I’m going to take a little detour from the discussions of money to talk about one of my other passions: books.  Yes, as you might guess from my (ideally) weekly book reviews, I enjoy reading and find it quite beneficial.  I’ve yet to read a book that didn’t provide me with some benefit, from learning something new to providing entertainment.

Thus, I read this list of the Ten Most Harmful Books of the past two centuries with great curiousity.  What books could be so bad as to receive marks as the worst in recent history from a panel of conservative leaders and thinkers?  Well, let’s find out.

The List (Summarized)

The first three entries (The Communist Manifesto, Mein Kampf, and Quotations From General Mao Zedong) are fairly solid entries; being associated with the Soviet Union, Nazi Germany, and Communist China (back in its prime) are enough to get bad marks from most anyone, regardless of their political leaning.

The Kinsey Report (also known as Sexual Behavior in the Human Male) comes in at number four, with much less justification (the list goes from books that were linked to mass murder and exile to one that ‘gave a scientific gloss to promiscuity and deviancy’.)  The fifth book, Democracy and Education, continues the trend denouncing the book more for the behavior of its author (John Dewey) than the content of the book (which, as Blog Critic notes, is mainly about the advantages of teaching students how to think, rather than strictly focusing on memorizing facts).  Book six gets back to Marx with Das Capital, (which is one of the founding documents of the socialist movement, for all the good and bad that has come from that), while book seven criticizes Betty Friedan’s The Feminine Mystique, which, to go back to Blog Critic:

While Betty Friedan was quite militant by today’s standards — as almost all pioneers are — the only way one can say this book was harmful is if one also argues that it was okay to force women into subservient, gender-defined social roles. Friedan, whatever her faults or excesses, laid the groundwork for today’s society, in which women are (horrors!!) allowed to choose their own lives and career paths. How terrible.

Book eight continues the trend, taking down The Course of Positive Philosophy for its promotion of the idea that man, through observation alone, could determine how things ought to be.  Book nine hits Nietzsche, with his Beyond Good and Evil, which denounces belief in God as a weakness and the ‘Will to Power’, where the strong men would dominate and overpower the weaker people in society (an actual, legitimate example of a book that should be on the list).  The list rounds out with The General Theory of Employment, Interest, and Money from Keynes, for its arguments about the need for government expansion to counteract a declining job market.

There’s a list of Honorable Mentions that follows the main list, hitting just about every other book that would raise conservative ire, from Unsafe at Any Speed by Ralph Nader to Silent Spring by Rachael Carson.  My personal favorite is On the Origin of Species by Charles Darwin; it’s hard to argue that a book that provides the theoretical underpinnings of understanding antibiotic resistance and viral activity, among other important biological functions, did more harm than good for the human race.

My Complaints with the List

As you might have guessed by now, I have a few qualms with this list.  First, there’s the huge conservative bias. Yes, yes, I know; a list on a conservative site, generated by conservative experts, written for a conservative audience, happens to include some books that only a conservative could hate…big shocker.  A liberal ‘Most Harmful Book List’ (which I have not located anywhere, but would be curious to read) would likely be just as biased, including books by Ayn Rand and William F. Buckley.  I just wish the list included more books that could be objectively shown as damaging and fewer that simply happened to disagree with conservative orthodoxy.  On the subject of objectively damaging…

My second qualm is that there’s not an objective method to determine the most harmful book.  The list goes from genocide and mass killing inspiring works to human sexuality and feminism without missing a beat.  As with any list based on a survey (particularly one that only surveys a particular segment of the population), it’s full of books that simply raise the dander of the reviewers, rather than actually causing harm.

My third (and by far the biggest) problem with this list, though, is the entire concept of a ‘harmful’ book.  Regardless of where you fall on the political spectrum, it’s hopefully apparent that people acting on the ideas in books (and frequently, twisting or otherwise MIS-using those ideas to suit their own purposes) that cause real-life damage, not the books themselves.  To paraphrase the NRA, ‘books don’t kill people, people who read books and draw homicidal conclusions kill people.’

The Communist Manifesto didn’t create the Soviet Gulags, The Kinsey Report didn’t force anyone in the decades since to become a deviant, and The Feminine Mystique didn’t destroy family values.  At most, they inspired people to take action on their own (whether that action was good or bad); it was the action-takers who should be held responsible for the negative actions in history, not the books.  Even the Bible could be seen as the ’cause’ of numerous negative events throughout history, from the Inquisition to witch trials to modern day family planning clinic bombings; just as we don’t talk about banning the Bible to avoid future negative influence, we shouldn’t ban any of the books on this list to avoid the ‘harm’ that they could cause in the future.

That’s the whole reason I decided to write this article, to point out that no books should be banned due to ‘harmful’ ideas.  Instead, reading, understanding, and learning as much as possible about other views, including those we don’t believe in, should be our goal.  (It’s apparently a goal for Human Events, as well; they include links to Amazon for all the Most Harmful books on their list.)  How else can we refute those ideas that we don’t accept, or defend our own ideas, if we don’t learn as much as we can about every idea?

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There aren’t that many economists who become celebrities; there’s something about the profession (or perhaps the people who gravitate to the profession) that keeps them from achieving the same level of almost certain celebrity as, say, athletes or actors.  One of the exceptions to this rule is Malcolm Gladwell, who has a tendency to write interesting and thought provoking books that get people talking (and sometimes end with him on a Talk Show).

The first of these books is The Tipping Point, a look at how relatively small changes can have a disproportionately large effect.  It’s a somewhat counter-intuitive to us, since we tend to believe that small changes cause small effects; that is, that the effect should be proportionate to the cause, but that’s not always the case.  Does a deeper look at this phenomenon lead to a more thorough understanding of the world around us?  Let’s find out.

Summary

The Tipping Point starts with several examples of the disproportionate behavior noted, such as the sudden rise in popularity of Hush Puppies in the mid-nineties and the sharp decline in New York City crime rates around the same time.  These examples serve to demonstrate the point that changes, even big, drastic changes, can occur quickly in response to changing external circumstances.  The first chapter introduces the three laws that govern these behavioral ‘epidemics’: the Law of the Few, the Stickiness Factor, and the Power of Context, followed by a quick introduction to what each of these concepts mean.

The second chapter goes further in depth on the Law of the Few, explaining exactly what types of people you need to reach a tipping point.  There are Connectors, those people who bridge the gap between different disparate groups, the types who can link different people together and spread word of a new trend from one social group to another.  Then there are Mavens, the people who accumulate information about a particular subject and take delight in passing their knowledge on.  Finally, the Salespeople are the ones who convince others to take action, changing our behavior in some way in response to this new information.  All these people have their roles in reaching the tipping point in a social epidemic.

The third chapter covers the Stickiness Factor, how much information stays with us, and uses children’s shows like Sesame Street as prime examples.  Much research was done in the way that toddlers pay attention in order to determine what types of imagery and story lines ’stuck’ in the children’s minds.  They also discovered the importance of repetition in making a message stick.

The fourth chapter starts to cover the Power of Context, the importance of having the right setting for a particular message to tip.  It covers New York City crime levels, and how, by focusing on changing small things like the level of graffiti in the city and fare-jumping, it was possible to change the context in which crimes were being committed and actually drive down the crime rate.  In the same way, contexts that allow (or even encourage) cheating in a classroom setting have more incidents of cheating than those that don’t; the students themselves didn’t change, but how much cheating occurred did change.

The fifth chapter looks closer at the type of groups in which we associate ourselves, noting that humans, in general, have about 150 reasonably close acquaintances.  Beyond that number, we simply don’t have the mental space left to form a genuine connection with the hundreds upon hundreds of other people we meet everyday.  It’s also linked to the idea of transactive memory, the concept thatwhile I may not know a particular fact, I know where (or who) has that fact, thus allowing me to essentially boost my memory power using external sources (such as having my fiancee remember much of our social circle).

The sixth chapter provides several examples of how all these factors come together to cause certain situations to tip.  It covers everything from the spread of a story of Japanese spies (really, a Chinese tourist) during WWII to the effects of a needle exchange program in Baltimore to show how, when everything is aligned right, circumstances can ‘tip’ to help spread a social epidemic.  Chapter seven is another collection of case studies, this time focusing on how to stop social epidemics from tipping.  It covers cases as diverse as suicide in Micronesia to teen smoking here in the United States.

The eighth chapter wraps up the book, drawing some conclusions about how to create a situation that will lead to tipping (or stop a situation that seems to be tipping).  The key, as Gladwell notes, is focusing on a relatively small, narrow set of changes and building up from there.  The afterword covers some of the real world effects of the book, such as a program to help libraries in New York state that was inspired by the content of the book, as well as further examples of where situations tipped.  It also discusses the ‘fax effect’, that methods of communication become more valuable as they link more and more people (so the first fax machine became much more valuable when the second was purchased, and the third, and so on).

Pros

-Thought Provoking: As mentioned already, thinking in terms of tipping points and small changes leading to big results is not the way we normally look at the world, and doing so gives us a different perspective on life.  You’ll think about the root causes of the big events you see and read about in a different way, and it might just help you to understand the world a bit better.

-Well Sourced: Gladwell draws on a huge number of resources to make his conclusions, demonstrating the numerous circumstances that illustrate the ideas developed in the book, showing how everything from the American Revolution to modern day sales campaigns can be seen as part of various social epidemics.  The examples cited in this review cover only a small part of the numerous areas from which he pulled together interesting data.

-Entertaining: While the topic he’s discussing is rather abstract and hard to grasp, Gladwell manages to make a book that’s fun to read, as well as being informative.  From learning about all the testing that went into Sesame Street to seeing how researchers are trying to make a less addictive cigarette, there’s lots of interesting anecdotes that pepper this book.

Cons

-Not a How-To: I suppose this would be a conditional con, depending on your desired goal.  Still, if you’re hoping to cause something to ‘tip’ in your own life (personal or professional), there’s not much in the way of specific instructions.  You’ll learn about Mavens, Connectors and Salespeople, for example, but the amount of information on how to find them is rather lacking.  The same goes for much of the rest of the material; you’re not going to have much luck if you’re hoping for a step by step guide to make your own venture sticky.

-Somewhat Complex Narrative: In the course of the book, Gladwell will go from one example to another, tying in multiple situations before showing how they all fit together.  Add in the fact that many of these examples are from psychological or sociological tests that are rather complex in and of themselves, and it can sometimes be easy to lose track of the point that is being made.

Overall

The Tipping Point is a very interesting book that will, if you can ignore the cliche, change the way you look at the world.  While it can be a bit hard to follow at some points, it’s overall a very interesting and entertaining guide to how situations can ‘tip’ from relatively small changes, and what that means for all of us.

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(Note: The author of this book, J. Steve Miller, provided me with two copies to review and give away.  I’ve tried not to let that fact influence my review, but in the spirit of full disclosure, I felt it was important to let you know the whole truth.  Now, onto the review!)

Enjoy Your Money! is rather different from the average personal finance book.  Rather than a dry guide to what you should and shouldn’t do with your money, it’s a story of a diverse group of teenagers (The Counterculture Club), their somewhat eccentric adviser Mrs. Kramer, and how they learned to manage their money and their lives during their teen years.  Could their experiences help you to learn how to enjoy your money?  Let’s find out!

Characters

Given the number of people who come and go in the book, as well as my troubles keeping characters straight without a playbill, I figured I should start things off by listing the people mentioned in the book, along with some defining characteristics.  The first four are the members of the Counterculture Club (hereafter called the CC, so I can save some time typing), while the others are the various people they meet with during the course of their club meetings:

James: African-American member of the club, hard working and eager to get ahead.  Also, likes cars, a lot.

Antonio: Laid-back Hispanic guy, likes the outdoors and physical fitness.  Not a morning person.

Amy: Atypical blonde girl, both smart and into punk and goth fashion.  Good at math, and rather flirtatious.

Akashi: Bold, assertive Asian girl who bristles whenever anyone implies that she should be good at math.  Would rather play video games than study.

Mrs. Kramer: Adviser to the CC, Social Studies (and Personal Finance) teacher whose thrift and good investing allowed her to accumulate a small fortune while doing what she loved.

Larry: Waiter at the restaurant where the CC met (and had their reunion), his questions led to the flashbacks that make up the book.

Hash Brown: Mrs. Kramer’s old friend and frequent co-investor; owns the restaurant where the club’s meetings took place.

Travis: Country boy and real estate investor.  Owns a number of hound dogs and loves working on his trucks.

Carmen: James’ sister and a single mother; loves to save money while shopping using her ‘Blitz Shopping’ technique.

Summary

The book starts with a scene of Antonio helping a Down’s syndrome boy mountain climb, then getting such a rush he decides to call a reunion of the CC.  They all meet a few months later at Hash Brown’s restaurant, and their chatting and stories of their successes in life caused Larry their waiter to ask about how they all became (in his eyes) so successful in their lives.  They all agree to tell them how they learned.

Flashback to high school for the CC members.  Amy, Akashi, James, and Antonio are all serving In School Suspension for a variety of offenses, and while waiting for the supervising teacher to arrive, get talking about the subject of money (and the poor money management skills exhibited by the adults in their lives).  Asking the coach in charge of watching them for help, he directs them to Mrs. Kramer, who tells them how she accumulated more than half a million dollars toward an early retirement and agrees to teach them over a series of breakfasts (as long as they pay to cover the breakfast costs).  Viola, the CC is formed!

The rest of the book is laid out in the series of breakfasts that the club attends, each devoted to a different aspect of money management and personal finance.  The first breakfast sets the stage for the group to understand money.  Mrs. Kramer passes out a list of facts about Americans and money (mostly emphasizing how sad a state the average American is in, money wise) and shares the story of Oseola McCarty, a washer woman who managed to accumulate more than a quarter million dollars through diligent savings and ended up giving most of it away.  The chapter ends (as with every chapter) with discussion questions and a guide to other sources of information.

The second breakfast starts with Akashi and Antonio setting up a date (without Antonio having much say in the matter…) and then discusses the power of compound interest.  Starting with the story of Warren Buffet (who better to exemplify the ideal investor?), the group then spends most of the breakfast discovering the power of multiplication when it comes to their finances, and how a relatively small investment can grow to great sizes with enough time.  The group reflects on compound interest and its ability to make wealth (or debts) grow.

The third breakfast begins with Akashi and Antonio reflecting on their date, before introducing Hash Brown and having him describe some of the mistakes he’s made with investing in the past.  There’s quite a few examples of where you can go wrong investing in stocks (trying to pick the ‘right’ individual stock or investing before building an emergency fund), scaring most of the CC members away from stock investing (and really, investing period).

Breakfast number four starts with problems developing between Akashi and Antonio, with Akashi thinking that Amy is trying to steal Antonio.  Mrs. Kramer tells them to leave all the emotions outside, before calling them in.  After hearing that the teens are worried about investing, she tells about inflation and how NOT investing will ensure that their money loses value.  Hash Brown and Mrs. Kramer then explain how the safest and easiest way to invest their money is through mutual funds, particularly index funds, making sure to hold an array of US stock, foreign stock, and bond funds (after building a sizable emergency fund, of course).  Dollar cost averaging and rebalancing are also discussed.

We meet up with Travis during the fifth breakfast.  He shares how he started by buying cars and trucks that were in need of repair and fixing them up to resell them, and how he moved from there to doing the same with real estate.  He shares some advice on investing and other money management tips to prepare for a recession or depression, and then reluctantly shares his net worth.  The chapter ends with Amy flirting with him pretty aggressively.

Breakfast six is a bit different, to say the least.  Mrs. Kramer gets abducted by a homeless man (apparently her brother, who had fallen on hard times), the CC follows in a high speed chase with James at the wheel, and after drawing the attention of the cops, manage to get things squared away.  The events also led Akashi to a closer connection to Mrs. Kramer, one that helped her get her life squared away.

After all that excitement, the seventh breakfast seems a bit uneventful by comparison.  It gets into the importance of saving (and brings Carmen into the group).  Mrs. Kramer brings up the point that most millionaires, contrary to popular belief, live fairly modest lifestyles, investing and saving money rather than spending it on the appearance of wealth.  The group takes some time to look over James’ spending habits, and finds ways to save a great deal of money by cutting down his fast food and gas spending (to help him save for a spoiler).

