The next section covers Getting Radical, taking a much different approach to your money than that of the average (and highly indebted) person.

The third section of the book covers budgeting, providing advice on how to prioritize your spending and saving as you try to get out of debt and build up your wealth.  It also stresses that you can’t let assumptions that ‘frugal’ is code for ‘miserly’ dissuade you from trying to save more.  There’s then a short section on how to keep your spending on food to a minimum.

The next section of the book looks at an always tricky point, dealing with money and relationships.  From ditching friends who lead you toward bad money decisions to NOT mixing money and family if you want a peaceful life, there are quite a few tips to keep your relationships (and wallet) healthy.  The following section is about children, stressing the importance of not bailing them out when they make mistakes with their money and suggesting they be paid by commission for chores, rather than a straight allowance each week.

The seventh section covers how to put a roof over your head, including plenty of considerations on how to keep your mortgage under control (and pay it off as soon as possible).  There is an unusual note on renting, pointing out that buying a home is not always the best option.  The next section covers vehicles, stressing the ways that you can keep your transport costs to a minimum.  There’s also a caution against getting an RV unless you will use it regularly and can pay cash for it.

The next section is all about buying and selling, well, just about everything that hasn’t been discussed already.  The buying part suggests buying used and inexpensively when possible (although noting that sometimes, it’s worthwhile to spend more up front to keep replacement costs down).  The selling section keeps up the pressure to sell unneeded or unused goods, as well as not paying to use a storage unit as an excuse to get even more stuff.

The tenth part of the book talks about vacations and how to save on them, from taking a ‘stay-cation’ as has been popular in recent years to avoiding timeshares at all costs.  The next section of the book looks at work, primarily suggesting the importance of treating your time as precious and not wasting it earning money you’ll just squander.  The twelfth section of the book is entitled Pride, and mainly covers ways that having excessive pride hurts your financial future, by keeping you from making the best financial decisions for you.

Next comes time, emphasizing how we trade time for money for much of our life, and how getting out of debt, saving, and investing can provide you with money that you can, in turn, trade for more time to do what you want later in life.  Speaking of Saving, that’s the next section of the book; it covers creation of a ‘job evacuation plan’ (that is, retirement plan), and stresses the power of compound interest to build up your wealth.  There’s also a note about keeping things in perspective when viewing others’ savings efforts; the secretary who has a $100,000 retirement account have probably had to save just as high a proportion of her money as the executive with the $10 million nest egg, and said executive should be respected for not spending all of his income, to boot.

The next chapter covers the act of giving, from giving presents to your family for Christmas or similar holidays to giving to charity to help others.  There’s a short section designed to give you one last kick in the pants, and then the book proper ends with a summary of all the points made throughout.

Pros

The book is nicely paced and very readable, with a healthy dose of humor and wit included (much of it at the expense of those who, like Daniel before he saw the light, would rather spend frivolously than save).  The tips are nice and solid, and each section is written in a nice, fluid pace.  The book is a pretty quick read, covering the needed material swiftly and without any excess material.

Cons

There’s not much here that you can’t get out of most introductory money management books (or websites, for that matter).  The book primarily focuses on debt reduction, with most other aspects of money management, from budgeting to investing, not getting much coverage.  The lack of details makes it hard to rely solely on this book as a monetary guide.

Overall

BOILED DOWN MONEY GOO is a pretty decent introductory money book.  If you are just getting started on your money management career, particularly if you are trying to get out of debt, it makes a great starting point.  If you’re ready to start applying your time and money to other goals, though, you’ll probably need to look elsewhere (or at least not consider this the be all and end all of money management books).

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The world changes, grows, and shifts.  I’m sure this isn’t a surprise to anyone reading this.  Unfortunately, books do not; once a book is published, the words contained within do not change, however much they might no longer apply to the world as it has become.  To counteract this trend, publishers tend to release new and expanded editions; I noted when I first reviewed the 4 Hour Workweek that just such an edition had been released shortly prior to me reviewing the original edition.

The 4-Hour Workweek, Expanded and Updated is that new edition, and boasts more than one hundred pages of new and up to date content.  Does the new content make the old book obsolete, or simply pad the length and give the publishers a reason to charge you twice for the same content?  As always, let’s read on to find out.

Summary

The 4 Hour Workweek – Expanded and Updated opens with a few notes from Tim Ferriss as to why he updated the book, including how he felt the lessons included were still relevant (and perhaps even more relevant) following the economic downturn in 2008.  Then, as in the first edition, there is an FAQ section directed at those who doubt the methods contained within, as well as Tim’s life story leading up to the publication of this book.

The first section of the book is entitled D is for Definition, and is about defining your ideal lifestyle.  Chapter one opens with comparisons between the New Rich (those who follow the lifestyle design that the book advocates) and the Deferrers (those who save and hope to have a traditional retirement in the future).  The chapter ends, as all the chapters in the new edition do, with notes from some readers who have put the principles in the first book into action.

Chapter two looks at some of the rules of the New Rich (the NR, as they are referred to in the book) and how to pursue that lifestyle, including a set of Questions and Actions at the back of the chapter (as with most chapters) to help change your mindset.  The third chapter asks you to define your worst case scenario if pursuing a NR lifestyle goes wrong, and how you lessen the blog.

The fourth chapter ends the section by providing methods for changing your mindset in regards to reaching such a seemingly impossible goal, including creating a ‘Dreamline’ to break the goal down into easier to obtain pieces.  It is also the first chapter to include a Comfort Challenge, ways of getting past your embarrassment and learning to embrace an unusual lifestyle.

The second section of the book is E is for Elimination, covers ways to cut down the time you need to spend making money so you have more time to enjoy your money.  The fifth chapter covers alternatives to traditional time management, introducing the 80/20 Rule (you will get 80% of your results out of 20% of your effort) and Parkinson’s Law (tasks will expand to fill the time allotted to complete them).

Chapter six is about maintaining a low information diet, cutting down the amount of unnecessary information you consume.  Chapter seven is about taking care of the major eliminations in your life.  These interruptions include Time Wasters, Time Consumers, and Empowerment Failures.

The third section of the book, A is for Automation, is about building a source of income that you can basically set and forget, one that requires only brief amounts of input from you to function.  Chapter eight is about finding a virtual assistant, someone who can help manage your business (and real life) while your spend your time having fun.

Chapters nine through eleven are about creating a source of income with the end goal of automating it, allowing you to draw an income with little actual work.  Chapter nine focuses on finding an idea for a product (referred to as a ‘Muse’) that can be automated once you’ve started to sell a decent amount (products with niche appeal, but a sizable market).  Chapter ten is about testing the Muse, ensuring that there is enough of a demand for the product before putting too much energy into it.  (The updated edition provides a LOT of online tools to make the testing easier.)  The eleventh chapter is then about how to go from the successful, but somewhat time intensive, business you created to one that requires little input from you but still makes high profits.  It focuses on ways you can outsource nearly every aspect of your new business.

The last section is L is for Liberation, and covers ways to take yourself out of the daily grind (and in many cases, the country).  It starts with chapter twelve, covering how to negotiate a remote work arrangement with your boss and be able to live anywhere while still getting a paycheck.  Chapter thirteen shows what to do if that’s not an option, providing advice on how to determine if your job isn’t worth saving and then killing it.

What to do with your new-found free time?  Chapter fourteen answers with one big suggestion, mini-retirements; these half vacation, half living abroad arrangements are discussed in great detail, with the book almost becoming a travel guide for this one chapter.  If that doesn’t give you enough fulfillment, the fifteenth chapter covers ways to fill the void, from doing charitable work to pursuing your dream vocation (not merely the job you had been doing to keep the money coming in).

The sixteenth chapter covers some common NR mistakes that are made in lifestyle design, from pursuing work for the sake of work to making non-time-sensitive issues urgent.  The Last Chapter (which is no longer the last part of the book) shares a poem about the importance of slowing down and enjoying life.

The book concludes with a section entitled Last but Not Least, which includes a number of items, many new to the revised edition.  There is a best of the blog section, covering some of Ferriss’s favorite posts from his blog.  Then there are case studies from numerous readers who applied the 4 Hour Workweek principles and are now enjoying life.  The book finishes with a list of the few books Tim really recommends reading, as well as bonus material that is available on the web.