Breakfast number eight has Carmen taking the lead, with the CC going on a field trip to the local store and learning how to save on their shopping.  Carmen passes on much of her hard-earned saving knowledge, from using generics and comparing the price ‘per ounce’ to get the best deal to stocking up on non-perishable items when there’s a great deal (all part of her ‘Blitz Shopping’ methods).  She also manages to tease James quite a bit about stool softeners.  Breakfast nine continues the savings spree, this time looking at savings on cars.  James, the resident car expert, takes the lead, showing ways to spend little or no money on cars over your lifetime.  (The latter methods included walking, public transportation, using company cars, or buying, repairing and using cars before reselling them.)  There’s also tips on how to cut down gas expenses and other costs of owning cars, as well.

Breakfast ten covers houses and real estate (after a brief discussion where James shares how much he wants a Porsche).  There’s quite a few suggestions that get bandied about by the CC and Mrs. Kramer on how to spend less (up to fifty percent less) when purchasing a house, from getting a bargain on the purchase price to getting a shorter term lease (and paying it off ahead of time, if possible).  Breakfast eleven is a rather long one, covering many of the mistakes people make with money that can derail their financial plans.  The list includes everything from abusing drugs and alcohol and abusing credit cards to gambling and trying to get rich quick.

Breakfast twelve kicks off the ‘Making Money’ part of the book, focusing on finding your dream job.  You start by knowing yourself (what you’re good at and enjoy doing), know the job market, and learn how to get a job (particularly the importance of getting job leads from friends and family).  The thirteenth breakfast continues the job thought process, telling you how to excel at your job.  It stresses the importance of social and life skills over intelligence and encourages you to work to build a team to compensate for your weaknesses, as well as working on relational skills.

Breakfast fourteen is all about investing in your mind, building your mental repertoire.  Most of the lessons are shown through the example of Sam Walton (Wal-Mart Founder), from working around your weaknesses and building on your strengths to learning from every source possible (books, employees, competitors, your mistakes, etc.).

Breakfast fifteen is all about finding happiness in the right places.  (Side Note: every chapter begins with a quote, usually related to the material within.  This chapter starts with one from “Weird Al” Yankovic’s song ‘Everything You Know Is Wrong’, which makes me happy.  That is all.)  The rest of the breakfast goes through some of the ways to make sure you lead a happy life, including helping others, not envying others, and immersing yourself in something you love.  It ends with Mrs. Kramer giving back all the money she collected for the breakfasts (with interest), giving the CC members a head start on saving and investing.

The book’s Epilogue covers where they are now.  Larry (our waiter/story instigator) was put in charge of Hash Brown’s restaurant, paid off his credit cards, and settled down with one of the waitresses.  Carmen was ‘discovered’ thanks to her Blitz Shopping techniques, and got a spot on the a shopping network.  James got a job at a Porsche dealership, made retirement by age of 45 (which, if I understand the time line of this book, would be around the year 2030…), and after a nasty divorce, fell in love with a fellow volunteer at a soup kitchen.  Antonio leads extreme wilderness adventures for troubled teens, Akashi started a clothing store that made the Fortune 500 (and married Antonio after popping the question), and Amy does market research for Akashi, counsels troubled teens and plays in a punk bank.  She also ended up marrying Travis after he proposed at a Dairy Queen.  Mrs. Kramer, after a short stint in an assisted living center, ended up touring the world with Hash Brown, both well over the age of eighty.  The book ends with some example budget sheets.

Pros

-Good Introduction to Personal Finance: This book is quite thorough in covering the myriad aspects of money management, from investing to giving to charity.  It covers much of the math and other tricky aspects of personal finance well, with clear and understandable explanations.  It’s easy to understand, even if you’re not a financial wunderkind.

-Excellently Sourced Information: One of the things that I liked most about this book was the amount of supporting material provided.  It references some of the masters of financial information, from Warren Buffet to Sam Walton, and provides a healthy list of references at the end for support.  Each chapter also ends with a list of sources for further information about the topics covered.

-A Unique Personal Finance Book…: This book stands out from most other personal finance books I’ve read due to the narrative form it takes.  Rather than reading like a money text book, it feels more like a fiction book (with a strong personal finance angle).  It’s hard not to see some of yourself in the characters included (I especially like Akashi; it’s hard for me to resist a girl whose biggest indulgence is Final Fantasy video games).

Cons

-…But Possibly Too Different For Some: If you get a lot out of traditional personal finance books, you probably won’t care for this book.  As with anything, different people respond to different methods of learning; perhaps a less narrative method suits you better.  Different strokes for different folks, and all that.

-Not Much Depth: As the expression goes, this book is ‘a mile wide and an inch deep’.  While it provides a decent introduction to investing, saving, and spending smart, there’s a great deal of material about these subjects that doesn’t get covered.  It’s a decent introduction, but doesn’t do more than scratch the surface for most of the covered subjects.

-Some Odd Narrative Twists: It’s not often I find myself in a position to critique a book with a plot line, but given the narrative nature of this book, I feel I should address it.  There are some aspects of the storyline that seem a bit implausible (see the kidnapping/car chase scene in breakfast six), and everyone’s happy ending seems a bit, well, too easily wrapped up (to say nothing of the fact that, as mentioned, James’ ending seems to take place well into the future, if the time frame presented in the book is accurate).  Admittedly, it’s a personal finance book, and the narrative is arguably secondary to the personal finance information, but it’s still weird at times.

Overall

Enjoy Your Money! is a pretty solid introduction to personal finance, investing and saving.  The narrative style is an interesting change, and might appeal to you (or someone you’d like to know more about money) even if other personal finance books haven’t done the trick.  It provides an alternative view on how to share basic personal information, which merits a decent read through, particularly if you’re a teenager trying to get a handle on your personal finances.

Giveaway!

Alright, I’ve been talking long enough; now is the time you’ve been waiting for, the giveaway!  As mention, J. Steve Miller gave me two copies of this book, and now I’m going to give them away to two lucky readers!

To enter, all you need to do is leave a comment here, telling me which character in the book seems most like you.  Think that Amy sounds like your type of girl?  Share James’ car addiction (and possible time traveling abilities)?  Are you like me and think that Akashi sounds like a fun (albeit gamer nerdy) girl?  Let me know what you think, and you’ll get a chance to win a copy of this book.

I’ll choose two respondents at random on June 15th; be sure to put down a choice before then for a chance to win!  P.S.  To find out more about the book, either check out the Amazon reviews, or see the press page for an author interview, free chapters, reviews, etc.

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Ah, the FairTax.  It seems I just can’t get away from writing about it in one form or another.  If you’ve never heard of it, I’ve already covered many of the most salient points when I first wrote about it.  Lately, I’ve gotten more jaded about the whole concept, and wrote about several of the flaws with the FairTax, at least in its current form.

Perhaps it’s fate, then, that I stumbled across FairTax: The Truth.  With a subtitle of ‘Answering the Critics’, it seems practically designed to quell the growing suspicions I have about the FairTax.  Will it leave me ready to take up the cause again, or leave me flat?  Let’s find out!

Summary

FairTax: The Truth starts, appropriately enough, with the history of the FairTax.  The preface details its genesis as an attempt by three Texas businessmen to find a way to improve the nation, focusing on improving the horrendous tax code we currently have in place, and growing into a mass movement.  The introduction continues on the theme of building support and the impact of the FairTax, as well as presenting several of the broad details of the Fair Tax plan.

The first chapter, entitled ‘The Ball is Rolling,’ provides a short summary of some of the many people who support changing the tax code to a FairTax system, from the various television personalities who support the change to anecdotes of ordinary citizens going far out of their way to support the tax.  The second chapter attempts to explain the authors’ devotion to the cause, providing some of the positive results expected from adopting the FairTax as well as why they personally feel so strongly about it (mainly having to do with the expansion of the role of the federal government, as well as the larger amount of taxes required to fund it).

The third chapter covers some of the economic reasons to support the FairTax, in particular the positive effects it would have on businesses in the United States.  According to the many studies cited, the FairTax would increase the number of jobs in the US (as companies would relocate their workers here), increase the amount the government takes in via taxes (by increasing the tax base and encouraging economic growth) and help solve any Social Security shortfalls (by changing the method of funding).  The fourth chapter provides evidence of the growing trend around the world of lowering tax rates (particularly corporate tax rates) and switching from taxing income to taxing consumption (mostly via a VAT, value-added tax), and imploring the US to take the lead via the FairTax.

The fifth chapter covers some of the advantages of the FairTax.  It frames the advantages in terms of some of the most contentious issues currently facing the country, like immigration, and provides ways in which the FairTax would improve the situation.  For immigration, it notes that much resentment is based on immigrants not contributing to the system, which would change under the FairTax system (since every purchase would send taxes off to the federal government).

Chapter six attempts to debunk some of the myths about the FairTax.  It notes that such a tax would add transparency to the tax system, decrease the chances of further tax increases, and likely boost employee earnings and/or decrease prices (depending on whether companies affected choose to pass their savings onto workers or consumers).

Chapter seven looks at how to view some of the criticisms of the FairTax, particularly through the ideals of simplicity and fairness.  Chapter eight covers some of the critics of the FairTax, and divides them into two categories: those who have a vested interest in the current tax system (from Realtors to insurance companies) and those who have a different political agenda (particularly those who think the tax code should be used for more than just raising funds for the government).  Chapter nine covers some of the criticisms that are barely worth mentioning, such as the FairTax not reducing government spending, not reducing the average American’s tax burden, and being a front for Scientologist’s attempts to eliminate the IRS (yes, that is actually in the book).

The tenth chapter is the real meat of the book, the worthwhile criticisms.  It starts with over six pages on that most frequent criticism of the FairTax, whether it’s 23% or 30%, and goes on to address issues such as whether the tax would provide enough funds for the government to work (the answer provided: yes), whether taxing services (as required under the FairTax for the provided rates to work) could be successful (answer: yes) and whether taxing the government for the goods and services it provides could actually work (apparently, it’s needed to keep the government from having an unfair advantage over private industry).  There’s quite a few other issues addressed, from mortgage interest deductions to charities to progressive taxation, all of which are addressed with multi-page responses (which I don’t have the space to reiterate here).

Chapter eleven discusses many of the people who have led the grassroots campaign to bring the FairTax to national attention.  Chapter twelve is a bit of a thought experiment, asking you to imagine yourself having lived under the FairTax system your whole life (which functions exactly as its supporters claim), and then being asked by a politician to consider switching over to the current system of taxes that exists in the United States, and wonders whether anyone would actually do so.  The book ends with an appendix discussing the Presidential Advisory Panel on Tax Reform, and particularly its (mostly negative) comments on the FairTax (and consumption taxes in general).

Pros

-Easy to Read: As the authors commented in their first chapter, most books on taxes and tax reform tend to be dense, nearly unreadable tomes.  FairTax: The Truth is very conversationally written, in a fairly easy to understand manner.  You can get a good idea of what the FairTax is all about, and have many of your potential questions answered.

-Well-Cited: One thing that always convinces me of a particular position is having facts, figures, and studies to back up that position.  This book has those in spades, citing dozens of studies done by various groups and individuals about the impact of the FairTax on many aspects of life.  It all adds up to a very compelling argument in favor of the FairTax.

-Fairly Persuasive: As you might guess, the overall effect of the book is to make the reader much more enthusiastic about the FairTax.  Most critics should find reasonable answers to their qualms, supporters should find more data to back up their position, and politicians can find justification for supporting the FairTax, all within the confines of this book.

Cons

-Not Every Criticism Addressed: As thorough as the book attempts to be in silencing critics of the FairTax, there are still criticisms that go unanswered.  Many of the issues I brought up in my own post about the flaws are not addressed, from handling the distinction between new goods, used goods, and business goods to how foreign countries will react to the FairTax.  That last point seems especially inexplicable, given that one of the major advantages of the FairTax, according to its supporters, is how much stronger it will make the US in terms of drawing foreign jobs to its shores; it seems hard to imagine that foreign countries will not react in some way that will likely nullify that advantage, at least.  (One caveat: I haven’t read The FairTax Book yet, so perhaps all my qualms have already been addressed in such detail that Mssrs Boortz and Linder did not feel it was necessary to reiterate.  If so, my apologies; although, posting the answers to these criticisms prominently on the FairTax website would help to silence myself and other critics.)

-Some Mistaken Arguments: There are several arguments made in the course of the book that upon closely inspection, fail to hold water.  Some are merely overtaken by events; claiming that the Bush tax cuts caused the economy to boom was a reasonable argument back in late 2007, for example.  Other mistakes are less easily waved away; one in particular is claiming conflating the average and marginal tax rates in the current tax system.  Given the amount of time and effort spent defending the FairTax rate as accurate, it seems like a double standard to then claim that the ‘average’ American in the 25% tax bracket pays 25% of his income toward income taxes (then adding the pay roll taxes, both the individual and corporate shares, onto that amount).

-Decided Conservative Bent: It’s hard not to notice while reading this book that the authors are a Libertarian radio talk show host and a Republican Congressman.  From minor points (the occasional joke at a Democratic lawmaker’s expense) to major ones (implying that the Democrats (and anyone who would support a progressive tax system) are communists), the book is definitely not meant for those on the left side of the aisle.  (Full Disclosure: I’m a registered Democrat, and I was less inclined to support the FairTax after reading this book.)

Overall

FairTax: The Truth is a mixed bag.  If you are generally supportive of the FairTax, have some questions about it you’d like to learn answers to, and are conservative leaning, it makes a decent read.  If you’re more liberal-leaning and support a progressive tax system (particularly if you’re thin skinned), it’s probably better to avoid this book; it definitely isn’t for you.

(Note to the Authors: if you happen to read this review, don’t take it that I’m opposed to the FairTax; I actually think it could be a good idea.  A little less venom toward the left (if you’re hoping to change a decades old approach to taxation, you could use all the help you can get, particularly if you also want to repeal the Sixteenth Amendment) and answers to a few more criticisms (both mine and those of other organizations like FactCheck.org) and the third FairTax book would make a lot more converts.)

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A major problem with most business books (from the view of the average worker) is that they are aimed at executives and managers.  The books discuss a lot about how to motivate workers, improve their effectiveness, and generally get them to work longer and harder for less pay (and frequently, with less of them doing the work).  This is a great goal for managers, but not exactly the top priority of most employees.

Enter The Joy of Work.  Scott Adams (the author of Dilbert) writes a book squarely aimed at the average cubicle dwelling office worker, designed to help them maximize their happiness at work.  Does it have useful applications to the real world, or should we leave it to Dilbert and his cubicle dwelling brethren?

Summary

The Joy of Work starts with a chapter aptly entitled ‘The Joy of Work’, wherein Scott Adams espouses his theory that happiness creates money.  Happier people get better jobs, are more willing to take smart risks, and even appear smarter.  Thus, the goal for workers should be to maximize their happiness, for all the intangible benefits (plus, it does feel rather good).

The second chapter is devoted to handling a major obstacle to employee happiness: your boss.  Depending on your particular boss type (whether they are capable or incompetent, harmless or evil), there are different basic strategies to use, from avoidance or refocusing their attention to upwardly delegating tasks.  There’s also a section on how to avoid having your work being measured, so as to escape the trap of having your progress checked against your goals.

The third chapter is about reverse telecommuting, the process of doing personal work at home.  It starts by stressing the importance of an unmonitored internet connection, and provides a number of ways to either sleep during business hours or accomplish personal work when your company expects you to be working (like writing a novel one paragraph at a time, then emailing them to yourself throughout the business day).  The chapter ends with a list of inventions that cubicle dwellers could use, such as an in-cube motion detector.

The next two chapters are about having fun at the expense of your office mates.  Chapter four includes ways of laughing at the problems of your coworkers, from starting false rumors (about the boss hiring a nail stylist as your new boss) to the joy of being sarcastic.  Chapter five takes it even further, providing a list of possible office pranks (most sent in by readers); if you want to embarrass your coworkers, particularly if you have a decent knowledge of computer programming, there’s plenty of joke fodder to be found.

Chapter six discusses how to survive meetings, from bringing in a Game Boy (disguised as a PDA) to embarrassing the presenter by raising annoying (and difficult to research) issues.  Chapter seven provides ways of dealing with your coworkers, by bossing them around or using the power of an office move to your advantage.  It ends with a handy list of logical errors, called ‘You Are Wrong Because’, providing a number of ways people come to incorrect conclusions.  (My personal favorite is ‘Faulty Pattern Recognition-Example: His last six wives were murdered mysteriously.  I hope to be wife number seven.’)

Chapter eight is the longest chapter in the book, about bringing humor and creativity to your job.  It provides some methods of managing your creativity, rather than your time (by leaving yourself some free time when you are at your most creative, for example).  It also provides many of Adams’ methods of creating humor, particularly his “Two of Six” rule; all humor uses at least two of the six dimensions of cuteness, meanness, bizarreness, recognizability, naughtiness and cleverness.  Find ways to combine them, and you’ll instantly create humor.

Chapter nine covers different methods of handling critics, depending on whether they are contrarians, sadists, nuts, or have valid criticisms (as Adams calls them, bastards).  The major method of avoiding criticism he provides is to recognize the proximity of your comments; it doesn’t matter what you meant, but rather, how people interpret your meaning on the basis of the context.  The chapter ends with Adams sharing the story of how he was criticized by Norman Soloman for being anti-worker (as a result of a quote taken out of context), and how he got back by, well, mocking Norman Soloman in The Joy of Work (as well as a snarky comic or two).

Chapter ten covers the downside of applying the methods in the book, namely that in spite of being a semi-famous (in his words) comic strip writer, Adams spends most of his life cleaning cat related stains out of his ‘white’ carpet and avoiding people who try to send him things.  The paperback edition ends with an afterword, telling of the death of one of his cats, and stressing how having a pet can make your life better.

Pros

-Very Funny: As you might guess for a guy who writes a daily comic strip for a living, Adams has quite a way with words.  His advice, even when ludicrously impractical, unethical, or illegal, is hilariously witty and quite well written.  There will definitely be some recognition of people you know (and possibly people you work for) in the course of this book.

-Decent Guide to Office Pranks: If you’re in an office where you don’t need to worry that one wrong step will lead to you being unemployed, there are plenty of light-hearted pranks listed here that you could try.  Even if you (like me) are more likely to be a victim rather than a puller of these pranks, knowing about them makes it that much easier to avoid falling for them.

-Some Good Advice: While most of the suggestions in the book would, if implemented, get you ‘fired, sued, or beaten’ (in Adams’ own words), there are some good points made at times, as well.  His advice on creating humor and allowing yourself time to be creative is actually applicable and well worth trying to apply.  (His ‘You Are Wrong Because’ list could also serve as the crash course in logic that so many people seem to need.)

Cons

-Could Cause Your Coworkers to Hate You: If you actually do much of what is listed in the first two thirds of the book, from turning your boss on your coworkers to pulling pranks, you’re likely to cause your coworkers to resent or even hate you.  You can’t really blame them, if you’re taking advice from a book subtitled ‘Dilbert’s Guide to Finding Happiness at the Expense of Your Co-workers’.  At best, expect to have some pranks pulled on you in turn; at worst, there’s the possibility for punishments from your boss.  Speaking of your boss…

-Could Get You Fired: With a general theme of minimizing how much useful work you do, keeping your boss from giving you any real assignments, and using office time to do personal work, there’s a good chance following the advice contained within could get you canned.  Even Adams recommends only following the advice when the job market is strong; if it’s too easy for your boss to have you replaced, any advantages to making you happier at work will quickly disappear if you lose your job.

-Most Applicable for Office Workers: Even if you can ignore the risks from angering your coworkers and boss, there’s still the issue that most of the ‘advice’ provided only works if you have access to a computer, a phone, and a host of victims within hearing (or peeking over cubicle walls) range.  In other words, if you work in a cubicle.  Otherwise, there’s not too much advice in here you’ll be able to apply, at least during work hours.

Conclusion

If you are a fan of Dilbert and want some thoughts on creating humor and managing creativity, The Joy of Work is definitely a good read.  Just don’t follow much of the advice on boss managing, pranks, and reverse telecommuting unless you have a really relaxed corporate culture (or simply want to be fired).  But if you do, be sure to let Scott Adams know for the next edition of his book.

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(Warning: This article (and for that matter, the book it’s reviewing) makes fairly frequent use of the word bull**** (without the apostrophes) as well as other terminology that you may find offensive.  If you would be offended by such terms, I suggest you vacate the blog entry now.  If not, then welcome!  Please feel free to read on.)

Office speak, corporatese, and other forms of weasel-words are prevalent in the modern office environment.  Whether to spare feelings (see ‘downsizing’ as opposed to ‘firing’), to disguise true intentions (again, see ‘downsizing’), or simply the result of trying to keep up with the company down the street in terms of utter incomprehensibility to outsiders or other plain thinking people (did I mention ‘downsizing’?), an unusual vocabulary dominates the modern corporate landscape.  How can you even figure out if you’re being insulted or complimented with all the slang being tossed around?

Enter The Dictionary of Bull****.  A compendium of useful (and too often over-used words) for surviving in the modern corporation, there’s plenty of information to be found.  Just about every word you’ve heard hurled around by a middle manager (or mentioned in a Dilbert (c) strip, if you’re lucky enough to not be a cog in a large corporate machine) is included, complete with a snarky definition.  Is it a useful resource or just a waste of time?  Let’s read on and see!

Summary

Most of the book is laid out in dictionary style, covering various buzzwords in alphabetical order.  While fitting for a book with ‘dictionary’ in the title, it makes for a rather boring chapter by chapter summary (’After the As, the next chapter covered words that begin with a B’), instead we’re going to look at several example definitions to show you what sort of snarky (that’s snide and sarcastic, by the way) definitions you’re going to encounter:

Accountancy: the art of lying, in a dull manner, using lots of numbers and charts

Blog: 1. an acronym for Boring Loser Of Grand-design

Customer: 1. pleb, idiot

E-tailer: 2. a cutesy reworking of ‘retailer’ in time honored e-fashion

Guesstimate: 1. a half-assed estimate

Homer, to pull a: to succeed in spite of being a complete idiot, derived from the exploits of animated TV star Homer Simpson.

Key: 2. of a person or element of a project or process: eminently dispensable, often forgotten.

Layoff: 2. firing people

Out of the Loop: 1. uninvolved 2. shut out 3. excluded 4. shunned 5. unloved

Quality Control: The process of ensuring that all products are manufactured to an acceptable standard; the process of filtering out obvious errors of judgment (rarely successful).

Runaround: See Wild Goose Chase

Staff Reduction: mass firing

User-centric: Impossible to use

Wild Goose Chase: See Runaround

Zoo, the: 1. What the sales team call the creative team, 2. What the creative team call the sales team, 3. What the production department call the entire company

Alright, that’s enough to give you a good taste.  Scattered throughout the definitions are a few boxes allowing you to create your own Bullshit Job Titles by choosing one word from each of three columns (giving results like ‘Principle Quality Liaison’).  Immediately after the definitions are a series of Bullshit Builders, which allow you to build your own bullshit sentences in much the same way.

The book ends with a series of short essays (no longer than five pages, at most) about different areas of bullshit.  There’s a chapter on sales bullshit, designed to help you thwart those people trying to sell you the latest and greatest devices.  There’s an example of mission statement bullshit that manages to use almost every buzzword from the dictionary part of the book.

The chapter on interviewing manages to mix some helpful advice in with the humor(good for anyone who actually intends to go on an interview).  There’s a chapter on how people bullshit with their bodies (and how you can bullshit back), and the book concludes with a chapter about how retailers attempt to bullshit you.

Pros

-Pretty Darn Funny: Most of the entries in this ‘dictionary’ are pretty hilarious, and it’s great fun to read through them, seeing which you’ve heard before and what they mean. (Hopefully, you heard them through comics or stories, rather than through your boss…)

-Decent Definitions: Once you get done having a chuckle at the definitions, you can stop and realize that it’s actually pretty accurate.  Most of the entries, while aiming to be funny first and foremost, give you a good idea of what the term actually means.  For terms with multiple definitions, there’s a tendency to give a straight definition for number 1 and joking definitions for the subsequent numbers.

Cons

-Pretty Offensive: Even getting aside the frequent use of the term ‘bullshit’ (and similar words), many of the definitions and other material ends up being rather derogatory to one group or another.  Just in the ones I provided, there are insults to accountants, bloggers (over two full pages of blog related terms are mocked), QC workers, salespeople, and retailers.  If you have a thin skin and an office job, there’s a good chance you’ll be offended before the book is over.

-Somewhat Soul-crushing: I’ll be completely up front: this is a very dark humor book. If you are in a job where these terms are tossed around regularly, this book is a bit like salt for the wound.  Even if you aren’t in such a job, it’s still a bit depressing to think about how many people have to deal with the stuff mentioned in this book everyday.

Conclusion

The Dictionary of Bull**** could be a good book for you if you don’t mind a bit of dark, dry British humor to go with your job.  It provides some fairly solid definitions with plenty of laughs (hopefully, not at your own expense) along the way.  Just one last thing: if your job sounds too much like this book, you might want to consider a career change.

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There are few more seminal figures in the field of economics than Adam Smith.  His book, An Inquiry into the Causes and Nature of the Wealth of Nations (hereafter referred to as ‘The Wealth of Nations’, so I don’t get carpal tunnel from repeatedly typing that name) is considered one of the first (if not THE first) book on economics, and originated concepts as diverse as the advantage of the division of labor to the ‘invisible hand of the market’ (Smith’s own term, by the way).  The Wealth of Nations is a true economic classic, and well worth a read.

Unfortunately, it’s also over 900 pages long, with a tendency to digress (there’s a 67 page digression on the history of silver prices, for example), making it a rather hard book for modern readers to get through. That’s where On The Wealth of Nations from P.J. O’Rourke comes in; you can get an understanding of the text without having to read through it yourself.  (Consider it a funnier, more snarky version of Cliff Notes(R).)  Does O’Rourke do justice to Smith and help you to understand The Wealth of Nations?  We’ll just have to find out.

Summary

Chapter one presents the start of the analysis of The Wealth of Nations.  Smith’s work emphasizes three individual prerogatives: the pursuit of self-interest, the division of labor, and the freedom of trade.  Pursuing our self-interest and desires causes us to want more than we could produce by ourselves, which drives freedom of trade, which allows labor to be divided, which allows specialization and creation of more objects that are desired by others, gradually leading to the betterment of all society.  Further points made by Smith include the fact that coercion from outside forces destroys the benefits of free trade, and that preserving the order of society is more important than the relief of misery.

The second chapter is aptly titled, ‘Why is The Wealth of Nations So Damn Long?’  The short answer is due to a combination of social pressure towards long books, the fact that economics was a new field and Smith had to explain every term he used, and that Smith frequently digressed (a 67 page digression on the history of silver prices is mentioned several times in the book).  The third chapter provides an overview of Smith’s first book, The Theory of Moral Sentiments, which is about how moral systems arise.  In it, Smith postulates the existence of an ‘Impartial Spectator’, the brain’s moral center, which seeks ‘to protect the weak, to curb the violent, and to chastise the guilty.’  This view of morality informs and shapes Smith’s economic writing in The Wealth of Nations.

Chapter four gets into the evaluation of The Wealth of Nations proper, starting with the first book, which looks into how wealth is produced and distributed.  It starts with an explanation of how humans are uniquely helpless, relying on the cooperation of many to sustain ourselves.  It goes on to discuss how property rights derive from the ownership of our labor and the products thereof and how humans specialize to maximize our productivity.  It also mentions the importance of specialization in increasing output and the (hopefully obvious) realization that price is what someone is willing to pay for something.

The fifth chapter covers the second book, a commentary on economics directed at the powerful in society.  Smith maintained that money was imaginary (albeit, not in so many words), that banks should work to render capital active and productive, and that there was great importance to regulating banks.  He also made many of the arguments for and against fiat currency (paper money not backed by gold or any other physical asset; it’s also the current form of every major currency on the Earth), back when such a thing was nearly unthinkable.  Chapter six finishes off the second book, providing some of Smith’s lessons on economic planning, including the government being a service to the need to control public spending.

Book three (and chapter seven) serve to cover an abbreviated economic history of the Western world, from the fall of the Roman empire to the situation Smith faced in the eighteenth century.  One of the more impressive stories is how feudalism was undermined.  Free traders (called burghers) grew in power and influence by giving the nobles fixed yearly tributes in exchange for freedom (the tributes, being fixed, would decrease in real worth every year), played the king and nobles off each other to keep either group from getting too powerful, and finally, created opulent items that led the nobles to spend more on baubles than on keeping their legions supplied.

Chapter eight is about political economy (the subject of Smith’s fourth book), which O’Rourke applies in particular to China and its current relationship with the United States.  The main points made by both men are that global trade is a net plus for all involved parties, the balance of trade is always good (assuming no coercion, each side is getting something that they want), and that tariffs, however well intentioned, will end up hurting the working class most.  Much of the remaining part of the fourth book (and chapter nine) are primarily attacks on the physiocrats, an economic theory (arguably, the first economic theory) that was popular in France during Smith’s time.  The major qualm Smith had with them was a love of the theory, the need for a broad, overarching theory that covered everything.

Chapter ten covers the last part of book four, Smith’s thoughts on the events occurring in America at the time (let it be noted that The Wealth of Nations was published in 1776, an interesting year for Americans).  Smith predicted the future of British-American relations as being very close due to a shared language and history, even following the revolution.  His suggestions to Great Britain included either simply giving America independence, or forming a combined government with them (neither option was followed, as any student of American history could tell you).  Let it be noted that Smith (himself a Scot) was not a great fan of America; he considered the colonists a group of skinflints who didn’t contribute to the cost of their own protection.

Chapter eleven covers Smith’s attempts at delving into public policy.  He touches on number of government policies, from the qualifications to be in government (Smith favored those with ’superiority of birth’) to tax policy (he favored property taxes and a progressive tax policy, as well as a surcharge on anyone serving in government) to national debt (he considered it a public outrage).  Chapter twelve covers more of Smith’s political views, which was to be the subject of his third, never published book.  Other than a need for some government to protect property, it’s difficult to discern how Smith would have suggested structuring a government, as his previous statements on the issue of government hadn’t been overly clear, and at times were downright conflicting.

The last few chapters take a closer look at Smith himself.  Chapter thirteen reveals him to be a rather upstanding, not particularly quarrelsome fellow.  Never married, well-thought of by many of his contemporaries (an impressive group including statesmen, philosophers, and nobles), and beloved by his students when he was a teacher; he wouldn’t be a likely subject for a tell-all biography.  Chapter fourteen covers Smith’s religious beliefs; if anything, that’s an even more inscrutable subject.  Smith seems to have been a good Christian (at a time when many of the intellectuals with whom he was acquainted were Deists), but other than that, he was quite disinterested in metaphysics and seemed skeptical of most belief systems, including skepticism.  The book concludes with an appendix of Smith quotations applied to modern phenomena like caring and celebrities, with much of O’Rourke’s usual wit and intelligence.

Pros

-Very Readable: Not to speak ill of the dead (particularly when the dead have been as important to revolutionizing economics as Adam Smith), but attempting to get through his works can be a major undertaking, at least to modern readers.  O’Rourke has a tendency toward semi-obscure and highly literate references, but most of them will at least make sense to a modern reader.  The overall book is fairly light and entertaining fare, at least for an economics text.

-Well Researched: O’Rourke does a very good job of understanding not only Smith’s text, but also putting it into the context of the time Smith lived and wrote.  While much of Smith’s work applies as readily today as during the late eighteenth century, O’Rourke helps to illustrate how Smith’s vision would apply to our more modern world.

-Funny; Very, Very Funny: As I’ve noted in my past review of O’Rourke’s work, he’s pretty darn funny, even when discussing dry economic data.  Add in the fact that Smith has a decent sense of wit (if a dry, Scottish sort of wit) about him, and the book becomes much more humorous than the typical economics fare.

Cons

-Not Quite as Good as The Wealth of Nations: This isn’t Smith’s original 900 page tome, nor is it a Cliff’s Notes (R) version either.  Instead, it’ll give you a general idea of Smith’s meaning in a creative, funny wrapper.  Consider it a primer, rather than a substitute.

-Gets Off Track at Times: While the bulk of the book is a thorough review of The Wealth of Nations and the important points thereof, O’Rourke does digress himself from time to time (although, not for 67 pages at a stretch).  In particular, the chapters on Adam Smith’s personal life don’t add much to the discussion of his writing (especially with some of O’Rourke’s added innuendo); a decent understanding of the work can be had by stopping at the twelfth chapter.

Overall

On The Wealth of Nations is, as mentioned, not a substitute for reading Smith’s work itself, so if you have a test on The Wealth of Nations, you’ll need to go through it on your own.  On the other hand, if you’re simply trying to get a better feel for Smith, his most famous work, and some of the thoughts he had that are still a major part of economics discussions today, this makes a decent primer.  Just remember that O’Rourke isn’t Smith, and that his opinions on the work don’t represent Smith’s opinions (however hilarious O’Rourke might be).