Pros

Most of the pros from the original books remain intact; the book is definitely unique amongst personal finance books.  (Which is one reason I included it in my 6 Best Books I’ve Read So Far.)  It remains informative and filled with lots of resources (even more so than before, between the expanded Tools and Tricks sections at the end of most chapters to the comments from readers that were included).  The procedures in the book are outlined clearly and in an easy to follow manner, allowing most anyone to put them into practice, as illustrated again by the numerous comments from readers of the first book.

Cons

Alas, many of the cons from the first book remain, as well; Ferriss’s tone is a bit boastful at times, and many of the techniques are only useful if you’re a white collar worker.  The new material, while interesting, doesn’t really do much to change the nuts and bolts of the book itself.  If you’ve read the first edition, there probably isn’t enough (useful) new material in the book to justify buying the expanded and updated edition.

Overall

The 4-Hour Workweek, Expanded and Updated is definitely an interesting, inspiring, and in contrast to many such books (*cough*Rich Dad, Poor Dad*cough*), filled with many useful resources and step by step instructions.  If you have read the original version, though, the ‘expanded and updated’ material alone is probably not enough to warrant purchasing the book again.  That said, if you haven’t read the 4 Hour Workweek yet, this edition is probably where you should look.

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If you know anything about me, it’s probably that I am a big bibliophile.  I love books, and books about personal finance are some of my favorites (fitting, as you can imagine, given that I write plenty about personal finance for this very blog).  But trying to keep up with all the latest books can be quite expensive; how can you indulge your desire to read while not completely emptying out your bank account?

Luckily for those of us who enjoy books and reading, there are perhaps more ways to have your books and read them too than for any other type of merchandise.  There’s any number of ways you can get books to read inexpensively, or even for free, including one of the classics:

1. Borrow Books From the Library: Yes, the library.  Chances are there is one in your town (or at least, in a nearby town) that can gain membership in for free (or at most, a modest surcharge).  With that, you can borrow books for at least a limited time before having to return them.  Increasingly, you’ll also have access to CDs, DVDs, magazines and other media, potentially allowing you to save nearly all the money you had been spending on entertainment.  Just watch out for the late fees; keep the books or other media too long, and it could end up being more expensive after all.

2. Buy Surplus Books: Figuring out the appropriate number of a particular book that will sell is a tough job.  Accordingly, you can frequently find excess books for sale at your local bookstore (assuming, of course, you can FIND a local bookstore).  If you don’t mind waiting for the most popular books for a few weeks, it’s usually easy enough to buy them used for a fraction of the original cost.  Of course, even if there is a surplus of new books to buy, you still have options:

3. Buy Used Books: Books, unlike many things in life, don’t tend to wear out too quickly (assuming they are treated properly); it’s possible to find books that date back centuries that are still readable.  So, why not let others pay full price and then buy it off of them later?  Besides bookstores that specifically deal in used books (which, again, are becoming rarer and rarer), you can search any number of books online at sites like Amazon.  In many cases, the books themselves will be cheaper than the cost of shipping.

4. Trade Your Books: If you’d like to get new books, while cleaning off an already overstuffed bookcase, you can look into trading your books.  There are increasing numbers of sites that will allow you trade books (and other items) with other people; one I’ve personally joined recently is PaperBackSwap, where you can offer up your own books to others and get credits for collecting your own (new-to-you) books.  Not a bad way to shift the contents of the old bookshelf.

5. Get Your Books Online: There’s several ways you can save by reading books online.  If you buy books for a Kindle or similar device, you can usually save compared to the cost of an actual book.  Or, if your tastes tend more to the classics, you can download free public domain books via services like Project Gutenberg.  Between those public domain books and the ones available at your local library, you might never need to buy a book again, while still reading a fresh one every day of your life.

There you go, a few ways to keep the costs of your books to a minimum, while still being able to read as much as you could want.

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We all want to give our children the best financial start that we can, which was (as you might recall) the subject of yesterday’s post (amongst others).   A large part of that is giving those children the best education possible.  But given both the dearth of financial knowledge among most adults and the fact that most personal finance books are geared towards adults (and more than a few even go above said adults’ head), how can you help give children a head start to good personal finance?

Not Your Parents’ Money Book attempts to do just that.  Providing a light tone, plenty of illustrations, and information about various aspects of personal finance, the book attempts to teach the basics of personal finance while aiming at the preteen and young teen population.  Does it provide a good introduction to finance for the youth, or fail to deliver on its promise?  Let’s read on and find out!

Summary

Not Your Parents’ Money Book opens by explaining why Jean Chatzky decides to write a money book oriented toward children, particularly trying to answer their questions to her as she traveled and asked them what they wanted to know about money.  It also introduces some of the book’s features, including statements from select 12-14 year old children and the artwork found throughout the book.  (In case you’re wondering, the artwork is drawn in a sort of westernized anime-style; don’t act so surprised, I’m engaged to an artist, after all.)

The first chapter opens up the book by describing the economy at large, and particularly how the government influences the economy, from printing money to the basics of the Federal Reserve.  Chapter two looks closer at the basics of individual money management, noting some basic tips to do financially well in life, and sharing some of things the children interviewed knew (or frequently, didn’t know) about money.

Chapter three starts to cover the basics of earning money, from the importance of higher education in increasing your income prospects to the realities of taxes when you get into the work force.  There’s also a list of possible ways for the target population to earn money besides baby sitting (without too much elaboration on each method though).  The fourth chapter looks at some of the ways young people can spend money after they make it, and includes ways parents can monitor the allowance they give their children.  It also includes a table listing the average income for numerous professions.

Chapter five discusses how to spend less than you earn, providing ways to help control your wants and emphasizing the importance of saving.  Chapter six discusses the basics of banking, covering some of different types of banks and similar organizations.  It also provides some basic instructions on how to balance your checkbook (something more than a few people well past their teens should learn how to do).

The seventh chapter covers how to spend smartly, including how to comparison shop and other methods of saving while shopping.  There’s also an introduction to credit cards and debit cards, both things people are using when they are younger and younger.  There’s also a few warnings about gift cards, particularly the fact that they expire pretty quickly.

Chapter eight provides a crash course in investing, introducing stocks, bonds, and mutual funds, as well as providing some basic advice on how to invest given your time frame for needing the money.  Chapter nine finishes off the book by talking about the emotional aspect of money, particularly how it can drive people so crazy.  The book finishes with some advice on how to give back to charity.  There are a few appendices at the end, including the history of money, how money is made in the US today, and a glossary of terms used throughout the book.

Pros

The book and the information is interesting and pretty informative.  The illustrations and the humor in the writing help make the book much more entertaining and should help it to grab the attention of its target audience (as well as those of us who simply enjoy cartoons).  It covers most major aspects of money, and does it in an easy to understand manner; plus, it’s pretty entertaining.

Cons

The information is rather sparse in places throughout the book, from the list of possible ways to earn money (without any further details) to the chapter on investing, which didn’t provide much information on HOW to invest when you are old enough (or mentioning custodial accounts).  The book is also quite basic, not really providing much new information for anyone who isn’t a complete beginner in money management.

Overall

Not Your Parents’ Money Book is pretty solid introduction to money for the target audience members.  It is a very, very basic book, and if you (or the person you intend to give it to) has already started to learn about money, there might not be too much new information found in the pages of the book.  With that said, though, it is pretty entertaining, and can provide some decent resources to the money management beginner

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Sometimes, a book manages to catch attention outside of the small group of people who would seem to be its natural target.  The Harry Potter books, for example, were written as children’s stories (well, some of the latter ones started to cover much more adult material, but you know what I mean), but have ended up being incredibly popular with, well, just about everyone (myself included).  It’s impressive when books are able to leap out of their genres like that.

Freakonomics has managed to do something similar: getting the average reader interested in economics.  What would seem to be a fairly dull topic has managed to sell millions of copies of the book, warranted a sequel (just one so far), sparked a website, and gotten its writers repeated spots on NPR, among many, many other appearances.  So, what’s going in this book that has caught so much attention, and is it worth a read?  As always, let’s read on to find out!

Summary

The revised and expanded edition of Freakonomics opens with several introductory section.  First is an explanatory note, detailing how Stephen Dubner, journalist, and Steven Levitt, economist, first met and ultimately decided to work together on the book (and eventually, the aforementioned related projects).  Then, there is a preface, noting some of the changes from the original publication of Freakonomics.  Finally, there is the introduction, providing a brief guide to some of the issues discussed in the book, from the link between legalized abortion and a falling crime rate to the power (or rather, lack of power) of money to influence elections.

The first chapter opens by discussing the concept of incentives as they relate to economics.  There’s a discussion of the different types of incentives, namely economic, moral, and social, and how they can work together (or not) to deter crime and other undesirable behavior.  The rest of the chapter discusses some instances of how incentives affected people’s behavior, from the way that high stakes testing of students as a result of laws like No Child Left Behind has created higher incentives for teachers to cheat to sumo wrestlers allowing their fellow wrestlers to win when it can really help those fellow wrestlers to improve their rankings (in return for easy matches against those same fellows when next they meet).

Chapter two looks at the power of information asymmetry, when one person or group knows more than another person or group, and uses that information to their advantage.  The chapter starts by showing how losing that advantage can take away much of your power, by looking at how the Ku Klux Klan was (largely) taken down by a dedicated attempt to share their secrets.  The chapter covers several other examples of how information asymmetry plays a role in our lives, including how compensation for real estate agents ensures that they are more concerned with moving real estate quickly, rather than shooting for the highest possible price.

Chapter three talks about conventional wisdom, and asks why drug dealers still live with their moms.  The answer was surprisingly simple (only the top members of a drug organization make big money, the rest are paid very little, frequently less than minimum wage), and explodes the common myth of all drug dealers making large amounts of money.  The chapter continues, telling of the rise of crack cocaine and the resulting street crime that seemed ready to overtake the country, at least, until…

…the results of legalized abortion started to be felt.  If you’ve heard only one thing about the subjects in Freakonomics, it’s probably the claim that legalized abortion in the United States in 1973 is the biggest reason that crimes began a substantial decline in the early nineties (and still remain much lower today than in the past, particularly in the eighties).  The book covers several of the other explanations for the decrease in crime, noting that they are at best too insignificant to explain the total drop, and at worst, didn’t have any effect at all, and notes all the evidence indicating that more abortions led to less crime two decades or so later.  (The authors do express being ‘jarred’ by this revelation; they weren’t attempting to celebrate it.)

The fifth chapter covers some of the issues that face parents, and the fear that many parents feel as they try to raise their children ‘right’.  It explains how data on thousands of students was gathered in the Early Childhood Longitudinal Study, and how that data was subjected to regression analysis to tease out the useful correlations.  It was found that many of the things within a parent’s control (how much television was watched, whether the child is spanked) DON’T have a correlation with higher student test scores, while many factors that aren’t really in the parent’s (direct) control (age of the mother, whether the parents are educated, if they have a high socioeconomic status) tend  to show a correlation.  Not the best news for parents looking to give their children an edge in school.

The sixth and final chapter looks at what, exactly, is in a name, using data from California names registration to trace the success of people with a variety of names.  There was a decided tendency for names associated with the wealthy, successful, and otherwise well off to end up being given to larger and larger portions of the population, before becoming highly unpopular again.  Basically, names given by the upper class to their children would be associated with wealth and power, be given to the children of middle class families, then to children of lower class families, become associated with a lack of success, and then die out (before sometimes becoming popular again).

The rest of the Revised and Expanded edition provides some interesting additions as bonus material.  There’s the original New York Times Magazine article from Levitt about Dubner, which eventually led to their co-writing of this book.  There are seven Freakonomics articles covering issues from the decline of crack cocaine use to the lack of economic benefits to voting.  Lastly, there are over forty pages of excerpts from the Freakonomics blog, covering everything from a discussion of Freakonomics itself to some random reflections on a variety of subjects.

Pros

Freakonomics is definitely an interesting read, providing a very different way of considering the world from what many of us think.  The conclusions (and there are many more issues discussed than I had space to cover here) are quite interesting, and the research seems quite thorough.  There’s a LOT of different studies covered and reviewed, all referenced at the end of the book.  As a way to stretch your mind and get you thinking about the world, it works quite well.

Cons

Not too much to complain about, although with some of the points made, the direct links that the book proclaims seem less certain than the authors portray them.  As I’ve said already, correlation is not causation, and since it’s impossible for economists to, say, control the number of abortions that are performed by a particular population, it’s hard to say with absolutely certainty that more abortions lead to lower crime rates, or prove any of the other assertions made in the book.  Take the results in the book with a grain of salt.

Overall

Freakonomics is a very interesting and thought provoking book.  It provides a rather unique outlook on the world, and it gives plenty of background to help support its points.  It also makes for very entertaining reading, always a plus for economics books.  Definitely worth a read.

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If you read a lot of personal finance books, you come across the same points repeatedly.  Certain things are simply good pieces of advice, and tend to be covered again and again, from how to research a company to the intricacies of the stock market.  The difference between the great books and the merely good tends to come down to the style and the approach that the book takes.

Trading in the Footsteps of Sherlock Holmes takes a very unique approach to trading guidance, drawing on the wisdom demonstrated by Sherlock Holmes to illustrate the trading advice given throughout the book.  When I was offered the opportunity to obtain and read through this book, I was naturally quite intrigued.  Does this unique approach make the book easier to follow (or at least more interesting), or does it distract from the advice contained within?  Let’s read on and find out!

Summary

Trading in the Footsteps of Sherlock Holmes (referred to from now on as ‘Trading’, to save some typing) opens by discussing some of the issues that face active traders.  Chapter one covers some of the factors that make trading the market a challenge, while chapter two covers how you can view stock market trading as a challenge.  Chapter three covers some means of preparing yourself mentally for a stock trade, so you can help lock in your profit before you even make the trade.  Chapter four focuses on looking forward, and avoiding hindsight while you trade.

Chapter five covers charting software that you might use to help you trade, and cautions you not to depend too highly on said software.  The sixth chapter cautions against getting carried away with the momentum of the stock market.  The seventh chapter covers information, and how to obtain, manage, and use the information about the financial markets to your advantage.  Chapter eight continues that theme, discussing ways to obtain further information that might otherwise go unnoticed.  Chapter nine looks at the power deduction can have while you are trading.

Chapter ten starts to get into the basics of trading itself, covering some of the basic types of trading.  Chapter eleven helps to flesh those concepts out, covering long and short positions, emphasizing unconventional orders that you can make in the stock market.  Chapter twelve provides a brief introduction to technical analysis, while chapter thirteen is about finding an appropriate trading strategy for your needs.  The fourteenth chapter discusses how you can go about incorporating statistics and other information into your analysis.

Chapter fifteen explains how you can build a strategy based on currently trending data, while chapter sixteen covers how you can monitor the success of your trading system.  The seventeenth chapter provides some notes on how to properly calculate risk and return levels, to ensure that you know just well (or poorly) the companies you are investing in have done.  Chapter eighteen covers the psychology of opening a new trading position, and how to react when you do so.

Chapter nineteen covers taking profits, when and how you should close your positions and take you money out of the investment.  Chapter twenty looks at what to do when a trade goes against you and you end up losing money, including a closer look at some special types of orders that can keep your investment pain to a minimum.  Chapter twenty-one, in turn, looks at what to do if your trading strategy is under-performing, earning less (or losing more) than the market as a whole.  Chapter twenty-two covers how you can try to continually improve your trading skill and make it easier to trade successfully.  Chapter twenty-three rounds out the book with some final advice on successful trading.

Pros

Trading provides some pretty solid advice on improving your stock market  trading skills.  The focus on careful, thoughtful reactions in a field where emotions and energy run high is a good approach.  The liberal use of quotations from Sherlock Holmes stories helps to illustrate the points being made, and also makes the book easier to follow.

Cons

Trading is definitely not focused on the beginner, as it barely covers the process of trading stocks, instead jumping right into improving your stock trading skills.  The focus on active trading is also likely to be inappropriate for many (if not most) individual investors.  The psychological approach in the book is also likely to be a turn off for many would-be traders.

Overall

Trading in the Footsteps of Sherlock Holmes is an interesting book.  While not the best book for beginners, particularly those who are planning to follow a more ‘buy and hold’ approach to their investing, it does provide an interesting insight into trading.  If you are an active trader (and intend on continuing to do so, in spite of the risks associated with active trading), it makes a pretty interesting, and probably helpful, read.