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Ah, Robert Kiyosaki.  You make some excellent points, but also raise more than a few questions in my mind.  Your first book in the Rich Dad(R) series, Rich Dad, Poor Dad, was one of the first personal finance books that I ever encountered, both setting me on the path to understanding my finances and making me think I needed a second opinion.  The second book, Rich Dad’s Cashflow Quadrant, seems to be an improvement, but was still a far cry from the detailed advice in most other personal finance books.

Which brings us to the third book in the series, Rich Dad’s Guide to Investing.  There’s certainly plenty of ground that could be covered in a book that claims to tell you what the Rich invest in.  Does it end the initial trilogy with a bang, or a whimper?  We’ll have to read on to find out.

Summary

The book starts with an introduction that brings up the 90/10 rule of money; 90% of the wealth is controlled by 10% of the people in the world.  He also explains his belief that in order to invest, you need to know about business.  The first phase of the book covers the mental preparation to be an investors.  The first chapter covers a story when Kiyosaki returned home from Vietnam, how he wanted to invest with his ‘Rich Dad’, but was unable because he didn’t meet the financial qualifications to do so.  He noted that he had much work to do to become an investor, starting with mentally preparing himself to be an investor.

The second chapter covers preparing a foundation of wealth.  It sets up the preparation that needs to go into the mental aspect of creating wealth.  The next sixteen chapters cover individual lessons an investor needs to learn.  These lessons are as follows:

1. There are three choices for reasons to invest: to be secure, to be comfortable, or to be rich.
2. You can see a world with too much money, if you shift away from thinking of money as scarce.
3. Investing is confusing to most people because there are many different goals, different products, and different techniques.
4. Investing is a plan, not a particular product; getting attached to a particular investing procedure will only limit your options.
5. You can plan to be rich or poor, and your financial plan will determine where you end up.
6. Getting Rich is Automatic, if you have a good plan and stick to it.
7. Finding the right plan takes some deep thought, careful consideration, and a good financial team.
8. Deciding now what you’ll be when you grow up, and keep expanding the goals for your life.
9. Whether you want to be secure, comfortable, or rich, your plan will have its own costs and expenses.
10. Investing isn’t risky, if you can invest from the inside.
11. Which side of the table you sit on, whether you are a business owner or an employee, will determine your level of success.
12. There are several basic rules of investing.  Knowing the type of income you’re working toward (earned, portfolio, or passive), converting your earned income into passive and portfolio, knowing that you (the investor) are the asset or liability, and having the ability to evaluate risk and reward.
13. You can reduce the risk level of your investments by increasing your financial literacy, such as learning to read income statements.
14. Some basics of financial literacy include focusing on cash flow, know the government rules (and that they can change), and that it takes two financial statements to see the whole picture (one from the payer, one from the payee).
15. Mistakes can lead to good results, if you learn from them.
16. There are many ways to become rich, all of which have a price.

Chapter nineteen again covers the 90/10 riddle, how you can acquire money making assets without spending your own money?  The answer, as expressed in chapter twenty, is to turn great ideas into profits by creating assets.  This is also the first chapter of Phase Two, which asks what type of investor you want to become.

Chapter twenty-one introduces the five categories of investors according to Rich Dad, which are covered in the next several chapters.  The first is the accredited investor, someone who has $200,000 in income ($300,000 for a couple) or a net worth of $1,000,000, and is accredited by the SEC, but may not have any skills or talent at investing.  The next is the qualified investor, who understands fundamental and technical investing, has education, and is generally confident.  Then, there’s the sophisticated investor, who has knowledge of the different laws and knows about the different types of legal entities.  The inside investor is someone who owns at least 10% of the outstanding shares of a company.  Finally, there’s the ultimate investor, someone who starts a company, takes it public, and sells shares in it.

Chapter twenty-seven is about how to get rich quick, by taking advantage of the tax laws in the B quadrant.  Then is the chapter on keeping your day job and becoming rich, by starting a business part time, emphasizing the need for business skills over needing a great product.  Finally in this section, chapter twenty-nine stresses the importance of simply getting started with your business plan.

Phase Three is about building a strong business.  First, there are answers to the question of why you should build a business.  Chapter thirty suggests that three possible reasons are to generate excess cash flow, to sell it, or to take it public.

Chapter thirty-one introduces the B-I Triangle (that’s business and investing triangle, by the way).  The three parts that make up the surrounding area are the mission, team, and leadership, the three elements needed to make functional business.  The next several chapters cover the five elements in the middle of the triangle: cash flow management, communication management, systems management, legal management, and product management.  Each one (save product management) provides a list of the many sub-elements of that aspect of creating a business.

Phase Four asks, who is a sophisticated investor?  Chapter thirty-seven covers how the sophisticated investor thinks, including the ten investor controls.  Some of these controls include controls over yourself, over income/expense and asset/liability ratios, over taxes, and over the entity, timing and characteristics of your company.  Chapter thirty-seven includes information on analyzing investments, including information on financial ratios and performing due diligence on companies in which you invest.

The ultimate investor makes a reappearance in chapter thirty-nine, with Kiyosaki sharing how he took his company public, and passes on a story of his friend Peter taking a company public on the Canadian Stock exchange.  Chapter forty provides some reasons why you would want to take a company public, as well as possible sources of funding before and after going public.  Chapter forty-one ends this section with a discussion of how rich people can go bankrupt, pointing out a few problems they might face, from not knowing how to handle their wealth to not having the experience needed to preserve it.

Phase five is about giving it back, and has only one chapter, entitled ‘Are You Ready to Give Back’?  The whole thing is the story of Kiyosaki’s encounter with a friend who was convinced that rich people cause problems in the world, but was convinced of how generous the wealthy people can be when it comes to giving money back to charity by the design of Kiyosaki’s game.  The book concludes that the world is changing, presenting a great deal more opportunity to those who are prepared.

Pros

-Interesting Perspective: It’s not the normal view of investing, but that’s not necessarily a bad thing.  If you’re interested in creating a business as a way of bringing some other income, it’s certainly an interesting book to get some perspective on what is involved.

-Encouraging: As always, Kiyosaki is nothing if not encouraging to his readers.  If you are interested in starting a business of your own, reading through this book could be a good way to find inspiration and get some generally good (if overly generalized) advice.

Cons

-Second Verse, Same as the First: If you read the first two Rich Dad books, you’ve already got a pretty good idea of what material is in the first phase of this book (which makes up the first third of the book).  The material is still fairly sound, if broadly drawn, but it continues Kiyosaki’s trend of repeating himself in his follow-up books.

-Not Really an Investment Book…But Not Really About Starting a Business, Either: In the minds of most people, starting a business and taking it public (the main ‘investment’ covered in this book) is not actually an investment, at all.  But the book doesn’t really provide instructions on how to start and grow a business, either.   There’s not even much instruction on how to take your company public, arguably the major thrust of the book.

-General Lack of Detail: Continuing on the last point, there’s not much helpful detail in this book, at all.  This is most apparent in the B-I Triangle related chapters; there are lists of things that need to be done to create and build your company, ranging from setting up daily office operations to handling legal issues, but no instruction provided on how to do any of it.  If you need something more than a checklist (and if you’re hoping to start a company you can go public with, you will), you’re going to need another book, or more likely, several.

Overall

If you’re looking for a bit of encouragement to start your own business, with plenty of folksy stories along the way, Rich Dad’s Guide to Investing might be a good book for you.  However, it’s far from the only book you’re going to need, and frankly, you can do without this book, since there’s little in the way of solid information to be found.  Just skip it, unless you’re a huge Kiyosaki fan and have to have all his works.

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I am a science fiction geek, I am the first to admit this.  I’ve been this way all my life; some of my favorite books and shows as a child were all sci fi or fantasy based.  Since I’m a nerd as well as a geek, I was usually reading a bit above my age level, as well.  One of the authors I particularly liked was Isaac Asimov.

I was recently re-reading Earth is Room Enough, a collection of his stories that, as you might guess, all took place on Earth.  The book was published in 1957, and most of the stories are set in early to mid twenty-first century America.  (Hey, that’d be us)  Of course, it’s a twenty-first century that doesn’t look much like ours; computers run nearly everything, with most people working to service them or feed in information, robots are starting to be integrated into the home, and mammoth corporations have merged with the government to completely dominate most people’s lives (alright, this one isn’t that far off).

Reading through all these stories, you get a fair idea of what the future was expected to look like, at least through Asimov’s eyes.  Looking at what he got wrong can give us an idea of how to avoid making false predictions as we look to the future.  Here are a few things to avoid when you try to think about life fifty years or so in the future:

1) Assume that society will be the same, and only the technology will change – Reading through Asimov’s work, you’d think that the fifties never ended, even though technology has gotten much more advanced.  The women in the stories are housewives or secretaries, the children are all raised by loving parents (and teaching robots) and the technology to record dreams existed for decades before anyone thought to record a pornographic one.  (No, really: that’s a major plot point in one story.)  I’d go into details about the apparent lack of inflation over the past half century, but you get the point.

Now, of course, it would have been hard to predict things like the feminist movement and the rise of divorce (to say nothing of the spread of porn) back in the fifties, when these stories were written.  In the same way, trying to predict today what society will look like by the 2060s is nigh impossible.  About the only thing we can say for certain is that things will (probably) be much different than they are right now; in what way, even the best science fiction writer couldn’t guess.

2) Technology development will continue as it has in the past – Ladies and Gentlemen, meet the Multivac.  A massive (10 sq. miles, according to one story) computer buried underground that is the linchpin of the entire future society, doing everything from finding out the true source of all the jokes in the world (hint: it’s an alien experiment) to extrapolating the voting pattern of a nation from the reactions of one man in 2008.  (Always a man; there’s that old fashioned attitude again.)  A perfectly reasonable prediction based on the state of computer science in the 1950s (at least, the giant, insanely powerful computer bit; the joke and voting thing was just story-telling tomfoolery).

Obviously, that’s not how it happened.  The development of the Internet has spread out computing power, cell phones (which I doubt Asimov ever imagined) have more memory than thousands of fifties era computers that filled entire rooms, and elections still require all of us (or as many as possible) to go to the polling place.  (Heck, we barely seem to be able to make a computer that counts the votes right, let alone extrapolates votes from one person to everyone else in the country.)  The point being: assuming that current traits will continue unabated is wrong.

3) People will fundamentally change: Before you think I’m beating up on Asimov for not knowing what the future would really be like (I’m not; I’m a huge fan, hence this post), let me assure you that he knew people.  The first story in this book, The Dead Past, shows some of his understanding in action.  The nutshell version of this story is that a group of academics, after being stonewalled by a government bureaucracy preventing access to a chronoscope (a device for looking into the past), end up discovering an alternative method to build one, one that can be easily replicated for home use.  (Still taking up nearly a whole room; Asimov was big on, well, big computers.)

In a disturbing (or oddly hilarious, if you have an odd sense of humor) twist, it turns out that the government wasn’t just arbitrarily suppressing this technology for nefarious purposes; they knew that if the technology got out, people wouldn’t use it for research into the long gone past (in this case, the range was limited to 125 years; given that the story was set around 2050, this puts the furthest into the past it can see at the mid-1920s), instead, people would use it to spy on their friends, relatively and neighbors.  It ends with the government agent in charge of suppressing this technology saying “Happy goldfish bowl to you, to me, to everyone, and may each of you fry in hell forever. Arrest rescinded.”

There is an unfortunate tendency for humans to use technology to satisfy their basest desires, indulging their greed, lust, and yes, nosiness when possible.  Almost every prediction Asimov made for how the chronoscope was being used, to spy on spouses, track celebrities, even viewing people at night, has been brought to life through one technology or another.

The Ultimate Lesson

Does all of this mean that it’s pointless to read through old science fiction, or any science fiction at all?  If almost every prediction that’s made turns out be false (and even ones that are mostly correct, like the increasing control of government and corporations over our lives, are subverted in fiction), why both reading them?

Simply this: science fiction and other ‘What If?’ stories help to expand our minds to the possibilities around us.  If we speculate on what might happen as we become more reliant on technology, we can see some of the pitfalls and (hopefully) avoid them.  If we take the trends of today and exaggerate them or follow them to their (il)logical end points, we can see if that’s truly the path we wish to follow.  In this way, looking at the future, or even what writers of the past thought would be here in the present, can give us more insight into who we are, and perhaps we wish to go as a society.

All of that, plus they are pretty amusing to read, even today.

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Whistles blow, car horns honk, things get thrown around the room and screams echo throughout the room.  The sounds of bulls, bears, and pigs are heard on a frequent basis.  Occasionally, even the sounds of ghosts are heard in the distance.  Is this a sign of the Apocalypse?

No, it’s Mad Money, the investing show from Jim Cramer.  If you ever felt the urge to go behind the scenes of this madness, you can read Jim Cramer’s Mad Money to get an even deeper understanding of the show, as well as Jim Cramer’s broader investment strategy.  Is the book a ‘Buy, Buy, Buy!’, as Cramer’s sound effect board would say?  We’ll have to look closer to find out

Summary

Jim Cramer’s Mad Money is a stock investing book, pure and simple.  The introduction plays up the book as a follow up to Jim Cramer’s Real Money, his first investing book.  It’s designed to share many of the lessons that Cramer learned in his first year or so of running his Mad Money show, in all its crazy glory.

The first three chapters are all about how to buy a stock, Mad Money style.  The first chapter is about knowing yourself and your goals.  Cramer makes the point that different people, at different stages of life, can invest in different ways; when you’re younger, you can afford to take more risks with your money.  The chapter stresses four different aspects that will determine how much (if anything) you should invest in stocks: your age, income, personality, and priorities.

The second chapter is all about doing your homework, at least one hour per week per stock that you own (or want to own), according to Cramer.  He has five areas you need to cover before you buy a stock: how the company makes money, the sector of the market it is in and how that sector has performed, the stock’s performance, how the competition is doing, and looking at the company’s balance sheet.  Chapter three is where you finally buy the stock; always using limit orders (where you set the price you’re going to pay for the stock) and buying a little bit at a time.  Once you buy the stocks, though, the homework has to continue, at one hour per week.

Chapter four looks at the other side of the coin, how to sell the stocks when the time comes.  Cramer provides a number of suggestions for when to sell (no hard and fast rules, as he acknowledges that everyone is different and has different needs).  One suggestion is to sell enough to get the amount of the stock you own back to the dollar amount you initially invested.  Another one is to set a target price you expect the price to hit, and sell when it reaches that price.

Chapters five and six cover the ‘Lightening Round’, the part of Mad Money where Cramer takes phone calls and provides a buy, sell, or hold verdict on a particular stock after just a short period time to consider them.  Chapter five details much of the thought process he goes through during that time, and shares the three dirty secrets he uses to do it every night.  (They aren’t that secret; he (a) has lots of experience, (b) really enjoys stocks, and (c) finds it easier than it looks.)

Chapter six covers how to do the same type of quick analysis yourself (the ‘Lightening Round Home Game’).  It’s a three step process; first, know what sectors (and subsectors) there are, then, form an opinion on each one (whether the automobile sector is going up or down, for example), and lastly, rank the top few stocks (’best in breed’) in each sector.  That way, when you’re asked about a particular stock, you have a ready rubric to help you decide whether it’s a buy or a sell.

Chapter seven covers what to look for in the interviews that Cramer does with CEOs and CFOs.  Depending on how they react (and in particular, how open they are about their company, even if it is currently going through tough times), there’s apparently a lot of information that can be gleaned from these interviews, even if SEC regulations prevent them from revealing anything not disclosed to other investors via public notices.

Chapter eight is a compilation of some of the mistakes that Cramer has made on his show, and the lessons he’s learned from them.  Some of these lessons include how to do the right type of homework (if you’re planning to buy and then sell in the short term, you shouldn’t be looking at the longer term prospects for the company, and vis versa) and that commodities companies are not interchangable, even though their products are identical.  In the same vein, chapter nine covers some of the lessons gleaned from his successes; some examples include to watch what the Street (that is, big mutual and hedge funds on Wall Street) does and mirror that unless you have good reason to think that they’re wrong, and not to be snob and consider all investment ideas, even those that come from an average middle-class life.

The last few chapters go into more depth on the show itself; chapter ten covers how Cramer chooses the stocks that are to be featured on his show, including watching what his charity fund invests in and paying attention to what he likes and dislikes on the show itself.  Chapter eleven covers many of the aspects of the show itself, from his trademark ‘Boo-yahs’ to the sounds on his sound board and what he intends them all to mean.  The book ends with a worksheet to evaluate stocks (a la Chapter two) and a revised guide to cyclical investing (which he introduced in Real Money).