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We’re at the end of the week, and as such, I’m going to be finishing up my lists of six things.  I figured that it would be appropriate to cover one of my favorite subjects, good personal finance books.  I’ve managed to review quite a few in my time, but it’s been quite a while since I listed some of my favorite personal finance books.  Since then, I’ve read a lot of great books and reviewed almost as many of them.  Given that, I can probably make a great deal of new recommendations, as well as having a greater appreciation of some of the books I’ve reviewed already, such as…

1. The Money Book for the Young, Fabulous, and Broke - It was my very first personal finance book review, and it still stands out in my mind as one of the best personal finance books for young people that I’ve read.  While I don’t agree with everything that Suze Orman writes (and as a general rule, would recommend against following the advice of any one person exclusively), it’s a pretty decent starting point for late teens and twenty-somethings.

2. The 4-Hour Workweek - This one is definitely a different take on personal finance, one that certainly has more than a little appeal; who wouldn’t want to earn thousands of dollars each week while putting in only a few hours each week?  But what really makes the book stand out is the large number of links and tips that are provided.  Tim Ferriss doesn’t simply tell you to make money, he gives all the tools you’ll need, and then a few more to boot.  It’s quite the resource for the would-be internet entrepreneur.

3. The Simple Dollar - It was a pretty recent entry in my book reading list (only reviewed last week, for that matter), but it’s hard to argue with a book written by one of the masters of the personal finance blogosphere.  Trent Hamm shares a complete guide to changing your perspective, taking control of your money, and building the life that you want.  If you need a tome to help you break out of a financial rut and start a new life, it’s hard to find a better one than this.

4. Investing for Dummies - I’ve said it before, and will likely say it again (and again, and again), I’m a fan of the ‘Dummies’ books, for the way they break down sometimes complex subjects into simple to understand language.  This book from Eric Tyson covers three possible areas you could invest, paper investments (stocks, bonds, and mutual funds), real estate, and small businesses.  If you are thinking about getting into any of those fields,  it makes a good introduction.

5. Rich Dad’s Cashflow Quadrant - Robert Kiyosaki’s books always seem to be a mixed bag, and this second volume is no exception.  While it provides a different way of looking at the world (and is much easier to put into practice than the philosophically interesting, but not very detailed, Rich Dad, Poor Dad), it isn’t the book for everyone.  Still, because it always good to expand your money reading horizons, I’d recommend reading through a few Rich Dad books, if only so you know what so many other personal finance writers vehemently oppose.

6. Dave Barry’s Money Secrets - Alright, this isn’t any more of a REAL personal finance book now than it was when I first reviewed it.  But Dave Barry remains one of the funniest writers in the English-speaking world, and this book is not only hilarious, but it gets more hilarious the more you learn about common personal finance tropes.  The guide to tipping alone is worth the price of the book.

There you have it, half a dozen personal finance books (well, five personal finance books and one humorous take on personal finance books) that should help you to better understand the personal finance world.  It’s hard to narrow it down to a mere six (and will only get harder in the future, as I’m already reading through a few books that could end up being in a future version of a list like this), but this should help you to dip your toes in the personal pool.

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If you are a long time reader (and I mean, back to the third post that I ever wrote; I’ve definitely grown a lot as a writer since then), you’ll know that I’ve been a fan of Trent Hamm and his blog The Simple Dollar since well before I started to write my own blog.  As I’ve shared more than once, if it weren’t for Trent and his blog, there’s a fair to good chance that I wouldn’t be blogging right now, myself, to say nothing of being on a completely different financial path.  So, to say he’s had an influence on me is a pretty big understatement.

So, it was with fairly great pleasure that I was able to read through his book, also entitled The Simple Dollar.  I expected it to be well-written, interesting, and to have a very human touch, just like Trent’s blog articles.  Were my assumptions confirmed, or did The Simple Dollar fail to make a smooth transition from blog to book?  As always, let’s read on and find out!

 Summary

The Simple Dollar book starts with an introduction from Trent explaining why he started The Simple Dollar blog, and some of the realizations he’s had about the current state of money and how the financial rules we live by have been changing over the past several decades.  Chapter one discusses debt, how it keeps you from achieving your dreams, and of course, how to pay it down.  (The chapter ends, as all the chapters do, with five solid steps you can take to achieve the goals mentioned in the chapter, in this case, paying down debt.)

The second chapter is about finding happiness in your life, and cultivating that happiness.  Chapter three is all about luck and the random events (both good and bad) in our life.  It also provides advice on how you can prepare for both the good and the bad in your life, in order to optimize your luck as best you can.

Chapter four covers setting goals and achieving dreams, both in the short term and in the long term.  The fifth chapter, in turn, discusses how we often make choices that keep us from moving forward with our goals, and ways we can break those bad habits and make progress toward the life of our dreams.  The sixth chapter covers the need for community and connections that we all have, and provides advice on how to build up those connections.

Chapter seven, entitled ‘Watch the Gap’, is all about increasing the size of the gap between what you earn and what you spend.  Chapter eight is one of the longer chapters in the book, discussing frugality and ways to cut down your expenses.  It discusses both the broad framework of thinking in a more frugal fashion, as well as specific examples of ways to cut down your spending in areas like food purchases and utility payments.

Chapter nine covers negative and positive relationships, and how to decrease the number of the former while building up the latter.  The tenth chapter covers the new career rules, and how to build up the skills that will make you more attractive to potential employers.   Chapter eleven covers some basics of changing your life, from preparing for such a change to dealing with people who won’t understand the changes you want to make.

The twelfth chapter is ‘Managing the Gap’, covering how to grow and take charge of the gap mentioned back in chapter seven.  Chapter thirteen discusses how to keep your relationships healthy and keep money from leading to stress and friction with the ones you love.

Chapter fourteen discusses the changing role of retirement, from final days of peace to an opportunity to take on new challenges and build a ‘second act’ for your life.  The fifteenth chapter focuses on raising children in this modern world, from instilling skills that will help them throughout life to giving them experiences that will help them stand out.  Chapter sixteen discusses charity, why we feel the need to give back and some of the ways that you can give (including ones that don’t require you to give money).

Chapter seventeen is all about things that can hold you back, and keep you from achieving your goals.  From lack of focus to the passive barriers to achieving success we have, it provides means of overcoming just about anything keeping you from your goals.  Chapter eighteen is about overcoming the disbelief and doubt of others if you choose to live an unconventional life (that is, no debt, low consumer spending, possibly an unusual job, if you have a job at all, and basically take most of the other suggestions in the book).  Chapter nineteen finishes off the book, providing numerous life lessons that Trent has learned in his own personal journey.

Pros

The Simple Dollar book, like The Simple Dollar blog, is very optimistic and highly encouraging.  It provides quite a bit of inspiration and a different way of thinking, about money and about how you live your life, from the typical advice you hear.  It also, unlike many inspirational books of this type, provides solid, actionable steps to achieve the goals that are laid out along the way.

Cons

The order of chapters in the book seems a bit unorganized and seems to jump around.  (For example, the ‘gap’ being introduced in chapter seven and then put aside until chapter twelve, rather than being discussed in sequential chapters.)  Other than that point, though, it’s a very solid, very good book.

Overall

The Simple Dollar book definitely meets the high standards I’d expect from Trent Hamm due to his work on The Simple Dollar blog.  It’s a great introduction to many aspects of personal finance and lifestyle design, and is written in an encouraging and enlightening way.  It’s definitely a good book to read if you find yourself in a rut and want to get out.

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• In praise of books

One of my favorite perks to being a moderately successful personal finance blogger is that occasionally, I get the opportunity to review books or other products (alright, mainly books) related to personal finance and share my opinion on them with you, my readers.  It’s always a pleasure to be able to read something, particularly something I might not otherwise have even considered reading.

Such is the case with Conquering the Divide.  It’s a book on using financial indicators to help you time the stock market.  Being pretty much a dyed in the wool buy and hold investor (both because that strategy comes highly recommended by sources I trust, and because, well, I don’t have that much time to read about companies’ finances), I was a bit skeptical about the premise.  Would my skepticism be borne out, or would I find gems of wisdom in the words contained within?  Let’s find out!

Summary

Conquering the Divide is broken up into four parts.  The first of these parts, covering the first three chapters, attempts to explain the authors’ purpose for the book.  Chapter one looks at the importance of developing a plan before you begin investing, comparing the process to the political campaigns of Bill Clinton and George W. Bush, and how their respective advisers approached the process of getting them elected.  Chapter two briefly discusses the concept of risk, explaining how it is constantly changing and must be considered while investing.  The third chapter, aptly named ‘Economics Can be Confusing’, provides a brief history of the field of economics and some of the major thinkers therein (Smith, Keynes, Mises, Minsky, etc.)