Pros

-Intelligent and Insightful: Although you might not guess it from watching the show, there is in fact a method (and a rather impressive one) behind what Cramer says and does in the course of his broadcast.  He emphasizes the importance of doing thorough research before making a stock investment and knowing how to read through the information provided by companies.  If you followhis techniques, you should have more success in stock investing than if you merely follow stock tips (including, interestingly enough, the tips on Mad Money).

-Stresses the Importance of Research: Almost everywhere you turn in the book, you’ll find Cramer hammering home the need to do research before and after any stock purchase.  A repeated refrain throughout the book is the need for at least one hour of research per held stock per week to keep up on the changes with the company or the stock that might change its prospects.  Add in the warning against buying a stock recommended on his show (or any show) in the first twenty-four hours, and you have a surprisingly sedate argument for a calm, methodical investment method from a guy most famous for almost literally bouncing off the walls on screen.

-Entertaining: Probably not a surprise, the book is rather amusing, even laugh-out-loud funny at times.  Even when discussing things like P/E and PEG ratios he manages to be more entertaining than many personal financial writers are while trying to make jokes.  It makes the book a rather quick moving read, as well as a general pleasure.

Cons

-Aimed at Mad Money Fans: If you haven’t ever watched Cramer’s CNBC show, much of the book will make little sense.  After the first four chapters (which are fairly useful regardless of how much CNBC you view), the book pretty much turns into all Mad Money, all the time.  The last few chapters in particular are less investment advice, more behind the scenes.  If you’re not a fan, much of the book will seem rather unhelpful.

-Lots of Information, Without Much Explanation: The parts that do focus on investing directly (rather than Mad Money) are useful, but in his attempt to give you all the information you need for investing in a few chapters, Cramer sometimes makes his book nigh incomprehensible.  This is most notable in chapter two, where you get a flash lesson in cash flow statements and balance sheets.  It took several read-through to get everything that Cramer was trying to illustrate (and I write about this stuff for my blog).

-Focuses on Short(er) Term Trading: While Cramer doesn’t explicitly recommend day-trading (and chides people for doing so), he does tend focus on short term investing, holding stocks for months or even mere weeks, to say nothing of buying stocks in small portions over a period of time.  While this can be profitable (Cramer himself is proof of this), for many people it can lead to excessive buying and selling.  If you can keep up the research that Cramer recommends, it can work out, but otherwise, it just adds to your costs.  (Plus, as you’re probably aware, in the mutual fund world, indexes are more profitable than actively managed funds for exactly this reason.)

Conclusion

If you’re a huge fan of Mad Money and want to learn how to play along at home in a smart manner, Jim Cramer’s Mad Money might be right for you.  If you’re simply interested in learning how to buy and sell individual stocks, you’re probably much better off with Jim Cramer’s Real Money, which provides more information for the first time stock investor (and less promotion for the show).  If you’re not interested in individual stocks at all, Jim Cramer’s books, while still interesting, probably aren’t the best for you.

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One of the biggest problems with many personal finance books is that they are written with the assumption that everyone is the same when it comes to money.  There’s a single path to financial security that is laid out, which may be different for each adviser, but assumes that everyone has the same goals and end desires.  You might not be on the same step, but inevitably, you’re moving toward the same goal.

Master Your Money Type from Jordan Goodman takes a different approach.  Rather than assuming that everyone is the same when it comes to money, it looks at six different money ‘types’; distinctive personalities and approaches to earning, investing and otherwise using money.  Does a more varied approach yield a better personal finance book?  Let’s find out.

Summary

The first chapter starts out with the basic premise: that by understanding how you deal emotionally and psychologically with money, you can get a better grip on your finances and control your spending, investing, and saving habits better.  It then provides a brief overview of the six money types covered in the course of the book: Strivers, Ostriches, Debt Desperadoes, Coasters, High Rollers, and Squirrels.

The second chapter takes a closer look at the emotional relationships we have with money, and how it can affect our attitudes and actions.  As Goodman notes, there are many different things that money can mean to us; for some of us, money is a source of security, for others, it’s a source of power, and for still others, it means means love, happiness, or a way to relieve our pain.  These feeling are born from a number of different sources, from our parents’ and grandparents’ attitudes about money to our experiences in childhood and as young adults.  The chapter ends with some of the basics of acknowledging, confronting, and changing our undesirable fiscal personality traits in order to get our financial house in order.

The next six chapters (which compose the bulk of the book) look over each of the aforementioned personality types in depth.  Each one explains what the main traits of the personality type are, the pros and cons associated with each type, and several examples of people whom Goodman has worked with in the past who exemplify those those personalities.  He then covers some of the more harmful traits each personality exhibits, and provides a shift in thinking to help rectify them.  Once the emotional stuff is out of the way, he provides a financial plan to help each type get their finances under control, usually with tools most appropriate for each type.  Each chapter ends with a list of resources that will be most helpful to people with those personalities.

First up in chapter three are the Strivers.  These are the people with a strong desire to be successful, or more importantly, to be perceived as successful by those around them.  At their best, Strivers are driven, focused, and determined to make their goals a reality; at worst, they stretch too far to appear well off, overestimating their income and underplaying their expenses.  The solution for this overreaching is to rein in the tendency to stretch their budget to show off their self-worth, and there are numerous budgeting and cash flow tools at the end of the chapter to allow them to still put their wealth on display, but doing so while staying in budget.

The second major type is the Ostriches, so called because they bury their heads in the sand when it comes to money (never mind that real ostriches don’t do that; it’s too good an image to resist).  The good news is that this group isn’t consumed with money, but they take it too far, not knowing (or caring) enough to get their money under control, and sometimes falling for bad advice because they don’t have the savvy to realize how bad it is.  The solutions given are to take control of their money, in the least painful ways possible, by automating their savings and investments as much as possible.

The next chapter covers the Debt Desperadoes, possibly the group with the fewest positive traits (mainly the ability to bounce back from a crash) and several negative ones, including denial of the reality of their situations.  The chapter opens with a quiz to see if you’re spending too much and several of the reasons that people can get in high levels of debt.  The list of financial solutions range from creating a financial plan to deal with the existing debt to the possibility of bankruptcy.

The Coasters are an odd breed, having a a decent handle on their spending and earning, but not having a longer term plan.  They have a tendency to prefer stability to change (even positive changes).  There’s a sub-category called Optimists who have a tendency to believe that everything will work out, and that the universe will provide what they need in life.  The major piece of financial advice for these groups is to expand their financial planning to ensure that their plans will cover ALL their goals, with plenty of retirement planning tools included.

The High Rollers are next; their pros include a high tolerance for risk and belief in their vision, while their biggest problem is the tendency towards thrill-seeking and gambling.  The major suggestions include making educated gambles, shifting a portion of invested money into safer investments like bonds, and making sure that the money put into speculative ventures can reasonably be lost without adversely affecting longer term goals.

The final group is the exact opposite; Squirrels value stability and safety over everything else, and as a result, have a tendency to live much below their means and not enjoy life as much as they could afford to do.  This is taken to the extreme in the sub-type of Bag Ladies, who tend to accumulate a great deal of wealth without any enjoyment (think of the stories you’re heard of the people who live like paupers and end up leaving several million dollars to charity when they die).  The solution is to slowly bump up the risk they take, to be better prepared for the future.

There’s a list of resources at the end of the book, providing a collection of material that could be useful to anyone who needs further information.

Pros

-More Individualized Approach to Personal Finance Advice: As mentioned at the beginning of this article, one of the strongest advantages of this book is the lack of a ‘one-size-fits-all’ attitude.  The book understands that all the readers are not the same, and attempts as best it can to tailor the advice in such a way as to be helpful for everyone.  While a book can’t hope to provide every single person with a unique plan for financial success, it does manage to differentiate significantly to help a wide variety of people.

-Interesting View of Money and Psychology: In a similar vein, too many books don’t take into account the effects of individual personalities and attitudes on how to handle money.  While some books cover the problems or goals for a particular group (get out of debt books for Debt Desperadoes, for example), a holistic approach for many different personalities is a bit of a rarity.  Getting advice on a variety of different money issues from both an emotional and monetary perspective helps to handle numerous different problems.

-Solid Financial Advice: It might seem like this book focuses on the mental aspect of using money, possibly skimping on the details of how to actually manage your money.  But, Goodman provides a solid foundation of money management and plenty of tools to help plan your financial future, from retirement planning figures to basic budgets, spread throughout the book.

Cons

-Sometimes Hard to Find Needed Information: Since the book is organized primarily according to the money types rather than the tools provided, it can be hard to find the budget tables (in the Striver chapter) or the investment return tables (unexpectedly, in the High Roller Chapter).  Given that many of the financial tools could be helpful to multiple types (there are several references telling one group to look in a different chapter for the appropriate tools), it seems like a better organization would be to put all the financial planning tools in one section, like an appendix.

-No Advice for Blended Types: Although there are early comments from Goodman about the need to consider that you may fall into multiple types and need to look at all aspects of your money type, the book doesn’t make this easy.  All the examples are solidly (and usually intensely) within one type and the book provides advice for only one type at a time, some of which contradicts the advice for other types.  A bit more advice for those who fit into multiple types (perhaps a section at the end of each chapter describing how to handle money for people with some traits that fit into another type) would be helpful.

-Too Many Resource Pages, in Too Many Places: At the end of each type chapter, there’s a list of resources specifically suited to that money type, and there is also an appendix that includes a list of general resources.  Many of the recommended books, magazines, and websites, showed up multiple times following the individual chapters, and again in the appendix.  Cutting down the number of places to list resources would make the book run smoother (and seem a bit less like an attempt to sell other books).

Overall

Master Your Money Type is a pretty solidly written book.  A few organizational changes would make the book a bit more useful, but it’s still useful and interesting.  Knowing your money type is an interesting point of view for money management, and it’s good to see someone looking at finances through a psychological perspective.  If you’re looking for a solid, unique personal finance book to help understand the basics, it makes a good introduction.

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Imagine working only one day each week.  Further imagine that during that one week of work, you aren’t putting in a full eight hour (or more) day, but instead, you’re only working four hours, max.  To top off, rather than going into the office, dealing with a horrible commute, gossipy coworkers, and bland coffee, you’re ‘working’ by checking into your business from an internet café in Paris, fitting it in between a tour of the Louvre and your weekly tango lessons.  Sounds like a dream, right?

Living that sort of life is the main point of The 4-Hour Workweek.  Timothy Ferriss writes about redesigning your lifestyle to ‘Escape 9-5, Live Anywhere, and Join the New Rich,’ as noted by the book’s subtitle.  He promises to help us design the lifestyle of our dreams, and make a decent profit at the same time.  But is it just hype, or can he really show us how to remake our lives?  Let’s read on:

Summary

The book starts with a short FAQ to quell some of the questions that likely popped into the readers’ heads upon reading the title and learning the purpose of this book.  The book then opens with a story of Ferriss preparing for a dance competition as an introduction to the main goal of the book: allowing the reader to design their own ideal lifestyle as a member of the ‘New Rich’ (NR, as it’s frequently abbreviated).  He introduces his method of lifestyle design, DEAL: D for Definition, E for Elimination, A for Automation, and L for Liberation.  Before getting into the details for all these steps, he provides a short chronology of his life, how he built a successful business that started to consume his life, and how he finally learned to automate it and escape.  Then we get into his plan for us:

D for Definition

The first part of the book sets up Ferriss’s definitions of New Rich, and how they compare to ‘Deferrers’, those who follow the typical plan of working, saving, and eventually retiring.  He stresses that though wealth is possible (even likely) following the NR plan in the book, the more important issue is having regular cash flow without needing to work long to obtain it, and using that money to fund your dream lifestyle.  The second chapter is about changing the standard rules regarding work and retirement, particularly when ‘Retirement is a worst case scenario’; that half a lifetime of work in exchange for the possibility to enjoy life when you are old is a poor deal.  There are a total of nine other principles Ferriss attempts to challenge, from asking for forgiveness rather than permission to money not being the answer.

The third chapter chapter is all about dodging bullets, defining the worst that could happen if you follow this plan, and how to get your previous life back if something fails.  It asks you to imagine the worst situations you could find yourself in if you followed the advice in the book, in an attempt to show how easy it would be to recover.  The fourth chapter is called ‘System Reset’, and is all about reorienting your perspective to achieve the (seemingly) impossible.  It introduces ‘dreamlining’, the process of writing down your dreams and creating time lines with actionable goals in order to meet those dreams.

It’s also the first chapter than ends in a comfort challenge, where Ferriss encourages the reader to do a number of tasks that most people would find uncomfortable, in order to help them ‘develop the uncommon habit of making decisions’.  The rest of the chapters in the book end with a comfort challenge, ranging from making eye contact on the street (Chapter 4) to asking for the number of several attractive strangers (Chapter 6) to laying down randomly in the course of the day (Chapter 11).

E for Elimination

The next part of the book covers how to eliminate unnecessary activity from your life.  Chapter five focuses on Pareto’s law, the concept that twenty percent of your effort will result in eighty percent of your results.  The recommendation is to cut out the less productive portion of your effort (the 80% of your efforts that result in only 20% of your results).  It also brings up Parkinson’s Law, where tasks swell to fill the time allotted to complete them; the suggestion is to cut down the time allotted to the minimum in order to increase productivity.

Chapter six is rather short, which is appropriate for its subject: limiting information intake.  The message is to cut down on the amount of information absorbed, whether from books, newspapers, magazines, or the internet.  Chapter seven is about cutting down the number of interruptions and pointless tasks you have during the day.  It suggests ignoring unproductive information (meetings, phone calls, and email) as much as possible and dealing with vital information in batches.  It also suggests empowering employees so they can make decisions on your behalf without needing to contact you for relatively minor issues.  If you don’t have any employees, don’t worry, we’ll cover that next…

A for Automation

The next section of the book is all about automating your life and your income, allowing you to enjoy life without as many worries or troubles.  Chapter eight is all about outsourcing your life; it highly recommends getting a virtual assistant (VA), someone who can manage many aspects of your life via the internet.  The chapter expands on the concept of VAs, creating a step by step description of how to find a VA (or a team of VAs), whether to choose someone in a Western country or the developing world, and what sort of tasks they can handle.

The next three chapters cover the steps of how to create an ‘Income Autopilot’.  Chapter nine is about finding your muse; finding a niche to which you can sell and then choosing a product to sell.  You could resell a product, license a product, or create a product of your own, as long as it meets the need of your market.  In chapter ten, you microtest the product to ensure that is a demand, building websites, testing ads, and otherwise using low cost methods to test the waters to see if there is any desire for what you intend to sell.  Finally, chapter eleven focuses on how to remove yourself from the equation; when and how to shift management of the daily function of your operation onto others.  It also provides tips on how to smooth the transition and minimize problems as you work to make the business self-sustaining.

L for Liberation

The last section of the book focuses on how to escape from the office.  Chapter twelve covers how to slowly get your boss to allow you to telecommute, starting with a day or two each week (or a one or two week trial period), and gradually increasing your time out of the office until you never step foot in the office, and instead do everything remotely.  The focus is on using your improved productivity (from the Elimination part of the book) to get your boss to agree to the remote working arrangement.  If that doesn’t work, there’s always plan B: chapter thirteen is about killing your job, and mainly provides counterarguments to some of the major reasons that people don’t want to lose their employment.

Chapter fourteen provides one way to use your new found freedom from the office: mini retirements.  These are short periods (one to six months) of relocation, usually to another country, with the goal of living life to the fullest while you’re still young, and making them a regular part of your lifestyle.  The rest of the chapter covers the details of how to make such a trip work, including a countdown of how to get your finances, household, and important documents in order for an extended stint away from home.

Chapter fifteen provides more information on how to fill your time and feel fulfilled when you no longer have to work.  The suggestions range from learning for the sake of learning to helping various service focused charities.  The sixteenth chapter is a list of 13 mistakes made by the New Rich, including working for the sake of work and losing sight of your dreams.  The final, unnumbered chapter is a poem by David Weatherford, reminding us to slow down and enjoy life.  The book ends with a list of some recommended reading material and a list of further content provided on the accompanying websites (some of which seems a bit racy, but that’s a separate issue).

Pros

-Interesting, Unique Perspective: This book has a very refreshing perspective on money.  Rather than the typical money book, which makes the assumption that you’re going to be working for many decades before retiring to live off your savings, Ferriss tries to create a method by which you can retire much earlier, while still maintaining a standard of living as high (if not higher) than you had before.  It’s nice to see a fresh approach to personal finance, one which may appeal to those who feel ill served by traditional personal finance books.

-Good Sets of Resources: Each chapter provides a great deal of information to be used to complete the goals set out.  They all end in a ‘Questions and Actions’ section that provides next steps toward achieving a 4 hour work week.  There’s also a list of other resources (almost all online) at the end of nearly every chapter.   Even if you aren’t completely sold on the lifestyle described in the book, many of the suggestions could still be useful, from eliminating extraneous information to hiring a virtual assistant.

-Humorous and Entertaining…: The book is very entertaining, and makes a rather easy read.  It’s interesting and involving, drawing you into the methods and means with a gripping tone.  There’s also a strong element of humor (much of it Ferriss poking fun at himself) running through the book, making it read more like an entertaining biography than a how-to manual.

Cons

-…But Sometimes Annoying: At times, the stories about his exploits get annoying.  Yes, given the point of the book, trying to design your ideal lifestyle, it does make sense to show what he’s done with his own lifestyle.  Still, it doesn’t stop me from wanting to hit him at various points in the books, usually after he’s described one of his adventures traveling the world.

-Most Applicable to White-Collar Workers or Entrepreneurs: The techniques described in this book, from enhancing your productivity in the office to telecommuting as a lifestyle, are virtually limited to those who work in the office, and frequently to those who have underlings to whom they can delegate responsibilities.  If you are in a position where your presence is physically required (anything from blue collar work to quality control), or at the bottom of the totem pole at your company, there’s a limit to what you can get out this book.

-The Lifestyle is Not for Everyone: Not just because you may not want to gallivant around the world or create businesses with the goal of automating them as quickly as possible (although, that certainly could be true).  But there’s a more basic reason: the lifestyle design espoused by the book requires a large support staff; at one point, Ferriss notes that his company requires 200 to 300 people to keep it running.  Simple math tells us that, even taking outsourcing into account, only a small portion of the population (a few percent, at most) can join the ‘New Rich’ before society ceases to run.  Just something to consider as you read through the rest of the book.

Overall

The 4-Hour Workweek is a bit like an overstuffed buffet.  There’s a great deal of information to be considered, much of it stuff I’ve never seen mentioned elsewhere.  Even if the overall buffet does not seem quite to your tastes, there’s probably something worthwhile to consider, from eliminating some of the distractions in your life to hiring a virtual assistant, that you probably haven’t considered.  It’s worth a read through, just to see the variety of ideas and new concepts that are suggested, in order to see if any can apply to your situation.

(Note: The version of The 4-Hour Workweek that I read and used for this review was the 2007 edition.  Recently (in December 2009) a new version, The 4-Hour Workweek, Expanded and Updated, was released, which touts over one hundred pages of new material.  I haven’t read this new edition as of the time of this post (although it’s on my to-read list), but as long as the general concepts are the same, I imagine this review will still be applicable.  Still, fair warning that there is a newer, potentially significantly different version out there.)

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Ah, Robert Kiyosaki.  So many contradictory thoughts come to mind when I think of you and the books you’ve authored.  On one hand, you were the first personal finance writer who really caused me to stop and re-evaluate how I was using my money, and for that I thank you.  On the other hand, much of your advice, particularly in your first book Rich Dad, Poor Dad, seems highly inappropriate for me at best, and downright dangerous for most people at worst.

Given those two considerably different views, I had to make a serious effort to read your second book, Cashflow Quadrant, with an open mind.  I did my best to judge it not based on my opinion of you, your critics, and even your first book, but rather the merits and demerits of the book itself.  Is it a must read for all would be investors, or something that most everyone can skip?  Let’s read on:

Overview

The book starts by introducing the Cashflow Quadrant(TM), an illustration of the four primary ways to earn money.  It’s shaped like a plus sign, with four letters in each corner, separated by the plus’s cross bars.  In the upper left, there’s an E (for employee), the lower left has an S (for self-employed), the upper right has a B (for business owner), and the lower right has an I (for investor).  (Look over at the cover of the book; you should be able to make it out.) Much of the rest of the book refers back to this diagram at one point or another, so having a good understanding of it is important.  In fact, before the introduction ends, Kiyosaki notes that his ‘Poor Dad’ (his biological father) always recommended he stick to the left side of the quadrant (the E and S side) while his ‘Rich Dad’ (his friend’s father, who gave him advice on how to become rich) suggested that he should focus on the right side (the B and I side).  The first chapter begins to introduce the idea of the four quadrants in more detail, as well as noting that it’s possible to be rich or poor in any one of them.

The second chapter starts to introduce the differences between the four groups.  According to Kiyosaki, E group employees desire security, the S group of self-employed people wants to do it themselves, B group business persons want to be surrounded by those who can help them build and grow their businesses, and investors in the I group use money to make money.  There’s a few side discussions in the chapter clarifying his definitions and expanding where he suggests people who wish to be wealthy should focus their attention (in the B and I quadrants).

The third chapter covers why people choose security over freedom.  Kiyosaki discusses how many people will, as they increase their salary at work or in their small business, spend more and start to borrow even more, leading to a cycle of ever increasing debt even as their income is rising.  He also covers some patterns of the rich (moving from the S quadrant to the I quadrant by investing their earnings, for example) and the not so rich (continually changing E quadrant jobs).  The fourth chapter covers the three types of business systems that Kiyosaki recommends; traditional C-corporations, franchises, and network marketing.  He goes into some detail about each type of system, giving particular recommendations to network marketing.

The fifth chapter covers the seven levels of investors, from level 0 (those who have nothing to invest) to level 4 (the long-term investor, who invests primarily in mutual funds) to level 5 (sophisticated investors who can make their own investments) and finally to level 6 (capitalists, who create investments like businesses and sell them to the market).  He ends with a note that you have to become good at being a level 4 investor before you can go on to level 5 or 6.  The first section of the book ends with a chapter advising you to see money with your mind, since it is just a concept.

The second part of the book is about ‘Bringing Out the Best in You’.  Kiyosaki starts with a chapter encouraging the reader to be who they want to be.  The eighth chapter covers how to become rich, focusing on changing your mental attitude toward money and becoming rich.  He spends quite a bit of time covering various emotional and mental hang ups many people have, attempting to dispel them.

The ninth chapter goes over some of the heroes and villains of past financial crises (and rather astutely notes that Alan Greenspan would become a villain in a financial downturn).  He covers some more advantages to using real estate to invest and starting corporations, mainly the tax advantages inherit in both.  The chapter ends with a sidebar, reminding readers to stay up to date on tax law and use the rules to their advantage.

The tenth chapter kicks off the last section of the book, on thinking like a B or I individual.  This chapter covers taking baby steps learning to think like a rich person, gradually re-educating yourself to think in terms of the possibilities for businesses or other investments that are out there.

The last seven chapters of the book are organized as seven steps to finding your financial fast track.  Step 1 is to mind your own business, learning about your financial situation and developing a plan to become wealthier.  Step 2 is taking control of your cash flow, determining where you money comes from and goes.  It ends with a pretty solid, if ambitious, plan for paying off your credit debt each month.  Step 3 is knowing the difference between risk and risky, the difference between make intelligent investments and never doing any investing.

Step 4 is to decide which type of investor to be, one who knows nothing, one who seeks ready solutions, or one who seeks problems to try to fix.  Step 5 is on seeking mentors, who could be anyone from good role models you want to follow to spiritual role models who can inspire you.  Step 6 is all about turning disappointment into strength, learning from the mistakes you’ll inevitably make.  Step 7 i about having faith; in this case, faith that you can accomplish your financial goals.  The book ends with a table comparing the Broke Masses, Successful Middle Class Investors, and the Rich on a number of features, from investment vehicles to the resources they use.

Pros

-Easy to Read: Kiyosaki is definitely good at creating a compelling narrative, and this book is no exception.  You should have no problem reading and following along with the points he makes, as well as the diagrams he shares.  The book is pretty easy for anyone to pick up and read.

-Actionable Advice: Particularly in the last set of seven chapters, Kiyosaki lays out a number of simple, easy to follow steps that make it possible to become wealthy using his methods.  Particularly compared to Rich Dad, Poor Dad, having real, workable advice is a good step in the right direction.

-More Inclusive Perspective: Again, compared to his first book, Cashflow Quadrant does much more to acknowledge alternate view points on wealth and money.  Kiyosaki notes that people in all four quadrants can become rich, for example, and also points out that most of the millionaires in the US would be considered level 4 investors on his scale.  All of this makes it much easier to get something out of the book, even if you don’t follow all his advice.

Cons

-…But Not Completely Unbiased: While not as bad as the first book, Kiyosaki still doesn’t show an excess of respect for those in E and S quadrants.  Some of his comments do have justification (the relatively high taxes paid on earned income, for example), but many of them are unfounded, attributing traits of fear or perfectionism onto those who are self-employed or work for someone else.

-Selective Emphasis of Risk: Kiyosaki is perfectly happy to discuss risk… the risk of not investing according to his principles.  What he mentions only in passing is that doing the high profit potential deals he emphasizes does have the risk that many, if not most, will fail.  Unfortunately, even when acknowledging such possible failures, there’s no mention of how to prevent or recover from them; the idea of insurance or an emergency fund never comes up.

-Denigration of Education: A continuing theme in Kiyosaki’s writing is the relative unimportance of education.  From calling his highly educated father ‘Poor Dad’ to maintaining that street smarts are much more important to success than book smarts to sharing a list of anti-education quotations in the middle of a chapter (sent to him by Poor Dad, no less), he has no fondness for education, and seems to delight in denigrating it.

Conclusions

Overall, I liked Cashflow Quadrant much better than Rich Dad, Poor Dad.  Yes, there are still flaws; it under-emphasizes risk and devalues formal education.  But it’s a much more practicable book, with specific suggestions for those trying to follow Kiyosaki’s advice, as well as including some advice for those who aren’t ready for his particular brand of investing.  It’s a decent beginning investing book; even if you didn’t really care for Rich Dad, Poor Dad, it might have some points worth knowing.

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If you’re a long-time reader, you’ve probably learned that I’m a fan of David Bach.  He makes good sense with most of his suggestions, and has a cheerful, optimistic style that makes you feel hopeful about your financial future.  I wouldn’t go as far as calling him my favorite personal finance adviser of all time, but he’s definitely near the top.

So, when I saw that he had come out with a new book specifically designed to target some of the areas where people have had trouble in the past few years, I decided to give it a shot.  Start Over, Finish Rich is designed as a guide to getting yourself and your finances back on track in 2010.  Is it the possible solution to all of your financial woes?  Let’s read through and find out!

Summary

Start Over, Finish Rich is organized as a series of steps to overcoming the financial problems so many of us seem to be facing lately.  The first step (and first chapter) is on recommitting to wealth.  After a personal story (all of Bach’s books that I’ve read have featured someone who shared a story with Bach about their personal financial journey) about a woman having trouble with money in spite of doing ‘all the right things’, Bach urges everyone to not give up and instead, to continue to strive to become wealthy.

The second chapter covers finding your money; organizing and understanding your current financial standing.  Bach presents the system of hanging files he recommends in order to organize and get your financial life under control.  The chapter then brings up the ‘Latte Factor’(R), his term for small, everyday expenses that use up much of our money without us even noticing.

Handling credit card debt is the subject of the third chapter.  For  people who can afford to make the minimum payments on all their debts, Bach recommends his DOLP(R) (Dead On Last Payment) method; paying as much extra as you can afford on the debt with lowest ratio of total amount owed to minimum payment due.  If you can’t make your minimum payments, he provides some advice and a few resources to get help paying down your debts (as well as some warnings about credit counseling and debt settlement companies).  The chapter ends with a brief overview of the changes brought on by the new CARD legislation.

Step four is a short guide to checking and fixing your FICO score, explaining how to check your score and a list of steps to improving it, covering suggestions from paying down your credit card debt as much as possible to keeping your old cards active by occasionally using them.  Chapter five goes over creating an emergency fund, starting with where to put your money and how much you should have (at least three months worth, up to enough to make you feel comfortable).  He emphasizes using a bank with FDIC insurance to ensure that even if your bank has financial trouble, your money will be protected by the federal government.

The sixth chapter is about getting your retirement saving and investing back on track.  Bach suggests not panicking (and definitely not pulling out all your investments just because they’re down), considering target date funds for your investments, and how to get advice if you need it.  He also emphasizes the fact that pre-tax accounts allow you to invest more money than you actually see removed from your paycheck (and that if you get a decent match on your 401(k) contributions, as well, you can end up investing more than twice the amount of money that actually disappears from your pay check).  The short seventh chapter provides some advice on ‘Making It Automatic’, automating your investing and other financial actions to simplify your life (sort of like a micro version of The Automatic Millionaire).

Chapter eight covers how to get rich in real estate.  Much of his enthusiasm for real estate echoes what he said in The Automatic Millionaire Homeowner, although he makes a few points specific to the current real estate market.  He suggests refinancing your mortgage while you have the time, not bailing out even if your house is underwater, and how to get the bank (or a government organization) to help modify your loan if it comes to that.  The chapter finishes with some advice on investing in real estate, either directly or via REIT funds.

Chapter nine covers ways to help save for the cost of education for your kids, giving a list of rules about such savings (not to save for your children’s education before you save for your own retirement, for example) and a number of possibilities if you can’t quite repay your debts.  The tenth chapter is a list of twenty-five ways to cut down on your expenses, covering everything from cutting out cable television to not playing the lottery any more.  Not a bad set of suggestions for decreasing your expenses.

There’s an eleventh ‘bonus’ chapter that covers many helpful sites if you are trying to donate to charity (many of which I’ve been using, with Bach’s prompting in the Automatic Millionaire, in order to do my own donation research).  The book ends with Bach sharing the story of his recent divorce and how he was able to hit the ‘reset button’ when he and his wife separated.

Pros

-Very optimistic: As always, Bach is very optimistic and supportive in his writing, giving plenty of encouragement to the reader to get their finances in shape this year.  He provides lots of encouragement to the reader, as well as helpful suggestions to help get your financial life in order, all in a very upbeat manner.

-Simple, Clear Instructions: Bach is never opaque with his recommendations or more complicated than he needs to be.  Everything that requires substantial effort is broken down and explained in a step by step fashion, making it easy to use this book as a guide to reworking your financial life.

-Engaging style: The book never seems hard to read through, coming off more like a friendly conversation with a helpful adviser than a detailed list of does and don’ts for you financial life.  The overall effect makes the book much more readable, and the whole thing goes by quite quickly.  Being interesting also helps make the suggestions and advice in the book more memorable.

Cons

-Some Questionable Advice: There are several points in the book where Bach’s recommendations (or his omissions) raised my eyebrows.  His DOLP method of paying off debts, for example, isn’t the most effective way to pay off your debts (I ran the numbers to prove it), and he champions traditional IRAs and 401(k)s without any acknowledge that the Roth versions will be better if tax rates rise in the future (which they likely will).  His advice isn’t bad, per se, since you will pay off your debts and build up your retirement account, but it is just a bit incomplete.

-Limited Depth: Even more so than the previous Bach books that I’ve read, Start Over, Finish Rich, covers a wide swath o f personal finance territory, necessarily meaning that some of the topics get short shrift.  If you are looking for a thorough guide to real estate ownership, investing, or finding ways to cut down your spending, you’ll need to expand your search beyond this book.

-More of the Same: If you’ve read a David Bach book before, many of the terms I’ve used in this review are probably familiar to you.  Things like DOLP, the Latte Factor, Make it Automatic, and even his fondness for home ownership have all been covered in his earlier guides.  If you’ve read some of Bach’s previous books, particularly the Automatic Millionaire/Finish Rich books, the amount of new material in this book will be under whelming.

Overall

If you’re new to David Bach’s writing, it’s definitely worthwhile to read through Start Over, Finish Rich, learn his philosophy, and try to apply many of his suggestions (being aware that sometimes he misses some possibilities, of course).  He makes many good points, and it’s always nice to learn another perspective on savings, investing, debt elimination.

If you have read his books before, it’s a less clear decision; if you found his advice helpful before, the new content might justify the purchase of this book.  If not, you might want to consider something else, since there’s not much new information here, and he certainly hasn’t made any big departures from his established positions on most monetary issues.  Good luck to anyone who needs to start over, in either case.

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You might not be aware, but I’m somewhat of a night owl.  It’s been quite helpful for working on the third shift; naturally being awake when most other people are asleep makes it that much easier to stay awake during the night.  But it has downsides, as well; on my nights off, there was virtually nothing to do.  By three or four in the morning, all the stores and bars are closed, so there was nothing to do but blog and watch late night infomercials.