The second part of the book attempts to review economic theory.  Chapter four looks at the relationship between the economy and the stock market, noting some of the work done by past writers (particularly Benjamin Graham) in figuring out the exact connection between the two.  Chapter five notes that in the long run, the stock market should grow at about the same rate as the economy, although in the shorter term, many market participants react to other news.  Chapter six focuses on determining market risk and finding investment opportunities as a result of that risk, ideally while avoiding the latest ‘big thing’.

The third part of the book looks at applying economic theories to analyzing the stock market.  The seventh chapter is a particularly dense one, as it attempts to point out some of the many economic factors that can have an impact on stock market performance.  Chapter eight attempts to make economics understandable, noting some ways that economists have applied economic theories to help predict the direction of stock market movements.

Chapter nine points out that bull and bear markets are different, that the indicators of bull markets are not the same indicators (or at least, do not always provide the same clarity of indication) for bear markets.  The tenth chapter covers some of the ways you can attempt to find reliable leading economic indicators (with the warning that some math is required to do so), while the eleventh chapter finishes out this part of the book by listing some indicators that have been shown to reliably indicate where the stock market was going.

The fourth part of the book shows how to use these indicators and apply them to the stock market.  Chapters twelve through fourteen look at three different indicators that the authors have found to predict the movement of the stock market (which I shan’t share out of respect for the effort they put into identifying these factors, as well as the fact that any one of them could fill a blog entry or two if I tried to explain it), while chapter fifteen provides a composite model combining all three of the indicators.  Chapter sixteen rounds out the book by explaining how to use the Economic Market Indicator the authors publish to predict where the market is headed.

The book finishes with a few appendices.  Appendix A provides several indicators that are touched on in the book, defining them and explaining where they can be found.  Appendix B provides all the raw regression data used in preparing the book and comparing the indicators.  Appendix C provides a worksheet to be used with the composite forecasting model described in chapter fifteen.

Pros

The book is rather stringent mathematically, with plenty of proof provided for the indicators and models discussed.  The authors cite plenty of sources to back up their claims and their models.  They also go out of their way to stress that though the models and indicators they are sharing have worked in the past, there is no guarantee that they will work in the future.

Cons

The depth of the math and concepts in the book will likely be a turn off to some people, as is the rather dry tone of the book.  In spite of the aforementioned warnings that the future may not be like the past, the whole book is oriented around the idea that economic indicators can (and should) be used to predict stock market movements to improve investment performance.

Overall

Conquering the Divide is an interesting book.  If you are the sort who would like a better idea of how broader economic trends could influence your investment performance, it makes a decent read.  Just try to take the authors’ advice and stay away from trading stocks over too short a time period, okay?

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In this time of turmoil and strife, there’s a nature tendency for investors (among all other people, really) to get nervous.  When that’s the case, investors start to look for ‘safe’ investments, investments that are unlikely to lose value (or perhaps even to become more valuable) when times get tough.  One investment in particular that gets attention during these times is gold.

How to Profit in Gold seeks to provide individual investors with a better understanding of gold as an investment.  (It’s also a prize that I won from a giveaway back in January; see, Kevin, I didn’t forget about your generous giveaway!)  So, does it give you everything you need to successfully invest in gold, or does it leave you wanting?  As always, let’s read on to find out!

Summary

How to Profit in Gold opens with a discussion of gold’s shift over the past decade or so, from being ‘friendless’ in 1999, when major banks were selling it to diversify their holdings, to hitting record highs in 2009, in the wake of the financial crisis in 2008.  Using that as an introduction to the ways that gold prices can fluctuate, the second chapter then covers some of the factors that can cause such fluctuations, from variations in the value of the dollar compared to other world currencies (as gold prices are set in dollars) to the physical demand for gold for jewelry or other uses.

The third chapter looks at the central banks around the world who hold gold, and provides an explanation for why they do so as well as some statistics about how much is being held.  The fourth chapter provides a basic primer of some of the issues that confront the non-central bank organizations of the world as they buy, sell, and borrow gold reserves.

Chapter five covers ‘bullion banks’, the banks that are involved in precious metals markets.  It provides a list of several of the most important players, and explains how such transactions are made and settled (that is, ‘cleared’).  Chapter six then looks at some of the major gold markets from around the world.  It provides information from the standards that are used by each exchange to the currency used for the price quotations.

The seventh chapter covers Exchange Traded Funds (ETFs) that can be used to invest in gold, with particular attention paid to SPDR Gold Shares (Symbol: GLD), which each represent roughly one tenth of a troy ounce of gold.  Chapter eight cover physical gold, and discusses the cultural difference in how gold is viewed in America compared to many Eastern countries.

Chapter nine covers some of the myths about gold, from its ability to serve as a portable source of wealth (not really so much in Western countries) to some of the conspiracy theories about gold price manipulation by countries, such as both the United States and Germany having completely lost their gold stores in a complex plot to bolster the US dollar (yes, that’s actually what some people believe, apparently).  The tenth and final chapter lists several different methods for starting to invest in gold, from stocks (which the author admits to knowing nothing about) to physical gold.

The remainder of the book is made up of several appendices.  Appendix A provides a few ‘rules’ for things to consider when thinking about gold investment.  Appendix B provides some frequently asked questions, from how much gold has been mined to the meaning of numerous gold-associated abbreviations.  Appendix C is an glossary of gold investment linked terms (and there are a lot of them; almost thirty pages worth).  Appendix D provides some of the physical properties of gold (including many, like its crystal structure, that are probably only useful to those of us who are chemists).  Finally, Appendix E provides a handy chart for determining the amount of gold in various weights of gold at different purities.

Pros

Very well written, quite interesting, and much less dry than you might think a book about investing in gold would be.  A number of different aspects are covered, and the book is quite informative.

Cons

A lot of information is covered, mostly quite rapidly and possibly not thoroughly enough for complete novices to gold investing (myself included).  Many of the terms remain confusing, even with in chapter explanations and the glossary at the end.  For a book that seeks to tell you ‘How to Profit in Gold’, there’s not much information on how individual investors can actually get into the gold market.

Overall

How to Profit in Gold is a pretty interesting read, and if you want more information on how the gold market functions, it definitely serves that purpose.  That said, if you want to invest in gold yourself, there’s not much here to help you.  You’ll have to look elsewhere if you want a hand-holding guide to getting started in gold-investing.

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I’ll admit it, I’m a Clark Howard fan.  For those who don’t know, Clark Howard runs a money advice show that airs on the CNN Headline News Channel.  (I’m not sure that his show qualifies as ‘headline news’, but that’s another discussion entirely).  His advice is pretty much common sense, and his enthusiasm is quite contagious.

When I saw a copy of Clark’s Big Book of Bargains, I decided to pick it up and give it a read through.  Would it be filled with helpful and interesting advice, or just an attempt by a well known money commentator to cash in on their popularity?  Well, let’s find out!

Summary

Clark’s Big Book of Bargains is organized in chapters covering different areas where people spend money, and provides advice on cutting down your spending in each of those areas.  Chapter one starts with advice on saving when you eat.  From using a list (and sticking with it) when you go grocery shopping to different ways you can learn how to cook, so you can eat at home more often, there’s quite a few suggestions on keeping yourself fat and happy on less money.  It even includes some advice on saving money on wine and bottled water, so you can have beverages with your food.

Chapter 2 covers methods of saving money on children and other family members.  From keeping your spending on your first child to a minimum to raising children with a decent understanding of money to sending them to a private school (not the cheapest option, as Clark even acknowledges, but worth it in his mind to develop your child’s skills and opportunities in life), there’s a number of ways to give your children a good life without breaking the bank.

The third chapter covers the necessities in life, from clothing and shoes to eye glasses and medicine.  That last section has a rather interesting table included, where Clark compares the prices of ten of the most popular medications currently available at several different pharmacies, illustrating the potential different prices depending on where you shop (and thus, the important of shopping around when getting medication).

Chapter four covers leisure, since as Clark’s mom used to say, “All work and no play makes Clark a dull boy.”  From movies to music to sports tickets, there are numerous ways to save on your relaxation habits.  There’s even quite a bit of advice on how to save when you go on vacation.  Chapter five is fairly short, and covers appliances, focusing on home entertainment appliances and large appliances like refrigerators and dishwashers.