It was on these infomercials that I first encountered Dean Graziosi and his book, Be a Real Estate Millionaire.  For those of you who haven’t encountered him, either because you never stay up that late or have better things to do when you are awake at three in the morning, he is a real estate guru.  That phrase alone probably sends up some red alerts for you, as it did for me, but when I saw his book in the store, I decided to pick it up and give him a chance.  Is there anything worthwhile in his message?  Let’s see.

Summary

The book is broken up into three different sections.  The first, modestly titled ‘Making a Fortune in Real Estate’, starts with a chapter about why real estate investing is a good idea (emphasis is put on being able to use leverage and borrow money).   The second chapter provides a brief overview of the different types of real estate markets, as well as why Graziosi favors residential real estate.

The next three chapters cover different factors to consider in the national and local real estate markets, to determine where you are in the real estate cycle.  Chapter three is an overview of national factors, like interest rates and inflation that can affect the real estate market nation-wide.  Chapter four goes into local factors for real estate markets, such as supply, demand, job growth and construction.  Chapter five shows how to apply these factors to your real estate market.

The last chapter in this section goes over how to find, buy, and sell real estate.  There are sections on what to look for in a property, how to pay for the real estate (mainly referencing future chapters in the third section), and people you should contact in order to buy and sell property.  The chapter end with a section on different strategies for making money from real estate, from buying and renting it out to flipping it.

The second section of the book is called ‘Building a Foundation for Success’.  The first chapter in this section covers getting your finances in order.  It’s full of good suggestions (most which can be found elsewhere on this very blog, for that matter), from building up your credit to tracking your spending.  Most of the suggestions in this chapter are pretty solid, even if you aren’t planning to invest in real estate.

The next two chapters cover how to remove mental blocks to success and overcome your fear of failure; the book starts to sound more like a self-help pamphlet than an investing guide at this point.  Chapter ten covers the basics of time management, so you have time available for real estate investing.  Chapter eleven finishes off this section by providing help with setting goals and then achieving them.

The third part of the book, ‘Creating Real Estate Wealth, finally gets to the meat of real estate investing.  Chapter twelve outlines the various types of (residential) real estate that are available, from single family homes to apartments, to give the reader an idea of what is out there.  Chapter thirteen covers various types of loans, deeds of trust, and mortgages, the various ways you can get funding for real estate investing.  It continues to go over the various sources you can consider tapping for loans, from banks to private investors, before covering the array of mortgage types available.

Chapter 14 covers buying real estate with no money down, covering a range of ways to purchase property without having any money on hand (although several, like using credit card advances or pulling equity from whole life insurance, are really alternative methods of getting money).  Chapter 15 covers lease options, where you lease a house with the option to buy it after a period of a year or two (with part of the lease money being applied to the purchase price).  Chapter 16 covers foreclosures, investing in property that has been seized by either a bank (if the previous owner failed to pay their mortgage) or a government agency (if the previous owner failed to pay their taxes).

The next two chapters chapters expand on some of the techniques in Chapter 16.  Chapter 17 covers how to purchase a home that is about to go into foreclosure, REOs (Real Estate Owned properties; those that have been seized by a bank) and short sales, where the home is sold for less than the present owner owes on their mortgage.  Chapter 18 covers tax liens (when the government requires that back taxes be paid or the owner evicted) and tax sales (when seized properties are sold to cover back taxes owed).

Chapter 19 covers some of the basics of managing a rental property, from finding good tenants to advice on collecting the rent.  He provides some basic advice on how to budget for repairs and improvements to your property, as well as how to deal with bad tenants.  The chapter ends with some advice on finding good property managers.  The final chapter is a short list of suggestions for how to get started investing, from creating an financial worksheet to see where your finances stand to finding advisers to help you invest.  The book ends with a short glossary of some of the terms used throughout.

Pros

-Optimistic: This book is nothing if not upbeat.  Grazisoi is, by all appearances, a very happy person, and that happiness comes across throughout the book.  Almost every chapter includes a ‘Real-Life Story’ about how he (or more often, one of his students) applied the suggestions in that particular chapter to successfully invest.  It seems both realistic and doable for the average person.

-Aimed at Novices: The book is not filled with jargon or designed to make real estate seem unfathomable.  All the terms used are defined when first introduced, and most also appear in the glossary at the end of the book.  It’s pretty easy to follow what Graziosi is saying, and to learn what he is trying to teach.

-Covers a Lot of Ground…: In the course of the book, you’ll get an introduction to just about every method of real estate you’ve ever encountered (and probably many you haven’t).  Further, it also covers a number of related topics, from money and time management to studying the national real estate market.  It’s hard to think of an area of real estate investing that is not at least touched upon in this book.

Cons

-…But Not Very Deeply: There’s an expression, ‘a mile wide and a foot deep,’ to describe something that attempts to cover too broad a topic and can just skim the surface.  That’s the way this book feels; by trying to cover everything about real estate investing (as well as several not quite vital subjects in part two) in a single book, the amount of space devoted to each method or other subject ends up being rather limited (even with the smaller than usual type used in the book).

-Some Odd Priorities: As mentioned above, there’s quite a bit of material included in the book that doesn’t directly relate to real estate investing (such as the chapter on overcoming your fear).  There’s also areas where the book seems to be lacking; only a single chapter is included on managing the property and filling it with tenants, and there’s nothing specific about selling your property.  A slightly different mix of material covered would make the book seem less like a self-help book and more like a real estate investment guide.

-Not Enough Caution: While there’s nothing wrong with optimism, it should be tempered with a proper amount of caution.  Graziosi makes the occasional passing comment about how something went wrong with one of his investments (such as the problems he had with a property management company one time), but a ‘Real-Life Story’ or two about how investments can go wrong, a section of each chapter telling how the methods described can go awry, or even a chapter or two on failed real estate investments would go a long way toward tempering the tone of the book.  It also wouldn’t hurt to give potential investors a better idea of what pitfalls to avoid.

Overall

Be a Real Estate Millionaire is a good introduction to investing in real estate investing, in all its many forms and possibilities.  If you are inclined to invest in real estate, this book makes a good place to get started.  Two caveats: first, it’s worth getting other books that go more in depth on the particular investment method you decide to use; a single chapter isn’t really enough to thoroughly understand the real estate method you choose to use.  Second, take the success stories and optimistic tone of the book with a grain or two of salt; you CAN, in fact, mess up while investing in real estate.  The precautions in the book will help you to avoid these problems, but well, sometimes things happen that you can’t foresee.  Follow these caveats, and Dean Graziosi should be a good guide to starting your investment career in real estate.

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It’s been a long time since I put a Ben Stein and Phil DeMuth book through the patented Amateur Financier review process, but here we are, and it’s time to put them back through the wringer.  Yes, if you write a personal finance book, sooner or later you will find that yourself in my steely gaze, and if you write more than one book, expect to find yourself a repeated target.  Which brings us right back to the book in question.

Yes, You Can Still Retire Comfortably! is another investment book from this pair, written in much the same way: heavy on statistics and explanation, light on ‘one size fits all’ advice.  It’s a guide specifically aimed at older persons approaching (or at least preparing for) retirement and attempts to beat the Baby Boomer retirement crisis.  What suggestions do they have to that generation to keep them in the black?  Well, let’s check out and see what’s under the cover:

Summary

The book is divided into three main parts.  The first one, called Yes, You Can Still Retire Comfortably! (creative, no?), starts with 21 basic rules of retirement (including things like spending less than you earn and maxing out your retirement accounts) and a decade by decade guide to your financial life, providing advice for every age bracket from teenagers up to (and beyond) retirement.  Consider it a shorthand version of Yes, You Can Get a Financial Life! (the other book I’ve read from Stein and DeMuth).

The first official chapter of the book details the coming problems with retirement planning for Baby Boomers (and Generation X, and although we aren’t mentioned, Generation Y, as well): Social Security is running out of money and company pensions have all but disappeared, taking out two of the three traditional ‘legs’ supporting retirement nearly nonexistent.  The third and final leg, personal savings, is still around; the only problem is, most people aren’t saving enough to supplement these programs, to say nothing of saving enough to supply all of their retirement needs.  The second chapter covers the importance of saving in order to save yourself.  The book recommends several ways to cut down your spending, including eating out less, buying used  cars, and owning your own home.

The second part of the book (entitled How Much to Save and How Much to Spend) attempts to go into more depth on how to get your finances in order.  The third chapter provides a ‘back of the envelope’ (in the author’s terms) guide to how much you should be saving at each stage of your life, making a number of assumptions about your life, your investments, and your eventual age at retirement.  The fourth chapter is similar, allowing you to choose from a number of options, not only those above, but things like how much you expect to get from Social Security (if anything) and from a pension (again, if anything).  Once you know how much to save, the fifth chapter covers what to use as your investment.  (Stein and DeMuth recommend index funds, of equal parts Total US Stock market, Total Foreign stock market, Total US Bond market, and TIPS.)

Now that you have your portfolio set up, it’s time to let you in on the retiree’s paradox: if your portfolio is set up properly, you will have plenty of money later in your retirement, as long as you can live on relatively small portion in the beginning (when you’re the youngest and most eager to go crazy with your retirement funds).  The last two chapters in this section address two different methods of getting income in your retirement.  The first is by setting up an income portfolio, with REITs and high-yielding dividend stocks (or appropriate funds) in place of the stock index funds mentioned above.  The second is information on how to draw down a non-dividend fund, which provides information on safe withdraw rates at different time stretches until the end of your retirement and at different margins of safety.  It finishes with an interesting discussion of how the advantages of dollar-cost averaging while you are saving for retirement end up biting your rump due to negative dollar cost averaging during retirement, and suggest market timing as a possible solution (selling stocks when they are overpriced, and bonds when they aren’t).

The third part of the book is called If Everything You Have Isn’t Enough, and covers three possible contingencies to make your money stretch further.  The first option they bring up is immediate annuities, where you turn over a lump sum of money to an investment company and receive a regular payout in return.  The second is to relocate, either to a less expensive part of the country or to a less expensive country (they recommend several, including Mexico and Costa Rica).  The third option presented is to take out a reverse mortgage to draw down the equity in your house.  All have potential, although will require significant research before you can safely choose one (or more than one) to make your savings carry you through retirement.

The final part of the book covers 25 Big Truths of Retirement Planning (yes, the authors do seem to like their lists).  Then they go over about a half dozen different retirement withdraw methods that have been suggested, subjecting them to the economic conditions of the Great Depression (and the three decades that follow), to ensure how well a one million dollar portfolio would have performed during that time frame.  Their method of using a balanced portfolio, rebalancing yearly, and using the safe withdraw numbers they provided earlier was a success in this regard, although a few other methods had some promise (and many more simply crashed and burned).

Pros

-Easy To Personalize Advice: Of all the books I’ve read about investing and retirement, this is first one that’s essentially a financial planner in book form.  If you go through the worksheets provided at various points along the way, you’ll create a reasonable financial plan for yourself, without the need to bring in an expensive planner.  It’s one of the only books I’ve read that didn’t fall back on a single number when telling people how much to save for retirement (or even worse, just telling you to ’save as much as you can’).

-Well Supported Information: The calculations and figures presented are well supported by research provided in the book, and the claims made by the authors are backed up, either by historical fact or repeated standardized testing protocols.  The level of backing provided by the authors for their arguments is rare in other books, and it helps to back their credentials as sources of information well worth giving a listen.

-Very Thorough: There aren’t many aspects of planning for retirement (or finding money in retirement if you didn’t start planning early enough) that aren’t covered in this book.  From creating a personalized investment and savings plan to drawing down your accumulated funds, there’s enough advice to help people gain a handle on their money.  From getting started investing to using your funds to provide for your retirement, there’s a wealth of information for all types of people.

Cons

-Conservative Leaning: I know I said this in my last review of a Stein/DeMuth book, but well, here it is again.  Although the conservative bias isn’t TOO noticeable after the first chapter (which details many of the ways the government has failed in the authors’ eyes, and also takes a crack at Al Gore), it does occasional tint the advice in the book.  Whether that is enough to make you skip this book is up to your individual politics, I suppose.

-Sometimes Confusing: As sometimes happens when trying to follow a rather complex train of thought, it’s possible, even likely that you’ll lose the thread of conversation or fail to completely understand the point.  Unfortunately, the book doesn’t make much effort to clarify or resolve the more complex issues it tackles, so it’s possible that you’ll end up missing something if you don’t have a decent monetary background.

-Occasionally Insulting: Besides the aforementioned conservative slant, there are some parts of the book that are simply insulting.  Negative comments about the lower class, lawyers, and the average worker (among others) are expressed, with varying levels of justification.  You might just find yourself (or someone in your family or circle of friends) being backhandedly insulted in the course of the book.

Overall

While it has a few flaws (due more to the authors’ politics than the book’s other contents), Yes, You Can Still Retire Comfortably! is an impressive store of personal finance planning knowledge.  Perhaps not the best gift for the devote leftist in your family, but a solid source of investing and saving information.  Whether you’re trying to create a saving and investment plan, checking to see that you’ll make your retirement goal, determining how fast to draw down your savings, or even figuring out how to stretch your retirement money further, this book will have some good suggestions.

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Ah, Rich Dad, Poor Dad.  I have a history with this book; if you recall from one of my first posts, it was an audiobook version of this very book that first caused me to think about personal finance, and is thus indirectly responsible for this blog.  So, I have a certain place in my heart for this book.

That said, it’s also one of the most controversial personal finance books in existence, and most readers either love it or hate it, with very few falling in between.  Kiyosaki’s high-risk, actively-trading style certainly is in high contrast to my more passive, index-based style.  So, now, more than a year and a half since I first encountered Rich Dad, Poor Dad, what’s my take on the print version of this famed investment tome?

Summary

The book starts with an introduction to the differing philosophies of Kiyosaki’s two ‘dads’, his poor biological father, and his friend’s rich dad (who might be entirely a metaphor).  The next six chapters cover several of the lessons passed on by Rich Dad while teaching Kiyosaki how to be rich.  The first lesson is that the rich don’t work for money; rather they put their money to work for them, by investing in wealth generating vehicles.  Many of the people who remain poor and middle class focus only on what they are currently earning through their work, rather than trying to lay a foundation so they no longer need to work.

The second lesson is to improve your financial literacy.  Kiyosaki focuses primarily on knowing the difference between an asset (an investment that earns you money) and a liability (something that costs you money on an ongoing basis), and knowing to buy only assets.  He goes on to note that a major reason most middle class people fall to become rich is that they purchase liabilities, which they mistake for assets.

The third lesson is to mind your business, buying assets (as Kiyosaki defines them) and using them to build your cash flow.  This short chapter gives some suggestions of investment vehicles you can use to build your investment income.  The fourth lesson covers the role of taxes and corporations in building your wealth.  It is an overly simplified view, but provides the lesson that knowing the tax laws of your location can make the difference between success or failure of an investment.

The fifth lesson maintains that the rich invent money.  He provides the story of buying a house worth $75,000 for merely $20,000 and selling it for $60,000, netting a $40,000 profit for his efforts.  Through this and other examples, he stresses that through the use of intelligent investments, it’s possible to generate high amounts of profits without putting in any of your own money.

The sixth and final lesson provided by the book is to work to learn, rather than working for money.  Kiyosaki maintains that work should be done to improve your knowledge and expand your skills, but that you shouldn’t depend on your job to supply you with enough money to meet all you needs.  The last few chapters provide advice on overcoming obstacles and getting started in your investment career.  The book ends with a story of how of one of Kiyosaki’s neighbors used investments in real estate to provide for his son’s education.

Pros

-Very Optimistic: Kiyosaki’s writing is nothing if not very hopeful and assured of success for the reader’s investment future (provided they follow his advice, of course).  If you are feeling unsure or pessimistic about your ability to successfully invest and build up your net worth, a short read through Kiyosaki’s works will generally leave you convinced that not only can you invest, but you can do so quickly and easily.

-Entertaining: While most investing and personal finance books are very dry and dull, Kiyosaki is an interesting, captivating writer.  His books are rarely dull, and most of the lessons are explained in the form of colorful anecdotes.  He teaches the point that the rich don’t work for money by explaining how his ‘rich dad’ told him to work without pay, and telling how it enabled him to come up a money-making plan all on his own.

Cons

-Overly Simplistic: Kiyosaki doesn’t provide much detail into how to carry out the methods he suggests in his book, instead focusing more on a broad way of thinking.  If you are seeking details of how to use any of the methods he methods in the course of the book, from purchasing real estate without a down payment to investing in tax lien certificates, you’ll need to look elsewhere for a how to.