Chapter six is all about events.  The section on weddings particularly struck me, both because I have my own wedding coming up soon and because I didn’t realize nearly how much goes into a wedding.  (Yes, yes, I’m a stereotypical guy in that respect.)  Even if you aren’t currently engaged and planning your nuptials, there’s advice on saving on Valentine’s Day, Christmas, and even for funerals.  (Morbid, but still an opportunity to not leave a great debt to your survivors.)

The seventh chapter is all about home improvement.  It covers the gamete from painting and insulation on the outside of the house to getting sheets and towels for the inside.  It also provides advice on how to find (reputable) service people for your home.

The eighth and final chapter covers cars, one of the biggest expenses you can face.  From tires to oil, there’s advice on how to save for most of your car needs.  Particularly pertinent right now, there’s also a section on how to save on gasoline.  As you might expect, there’s also advice on saving when you choose a mechanic.  The book ends with several lists of pertinent websites for each section covered in the book.

Pros

The book is clear, well-organized, and presents the information in a straightforward manner.  Most of the suggestions should save a sizable amount of money, and also help you to start thinking about how you can cut your spending even beyond what Clark suggests.  It’s also fairly entertaining, and if you follow all the suggestions provided, you’d undoubtedly save a great deal of money.

Cons

Since the book came out in 2003, many of suggestions and resources (and perhaps more importantly, many of the missing resources of which most Internet savvy people are already aware) seem out of date.  Given the proliferation of daily deal and smart shopping sites out there, there’s not too much in this book that can’t be discovered online, and quite a bit more available via online resources than is included in the book.

Overall

Clark’s Big Book of Bargains makes a pretty nice introduction to finding savings in your regular spending habits.  That said, you’ll likely have more luck getting up to date information online, including from the Clark Howard website.  If you prefer the printed page and don’t mind somewhat stale information, though, it makes a pretty good read.  (Plus, you can buy it used for a song, an action I’m sure Clark would approve.)

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I’ll admit, I haven’t been able to read all the books on money and related issues that are out there.  Admittedly, it would all but impossible to do so, even if I really wanted to; there are tens of thousands (probably more) of money books out there now, and hundreds, if not thousands, of new books being released on a regular basis.  Trying to read even one percent of them could occupy all of my free time for the next decade, easily.  So, I don’t stress too much that I haven’t read EVERYTHING in the personal finance sphere.

That said, there are times when I look at my book collection and my book reviews and notice a rather surprising gap.  One such gap is that I haven’t reviewed any books by Dave Ramsey, or even read any.  Given that Dave Ramsey is one of the huge names in the personal finance field, right up there with Suze Orman and David Bach, such a gap in my reviews (and my personal reading) just seems unforgivable.  So, when I saw a copy of The Money Answer Book in my local supermarket, I decided to buy a copy and learn more about Ramsey’s take on personal finance, and share that learning with you:

Summary

The Money Answer Book opens with a chapter on the basics, which lists Ramsey’s Seven Baby Steps to getting out of debt and managing your money.  The chapter also starts to cover Ramsey’s view on debt and credit cards (short version: he’s not a fan).

Speaking of debt and credit, that’s the subject of the next chapter of the book, along with bankruptcy.  In a series of questions (such as those from people following the Seven Baby Steps) and answers from Ramsey, the same format used throughout the book, he covers advice on how to pay down debt, avoid bankruptcy, and otherwise manage your money.  There’s also advice on handling creditors and bill collectors attempting to collect owed money.

The next chapter covers relationships and money, which tend to be tricky for many people to handle.  There are quite a few questions about combining finances when you get married (and separating them if you happen to separate).  This chapter also covers issues with children, from how to handle allowances (Ramsey prefers paying commissions for completing tasks around the house) to how to handle adult children who make poor money decisions.

The fourth chapter covers budgeting.  Ramsey recommends sticking with a strict budget, and using envelopes to divide up the money you will be spending each budget period (and no refilling envelopes once they’re empty, of course).  Chapter five covers saving and investing.  After stressing the importance of saving money (and the need for focused emotions to build up your savings), Ramsey stresses the need to invest, as much as possible, preferably in mutual funds.

The rest of the chapters in the book are fairly short, covering a variety of other monetary issues.  Chapter six primarily covers student loans and education expenses; as with everything, Ramsey doesn’t recommend using borrowed money (that is, student loans) to get a higher education.  Chapter seven covers giving to charities and the church, stressing the Biblical mandates to tithe a portion of your income.

Chapter eight is about insurance, providing a list of the types of insurance you need, from life insurance (term, not whole) to disability insurance.  The ninth chapter is on retirement and estate planning, covering things like how much to save for retirement and the importance of having a will.

Chapter ten covers automobiles, stressing the importance of buying a used car (one at least two years old) and not taking out a loan in order to purchase it.  Chapter eleven covers real estate, recommending only getting a house if you can pay at least 20% down and can get a mortgage that requires less than 25% of your monthly income to pay the monthly bill.  As you might expect, even more recommended is paying cash for your home.  The book ends with a series of useful resources to find other information that you might need.

Pros

If Ramsey is nothing else, he’s quite passionate about money and getting people out of debt.  Most of his methods are quite effective, and he’s well known for encouraging people to get out of debt.  If you have an excess of debt that you are trying to eliminate, Ramsey’s methods are likely a good bet.

Neutral

Ramsey is a very passionate Christian, and throughout the book (particularly the chapter on Stewardship), he emphasizes a relationship with God, and he shares Biblical quotes in the book’s margins.  Depending on your religious views, this could be a plus or a minus.

Cons

The emphasis on no borrowed money seems to be taken to extremes.  In particular, not borrowing money for student loans seems to rather short-sighted, as does the suggestion to work a second full time job to gain more money to pay off debts.  The assumptions about the growth of investments also seems a bit optimistic, leading people to underestimate the amount they need to invest to meet their goals.

Overall

The Money Answer Book can serve as a helpful guide to those who really need help getting (and hopefully staying) out of debt.  The hard-line approach against debt, though, seems to be ill advised for most people.  Most people tend to either be all for Ramsey’s methods or tend to disagree with them; I’m more of the latter, but if you think his extreme approach to eliminate debt would work for you, this could be a good book for you.

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Ah, it’s time again for another book review, one of my favorite parts of having a blog of my very own.  This week, we’re looking at another book in my favorite money management series (among other things), Real Estate Investing For Dummies.  Now, there are plenty of books out there about real estate investing (trust me, I’ve read through more than a few, most of which I haven’t inflicted on you here), so where does this one stack up?  Let’s read on and find out!

Summary

The first chapter of Real Estate Investing for Dummies opens by comparing real estate to other types of investments, noting the sort of returns you can realistically expect from real estate (10.1 percent annually is the number the authors throw out).  There’s also some discussion of the pros and cons of real estate as an investment, from limited liquidity to potential tax advantages.

The second chapter covers some of the different types of real estate in which you could invest, from buying and selling homes to commercial properties.  The end of the chapter even touches on Real Estate Investment Trusts (REITs).  Chapter three looks at even more types of real estate investments, from flipping properties to dealing in foreclosures.  There are a variety of investment types that are considered outside of ‘normal’ real estate investments.  Chapter four looks at the people you’ll need to have on your real estate team, from financial and tax advisers to real estate brokers.

The fifth chapter looks at sources of capital for you to make your real estate purchases.  From simple sources like savings and cashing out other investments to advanced techniques such as getting partners or investors, there’s a variety of ways to get the money you need for real estate investing.

In case that doesn’t get you enough money, chapter six looks into financing, discussing a number of different mortgage types you could choose (and few that should make you think twice).  Chapter seven then provides some tips on how to shop for and find the best mortgage terms for your situation.

Chapter eight opens the portion of the book devoted to finding good properties by reworking the old ‘Location, Location, Location’ saying into ‘Location, Location, Value’.  It lists a number of factors that you need to consider when trying to decide where to purchase property as you are making your investment decisions.

Chapter nine takes a closer look at the details found in leases, and how to establish value in your investments.  The tenth chapter answers the important question of how much should you pay for a piece of property.  It includes a number of issues that you need to consider in order to determine if the piece of property you are interested in has potential as an investment, from net cash flow to potential appreciation.

Chapter eleven shows how to use all this information to put together an offer on the property, including the basics of negotiating such an offer.  It also stresses the importance of fair and honest dealings with the seller even as you try to get the best price possible.  The twelfth chapter covers the details of wrapping up the deal, from doing your due diligence in investigating the property and doing property inspections to closing the sale.

Next is the part of the book looking at operating the property.  Chapter 13, one of the longer chapters in the book, serves as a crash course in ‘Landlording 101′, covering everything from finding appropriate tenants (and weeding out the troublemakers, legally and ethically) to collecting rent checks.  There’s a lot of troubleshooting tips and tricks to making your property run smoothly noted throughout the chapter.

Chapter fourteen cover insurance and other risk management strategies designed to limit how much risk you take on while investing in real estate.  It covers the types of insurance you will need, and other ways to limit your potential liability.  Chapter fifteen covers record-keeping and accounting, showing you how to organize your paperwork and keep all the information about your real estate organized.

The sixteenth chapter looks at some tax consequences that should be considered when investing in real estate, covering some of the ways that taxes can influence the value of your investment.  It also discusses exit strategies, which are different methods of selling your property when you’re done with real estate.  It notes the importance of paying attention to tax consideration when trying to decide the best method of selling your property.

The last two chapters are in the book’s Part of Tens, lists of ten tips covering various aspects of the topic that’s been discussed so far.  Chapter seventeen provides ten ways to increase a property’s return, while chapter eighteen lists methods of increasing your cash flow from the real estate investments (and possibly becoming a millionaire in the process).  The book ends with a sample purchase agreement, to illustrate some of the features you can expect to see.

Pros

As with all ‘For Dummies’ books, it’s written in plain language and is quite easy to follow.  Realistic expectations for real estate investments are noted, the problems that can arise are clearly spelled out, and a great number of options are discussed.  The book covers many real world issues and does so clearly and simply.  The emphasis on ethical behavior is certainly a nice touch, especially in an area that sometimes gets a reputation for shady or unethical dealings.

Cons

As with any book that tries to deal with a topic as broad as ‘real estate investing’, this book doesn’t go into too much depth on the topics it covers.  (Not surprising, as entire books have been written on the subjects touched on in a single chapter.)  You’ll likely need to do further research on some of the subjects to gain a full understanding.

Overall

Real Estate Investing For Dummies is a pretty solid introduction to the many splendors of real estate investing.  While I’m not sure I’d want to invest with only the information provided in this book, it’s a great place to get started if you’d like to invest in real estate and want a solid foundation in the field.  It’s hard to go wrong with an appropriate ‘For Dummies’ book.

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I’m going to go a little off the topic of money here, to discuss one of my other pet topics, that is, education. If you’ve paid any attention to the American media over the past few weeks, you’re probably aware that one major topic in our national conversation has been Amy Chua, author of ‘Battle Hymn of the Tiger Mother‘, about how she raised her daughters to be highly successful using the same methods as her Chinese immigrant parents.  (In spite of the fact that Ms. Chua maintains that she did not write the book as a ‘How-To’ guide.)

Those same methods are why the book is getting so much attention (and causing so much controversy).  In contrast to our ‘Western’ method of giving children a great deal of freedom, allowing them to grow and explore without any pressure (a ‘kids will be kids’ approach, if you will), Chua stressed discipline and high achievement to her children.  She (and the other Chinese parents after whom she monitored her approach) would withhold praise, use insults when her daughters didn’t achieve the desired results, and maintain practice schedules that would strike most Western parents as closer to torture than tough love.  As a reviewer for Slate noted, while discussing a passage where Chua talked about forcing her younger daughter to practice violin for hours, not stopping for breaks, food, or even to use the bathroom, “It’s appalling.” And for most of us in the West, it certainly seems to be.

"Tigers" and "Mothers" are not usually a good combination

If it were just a book about tough love child-rearing experiences, though, the book probably wouldn’t be getting nearly the amount of attention it has.  One of the major causes for so many people discussing this Battle Hymn is the achievements that Chua’s daughters have accomplished.  Her elder daughter, a piano prodigy, played at Carnegie Hall…at the age of 14.  Her younger daughter, even though she eventually stopped playing the violin, currently spends many hours training at tennis.  By almost any standard, they are highly successful, very devoted to improving themselves and more accomplished as teenagers than many of us in the West are by the time we’ve hit middle age.

Welcoming the Tiger

And therein lies the draw.  Even reading and hearing about these accomplishments second hand, it gets you thinking about how you were raised.  “If,” you think, “I had parents who pushed me as hard as Chua and her husband pushed their daughters, what could I have accomplished?  Becoming a famous musician, developing into a great athlete, getting into a prestigious school?  Who knows what I could have done?”

If you have children, or eventually intend to have children, your thoughts probably go to them before too long, as well as your own parenting style.  You think about their future, what they could accomplish, and how to help them achieve those accomplishments.  If you start thinking that being a ‘Tiger Parent’ will help them get there, perhaps you head out to get this book for tips, regardless of whether it is technical a parenting manual.

All of this doesn’t even touch on the fact that, if all Chinese parents treat their children (and their children’s achievements), then you think about the billion plus residents of China proper, and how their economy seems to gaining more and more steam as the West seems to be continuing a downfall.  Are we on a decline that can’t be reversed until we practice REALLY tough love with our children?

Fighting the Tiger

Of course, such a provocative book is sure to draw counterarguments, both from people who experienced the ‘Tiger’ method first hand, and those who take a view on the American economy and think that a nation of highly focused workers might not be in our best interest.  In the former category, you have Christina H, a writer for Cracked.com (and a Chinese American who apparently experienced this type of parenting), who notes that there are flaws in the Chinese method, as there are flaws in the American method, and that opting for one to cover up the flaws of the other isn’t a good strategy.

On the broader subject of American competitiveness, there’s another article on Slate about American society, China, and parenting.  The point made there is that different countries have different skills; China focuses on high precision tasks that require tight concentration, while America is the land of big thoughts and bright ideas.  The idea there is that by allowing children more freedom than a Tiger style of parenting permits, you can develop their imagination and allow them to form those deep thoughts and bright ideas to potentially change the world.

Where I Stand

So, where do I stand on how I’ll raise my children when I have them in a few years (God willing)?  I’m torn, as I often am.  On one hand, I see the advantages to having such a disciplined, focused parenting style and trying to make your children continually improve themselves; on the other, I realize that there are advantages to allowing a child time to think, and dream, and enjoy themselves.

My solution comes from the realization that it doesn’t have to be all of one or the other.  I don’t have to choose between pushing my children to be their best and improve themselves in some way OR letting them have an unstructured, imagination filled childhood.  What I hope to be able to do is help to encourage them to build up their skills, preferably finding something that can teach them discipline and focus, but allow them time to be kids, and run, play, and imagine at the same time.  Given that my future wife is an artist, perhaps we can help them to develop artistic skills, as that strikes me as a task that requires both imagination and (as I can tell you from experience) lots of practice to build up your skills.

Regardless of how much of a Tiger couple we decide to be, I’m sure that our children will end up doing well, as long as we support and encourage them.

What do you think of the Tiger Mom concept?

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Another week has gone by, and around here lately, that means it’s time for another book that I’ve been asked to review.  I have to say, of the perks that come with being a semi-famous personal finance blogger, one of my favorite ones is getting the opportunity to read and write about so many different books.  (And if there are any other authors, publishers, or others who’d like me to read and review their works, feel free to drop me a line; I’m always happy to read through another personal finance book.)  This week, I’m going to review How to Make a Fortune (From the Biggest Market Opportunities in U.S. History), by Ron Insana.  Are there opportunities hidden amongst the pain of the the recent market downturn?  Let’s read further and find out!

Summary

How to Make a Fortune opens with an Introduction pointing out that now, when the markets seem horrible and all the news is bad, is the best time to acquire investments and other assets.  Insana points out that when other people are panicking and selling assets, it’s one of the best times to build up your own portfolio (particularly with all the efforts the government is putting into keeping the economy afloat).  Chapter one is a short one, providing a brief history of the financial meltdown, just in case you’ve managed to avoid all other financial media for the past few years.  Chapter two takes a longer view, looking at several other downturns through history, noting how they usually aren’t the end of the world (and are usually good times to get into the market).

Chapter three covers some of the individuals who are taking advantage of the current market downturn in order to shore up their investments, from Warren Buffett to Bill Gross (of Pimco fame).  It also provides numerous resources to would-be investors to help them get more information about the investments they are considering (and some of the potential threats throughout the world that could derail a potential recovery.  Chapter four paints the picture for stocks, sharing the case for stocks to begin rising again.  It shares some of the stocks should do especially well in the recovery, particularly those that were exceptionally hard hit during the downturn, like bank stocks, home builders, and REITs.

Chapter five covers more on the housing market, noting that with the recent downturn, homes in many places are at the same prices they were in the sixties.  It shares many resources, particularly government websites and resources designed to help the individual homeowner.  Chapter six covers debt, that is, bonds, cautioning investors off of Treasuries at their current yields but suggesting TIPS, muni bonds, and corporate bonds, both investment grade and junk bonds.

Chapter seven is a short one, noting that with all the government programs designed to shore up the economy, some opportunities have opened for investors, particularly with the TALF and PIPP programs.  The book ends with an Afterword reminding us that busts happen, recoveries come, and if you invest when things look their worst, you can end up making an out-sized profit when things get back to normal.

Pros

How to Make a Fortune is very optimistic (at a time when many financial writers seem to be rather pessimistic).  It does provide some interesting perspectives on the possibilities for investors and useful resources to find out more.  Many of the opportunities presented are still available for investors.

Cons

The book does seem a bit dated; with the stock market setting post-downturn records on a daily basis, it seems like we must be getting near fair value for most stocks (especially financial firms, some of which have been reporting record profits).  It’s not really a book for when you just get started, given the focus on restoring confidence to investors who have lost their nerve. There’s also a larger emphasis on individual stock investing than is probably appropriate for most investors.

Overall

How to Make a Fortune is an interesting read. If you’ve been investing regularly, though, as well as reading blogs like this, you probably don’t need the encouragement to keep at it. If you need some help getting a friend or relative to step back into the investing arena, though, it would make a decent encouragement gift.

Giveaway

Once again, I have the privilege of offering a copy of this book to one of my readers.  The publisher has been generous enough to allow me to give away a copy of How to Make a Fortune to one lucky reader of The Amateur Financier.  All you need to do is leave a comment answering one simple question: Do you think there are still opportunities to make outsize profits in our recovering market?  If so, where do you think they are?  (Alright, that’s two questions; so sue me.)

Are stocks still undervalued?  Are real estate markets still undervalued?  Do bonds have lots of room to grow?  Let me know what you think, by February 13th, and you could win a copy of How to Make a Fortune.  Thanks for reading, and good luck!

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Once again, the advantages of being a semi-famous blogger have come to light, as I have the opportunity to review another personal finance book and give a copy away to a lucky reader.  This time, the book in question is Your Money Ratios by Charles Farrell, which seeks to break all those complex financial questions down into simple ratios in order to give us an answer in plain English.  Does it succeed?  Well, we’ll just have to find out…

Summary

Your Money Ratios starts with an introduction that lays out the areas of finance that the book will cover (savings, debt, investment, and insurance).  It also provides a brief introduction to some of the particular topics that are covered in each of those areas, as well as the unifying theory of book: trying to move you from laborer (who is paid for the service you provide) to capitalist (who is paid for the use of your money).

The first chapter introduces the capital to income ratio, which is of prime importance in determining when (if) you will be able to retire.  The goal to shoot for is capital (the total of all your investments) that is 12 times your salary, which should allow you to retire at 65 with 80% of your pre-retirement income (when Social Security is added in).  Chapter two covers how much you need to save in order to reach that point, the percentages you should save at each point in your life to end up with 12 times your income at retirement time.  It also provides two alternative scenarios in case it proves impossible to meet the requirements to make it to 12 times savings by age 65.

Chapter three provides a discussion of Social Security, including what it is, how it works, and why it most likely will still be around when it’s time for you to retire (rhetoric to the contrary aside).  It also covers a few of the problems that the plan faces, and how to adjust your savings goal if you want to exclude Social Security benefits from your calculations (basically, shoot for 16 times your salary).  Once you know how much you need to save, chapter four discusses where to save it: in descending order of importance, 401(k) plans, IRAs, and then taxable accounts.  The characteristics of each are discussed, as are the differences between Traditional and Roth style 401(k) and IRA plans.

Chapter five is a long one, covering the amount of Income Producing (reasonable housing, education, and transportation) debt you should take on.  It provides a Mortgage to Income ratio to determine how much you can afford to borrow for a house (if taking out a mortgage is your best move, another issue that is discussed), an Education Debt to Average Annual Income (with said education) ratio to determine the maximum amount to take out in student loans, and a discussion about how much to spend on getting an automobile (basically, as little as possible to get a reliable car, emphasis on reliable).  The chapter ends with a brief discussion of credit card debt, stressing the importance of keeping the amount you owe to nothing (or the smallest balance possible) and paying it down as soon as possible.

Chapter six covers how to divide up the money you’re putting into your investments between stocks and bonds.  Farrell suggests a 50-50 split for most of your investing lifetime, moving to 40% stocks, 60% bonds within five years of retirement.  More over, he also clarifies what he means by stocks (a S&P 500 index fund) and bonds (an Intermediate US Treasuries fund).  Chapter seven delves deeper into the world of stocks and bonds, providing some introductory information to help better understand these investments.  It also shares Farrell’s recommendation to re-balance your portfolio when stocks go up, but not when they decline.  The shortest chapter, chapter eight basically comes down to its title, ‘Ignoring Wall Street’, and providing several reasons why you should do just that.

Chapter nine is the first of several chapters that cover insurance, in this case disability insurance.  The suggestion is to have sufficient disability insurance to cover the bulk of your income for most of your working life, so you have a back up source of income should something happen to you.  Chapter ten covers life insurance, suggesting that you need enough term life insurance that when combined with your savings thus far, you’ll reach 12 times your salary, allowing your survivors to generate enough money to live off once you’re gone.  Chapter eleven looks at long term care insurance, how to determine the amount you need, and how to choose the best policy.  (The basic rule of thumb being to get the longest term you can afford, preferably a lifetime policy, but otherwise the term that provides the most years of benefits at lower rates rather than higher benefits for fewer years.)  Chapter twelve rounds out the discussion of insurance by looking at health insurance.  There is no ratio for health insurance; instead, the advice is to get the health insurance policy that best balances cost, quality care, benefits, and good customer service.

Chapter thirteen is ‘Getting Professional Help’ (of a financial, not psychiatric, nature…mostly), providing some of the things to look for in a financial adviser.  It particularly recommends looking for advisers designated as Registered Investment Advisers or Certified Financial Planners.  Chapter fourteen is a brief one that directs you to go online and use the Money Mass Calculator there to see how your progress stacks up (I’m currently ahead of the savings game, which is nice).  The appendix covers a few situations where you might need to make adjustments to the provided Capital to Income and Savings Ratios, from being one of the lucky few who still has a traditional pension to having a wide difference in ages between you and your spouse.

Pros

Your Money Ratios is very straightforward and easy to follow.  If you can do some fairly simple math, you can determine if your savings, investments, insurance and debts are all on track for you to retire on schedule.  The suggestions provided are pretty solid for the most part, and are presented in a straightforward, fairly humorous manner.

Cons

The suggestions presented are quite conservative, from keeping half of your investments in bonds at 25 to using only Treasuries for your bond investments.  The black box design of the book, not providing the background calculations that go into figuring out your ideal ratios, does make it harder for you to figure out how to modify your ratios if you want to make any changes to your goals.  (Although, that might not be too bad if you’re not a money wonk like me and don’t want to play around with figures and calculations.)

Overall

Your Money Ratios is a pretty solid introduction to personal finance, albeit a bit on the simplistic side.  If you want a simple answers to questions about how much to invest, how much to save, and how much insurance to have, you’ll find them here.  It’s a good place to start your financial research (although, I would suggest you continue on, and read some additional sources of personal finance information, to expand the perspective you have on the subject of money).

Giveaway

Thanks to the generosity of the publisher, you have the opportunity to win a copy of Your Money Ratios, and find out for yourself how helpful it can be for a beginning investor.  We’re going to make it pretty simple one this time around; simply leave a comment telling me how close you are to reaching a Capital to Income Ratio of 12 (and thus, to having enough to retire, when Social Security benefits are factored int) and you’ll be entered for a chance to win.

My own ratio stands at 0.67 (at least, if you use my ‘desired’ income of $40,000 per year, rather than my actual income of $12,000 per year as a grad student, where it’d be something like 2.25), which puts me ahead of the game for a 28-year-old.  You can get your own ratio by dividing your investment totals by your income (either actual income or desired income, if you, like me are making a much lower amount than you want to make).  Let me know what your ratio is by next Saturday, January 29th, and you’ll have a chance to win your own copy and learn more about where your finances currently stand.

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