-Some Incorrect Advice: In the course of his book, several of the points that Kiyosaki addresses are either incorrect, or simplified to the point that they aren’t that useful at all.  This is probably most evident in the fourth lesson, covering corporations.  He mentions how corporations can avoid taxation on their expenses, without covering the fact that corporate profits are subject to taxation at both the corporate and individual level.  (For C corporations, at least.)

-Sometimes Condescending: At times during the book, Kiyosaki takes a tone that is rather insulting.  Starting with how he wrote an entire book (and actually, created a media empire) by calling his father ‘Poor Dad’, he has a tendency to talk about people who derive their income primarily through work as failures.  He refers to workers as hamsters, calls the process of working for your income the ‘Rat Race’, and denigrates the government.  Add in the not so subtle jabs at anyone who doesn’t use his methods to generate wealth, and there’s a good chance you’ll be insulted at some point during this book.

Overall

If you’re looking for a source of inspiration during your investing life and have a rather thick skin, Rich Dad, Poor Dad could be just the thing to give you a kick in the pants and make you think more about your investments (it did for me).  That said, it’s not the only investment book you need, and frankly, you can get by without ever reading it.  Try to find it in the library (it’s a fairly popular book, so it shouldn’t be that hard to find) and give it a read before you buy; that way, you’ll have a better idea if it fits your needs and personality well.

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For the second time (but probably not the last), I’m going to be reviewing a book about money that is more humorous than straight out informative.  Unlike Dave Barry’s Money Secrets, which was an out and out humor book that was only tangentially about money, this week’s book contains plenty of good, accurate information, just written in a humorous manner.

P.J. O’Rourke’s Eat the Rich is, I hope you have guessed, not a cook book about preparing well off as snacks.  Instead, it’s a comparison of several of the different types of economies from around the world, from capitalism to socialism and back again.  Let’s take a look at some of his findings along the way.

Summary

O’Rourke opens with a explanation of his own history of interest in money (starting from his youth as a leftist, becoming the Republican Party member he is today.  Then, he covers a series of different types of economies: good capitalism (Wall Street; remember, this book was published back in 1998), bad capitalism (Albania), good socialism (Sweden), and bad socialism (Cuba).  There’s little coverage of the details of how the systems work; it’s more of how each system looks from the ground level (although, the Wall Street chapter covers several types of investments that should be familiar to long time readers of The Amateur Financier).

The sixth chapter is an ultra short course in economics (including such profound lessons as ‘You Can’t Have Everything’ and ‘Everyone Gets Paid’), followed by further tours of a variety of economic situations.  Post-communist Russia is explored as an economy desperately trying to find the best path, Tanzania is given as an example of a land with tremendous natural resources that has been unable to make anything of itself, Hong Kong is touted as making everything from nothing (and seems to meet the qualification), and Shanghai is given as an example of how to have the worst of both capitalism and socialism.

The book concludes with a rather passionate, well thought out defense of free trade, as well as freedom of all types.  O’Rourke does a very good job of defending capitalism, with all its winners and losers, from those who would attempt to limit capitalism’s growth.  In particular, he makes a very good argument against redistribution of money in the interest of fairness.

Overall

I like P.J. O’Rourke.  He makes one of the most compelling case in favor of capitalism in its purest, most unfettered form (as practiced in Hong Kong, for example, where the government provides only the basics of society and allows private enterprise to provide the rest).  If you want to read a well-reasoned, rational defense of capitalism, either to bolster your own beliefs or to challenge them,you’d be hard pressed to find a better one than what Mr. O’Rourke provides.

Plus, it’s pretty funny, to boot.

(As an Addendum: I can’t write several hundred words on P.J. O’Rourke without mentioning one of his other books, one that should shed more light on just why the US government does the things that it does. Parliament of Whores is a fantastic guide to the government and exactly our democracy works.  Even though O’Rourke is an avowed conservative, the descriptions of Washington politics he gives is surprisingly sympathetic to the trials and tribulations of politicians and bureaucrats.  Although, it’s worth noting that he concludes that all governments are a parliament of whores, and in a democracy, the whores are us…)

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

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

Summary

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

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

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

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

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

Pros

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

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

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

Cons

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

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

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

Overall

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

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Boo-yah!  Chances are, even if you have no interest in individual stock investing, you’ve still heard of Jim Cramer at some point in your investment career.  The hyper, over-the-top host of CNBC’s Mad Money is one of the most famous personal finance personalities currently on the air, well-known and repeatedly parodied.  (How many people can claim to be a major plot point on an episode of ‘King of the Hill’ AND a throw-away joke on ‘The Simpsons’, amongst other references?)

Besides being very, uh, enthusiastic on his television show, Mr. Cramer is also a fairly prolific author.  In Jim Cramer’s Real Money (and yes, that is the real title of the book; he’s also just a wee bit egotistical at times), he details his methods of investing in the stock market.  What nuggets of wisdom can we learn about from a guy whose biggest claim to fame is using sound effects during his broadcasts?  Well, let’s find out!

Summary

Jim Cramer’s Real Money is two parts stock trading text book, one part Jim Cramer’s greatest hits, and one part Jim Cramer’s biggest mistakes.  He opens the book with the story of how he came back from one of his biggest loses from his hedge fund days, before providing a basic explanation of stocks, where he stresses that while you can’t completely ignore the financial situation of the issuing company, stocks are by and large simply pieces of paper that are traded, before covering some of the basics of investing.

Once the general information is out of the way, Cramer goes into more details on how he goes choosing his investments, from discussing the investment cycle he follows to the factors he considers when choosing a company he expects to exhibit break out performance.  He covers his ten commandments of trading, his twenty-five rules of investing, and the five (or ten, if you have the time and inclination) types of stocks he recommends for a good, diverse portfolio.  The book finishes off with some suggestions on spotting tops and bottoms in the market, as well as a brief discussion of some more advanced techniques for investing and speculating in the market.

Pros

- Stresses Hard Work: One flaw of many ‘investment’ guides that focus on trading individual stocks is that they imply that stock investing is safe, easy and highly profitable.  Not Cramer; he acknowledges that stocks are more volatile and potentially risky than funds, and strongly encourages anyone who wants to invest in stocks to do their homework.  One of his tag lines through the book is ‘buy and homework’, that is, the need to spend one hour per week per stock doing research to make sure your investment is still a good one.

-Makes Retirement Investing a Priority: Cramer makes the distinction between money set aside for retirement, which needs to be kept safe, and money that can be used for speculative investments without putting your retirement at risk.  He pointedly tells readers to only speculate with money they can afford to lose without materially affecting their retirement.  It’s definitely good advice to keep a distance between your speculation money and your investment money, and never forget which is which.

-Thick with Good Trading Advice: The entire book comes off as ‘Professor Cramer’s Lessons to Would-Be Traders’, which is a pretty good description.  My summary only touched upon the sheer breadth of material covered in this book, which goes into much greater depth on everything and anything that can affect stock prices over the short term.  If you’re looking for a text book guide to trading, you could do worse than this book.

Cons

-One Word: Trading: A book is only as good as what you can get out of it, and if you aren’t planning to trade stocks, there’s not too much here for you.  Cramer himself tries to warn off anyone without the time or inclination to do the needed research, and if you’re going to be investing primarily in mutual funds, you should probably stick with a different book.

-’Crameresque’: If you’ve ever watched Cramer’s shows, you’re probably aware that he tends to be full of energy and somewhat stream of conscious in his hosting style.  The book has much of the same feel, with stories and anecdotes intermingled within his explanations and examples.  It makes for a sometimes difficult, if arguably entertaining read.

-Too Optimistic: Far be it for me to try to rain on anyone’s parade, but unfortunately beating the market is a fairly difficult proposition.  (Many would go as far as arguing that it’s nigh impossible to do and costly to try, but that’s a story for another day.)  Cramer’s claims that just about anyone can do so, as long as they follow his methods, have to be reconciled with the horrible results even many professional investors suffer much of the time.

Overall

If you’re looking for a guide to individual stock investing, you would be hard pressed to come up with one more thorough, in-depth, and simply entertaining as Jim Cramer’s Real Money.  He does a good job of preparing you to invest your own money in the stock market, and of showing you how to follow the methods he uses.  Just make sure that individual stock investing is right for you, you are only trading with money you can afford to lose, and that your retirement investments are on track, and you’ll do fine.

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Ah, David Bach.  I like you; you give out good advice, promote a long term view, and encourage automation of everyone’s expenses, all of which appeals to me.  Your book, The Automatic Millionaire, is clear guide to setting up your expenses, and it’s become one of my favorite investing books.  Because of all this, I picked up another of your books with great interest.

Alas, I think I  had bad timing when I first read through The Automatic Millionaire Homeowner.  It was just after the real estate market started to collapse, when it was hard to believe that there was still a way to make a profit from real estate.  If I wasn’t already a Bach fan, I probably would have just passed it up like all the other real estate books.  But I decided to pick it up, give it a read or two, and actually walked away with a bit more knowledge as a result.  Let’s take a look inside, then.

Summary

The Automatic Millionaire Homeowner is essentially a guide for the first time home buyer, wrapped up in David Bach’s particular philosophy of money management.  If you’ve read any of Bach’s books (or the review of The Automatic Millionaire I linked), you should probably be familiar with many of his points: automate your expenses as much as possible (applied here to saving for your down payment and paying your mortgage) and cut down on the small, everyday expenses (like that morning Latte).   The basic plan he tries to express is that by buying a house, living in it, paying off the mortgage over time, and then using the equity in the house for other purposes, such as buying rental property, by selling the home or taking out a home equity loan.

Much of the rest of the material in the book covers some of the basics of home buying.  The first few chapters, on saving for the down payment and why home ownership is a smart idea, should be familiar to anyone who read his earlier works.  The later chapters, though, start to cover the process of buying a home in much greater detail, from choosing a mortgage and a mortgage broker to finding a real estate coach and starting to buy property as an investment.  He also touts his preferred biweekly mortgage plan (wherein you pay down your mortgage with a half payment every two weeks rather than a full payment every month, leading to 13 full payments per year vs. 12), a sound plan in principle, but one that draws much fire from other financial gurus.

Pros

-Easy to follow: One of Bach’s biggest strengths as a writer is being able to write in a friendly, easy to understand fashion.  Whether discussing all of the types of mortgages that exist (or used to exist) or explaining how to choose a mortgage broker, he makes every step of the home buying process easy to understand, even to someone like me who has never purchased a home.  Combine that with the step-by-step instructions he gives at every stage of the process,, and you have a very helpful and informative book.

-Lots of Details: If you are a fan of charts and graphs illustrating what happens in different circumstances, Bach has you covered there, as well; you find plenty of information to help make decisions on how much to spend on the house, what sort of mortgage to take, and how long it will take you to pay it off.  You’ll also find lots of sources listed for more information, from online banks to save up your down payment to the Department of Housing and Urban Development.  In spite of the details, the book never seems overwhelmingly stuffed with information; you’re given just enough information to help you find what you need on your own.

-Encouraging Tone: Reading a Bach book is a bit akin to getting a lesson from someone who is part professor and part cheerleader.  He not only makes the material easy to understand, but also adds his words of encouragement and kudos to the readers, attempting to motivate them into taking action.  The result is an uplifting, very hopeful book.

Cons

-A Bit Gung Ho: At times, it almost feels as if Bach is pushing you into home ownership, regardless of your wants or desires.  The entire second chapter is devoted to reasons why ‘homeowners finish rich, and renters don’t', for example, which ignores that there are valid reasons for continuing to rent (need for flexibility, rapidly changing life circumstances, etc) even during a positive real estate market.  It even feels as if he is pushing a home ownership agenda upon you at some points in the book, and when you get to the end, you realize he is…

-Questionable Associations: At the back of the book, it’s revealed that Bach has partnered with Wells Fargo to promote home purchases.  Now, I’m not saying that there is anything nefarious occurring there; such business and promotional relationships are quite common, and it seems as if Bach did nothing untoward in his attempts to promote this Great American Homeowner Challenge (c).  But, it does cast a bit of suspicion on the rest of the book, in light of Bach’s attitude.

-Somewhat Outdated: Again, I purchased the version of the book made in 2006, when wild and off the wall mortgages roamed the Earth and anyone with a pulse could get a house.  As a result, some of what is described in this version in terms of mortgages, minimal down payments, and requirements to get credit seems out of step with the current real estate climate.  There is a newer version of the book, though, which might bring some of these issues up to date, so consider this a tentative con to the book.

Overall

If you’re new to purchasing a home of your own and want some simple, hand holding advice on where to go and what to do, you could do much worse than The Automatic Millionaire Homeowner.  As a simple, very articulate guide to home buying, directed at the neophyte homeowner, it serves quite well.  Just take Bach’s concerns about renting as opposed to buying with a grain of salt, and consider your own situation (now and in the foreseeable future) before you make any big, life-changing decisions, and you will find this book a valuable resource.

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If you’ve done much reading in the financial sector, you’re probably aware that there are many, many experts out there, all offering advice.  Many of them have published books or written numerous magazine articles to express their opinions, but you don’t have the time or inclination to read through all that information.  What if there was a book that enabled you to get the most pertinent information from dozens of investment and money-management experts all in one place?

That’s the general concept behind The Best Investment Advice I Ever Received compiled by Liz Claman.  She has assembled a collection of essays from some of the most famous financial advisers currently working (Orman, Cramer, Kiyosaki, Forbes, etc.) as well as numerous professional money managers (most famously, Warren Buffet).  Their collective investing advice is boiled down to simple essays ranging from five words (’”Buy Low, Sell High”-Unknown’, contributed by C. John Wilder) to several pages long.  Does cutting down on the length still leave you with good and pertinent advice?  Let’s read on and see!

Pros

-Short, concise segments: Each article in the books is fairly short, but in general, they get across the major points the writers tend to stress in their other work.  John Bogle’s article, for example, stresses the benefits of index investing (and the costs of market timing), while Steven Forbes emphasizes diversification and sticking to your investment plan.  You won’t get all the detail found in the individual authors’ works, but as a broad, quick guide, this books serves rather well.

-Good Advice (Mostly): Even though there are sixty-six different contributors to this book, the same advice keeps coming up, time and time again: diversify, plan for the long term, do lots of research, and regard your stock broker’s (or other financial adviser’s) suggestions with a grain of salt, as they might be trying to benefit themselves more than you.  Hearing the same advice from so many different commentators, stated in a variety of ways, helps to reinforce it as well as highlighting just how many people believe in the advice.

-Genuinely Entertaining: Too many personal finance books tend to get bogged down in the math and research needed to manage your money or do well in investing, and tend to be a bit dry as a result.  The Best Investment Advice I Ever Received manages to avoid that fate, in part by having virtually no math content, and also because most of the writers tell stories rather than make lists of facts.  The structure of the book has many authors relaying stories from their childhood or younger adult life, giving the book an overall feel of a group of people gathered to share stories, rather than a usual personal finance book.  All of which makes for a much easier and more entertaining read.

Cons

-Some Unhelpful Advice: As with any book that attempts to gather so many different voices, there’s going to be some that aren’t as useful as the others.  Some of the ‘best investment advice’ the writers rely was highly situational and wouldn’t be as helpful now.  The most glaring example is from John W. Brown, chairman of the Stryker Corporation, who notes that the best financial advice he ever got was… to join the Stryker Corporation.  Not exactly something that’s easy for the average investor to apply to their portfolio.

-Lack of Detail: The disadvantage of having so many different perspectives packed into a single book is that there’s little room for the contributors to flesh out their comments.  If you’re seeking specific investment recommendations, or even a detailed procedure for investigating and determining your own financial plan, this isn’t the book for you.

-A Bit Overwhelming: Let me be frank: this should not be the first investment book that you read.  If you’ve got a basic understanding of investing and a handle on the general concept, you should be able to follow the suggestions easily enough, but if you are still learning, it could prove a bit tricky to understand what these advisers are discussing.  Trying to sort through the advice from over sixty people, to determine which ones are giving you good advice and which ones are not, is something a bit beyond the skills of the average would-be investor just getting his or her feet wet.  Save this book for when you have a basic financial plan and want some second opinions.

Overall

I like this book in general.  It’s definitely an easy read, and the advice given by (most of) the included writers is helpful and entertaining.  That said, I would treat this book as more a collection of mini-biographies of famous financial people, rather than a guide to investing.  As mentioned in the ‘Cons’ section, trying to develop an investment plan just from the information in this book would prove quite difficult, if not impossible.  If you have an investment plan already, the tips included in the book might help you to refine and improve it, but building from scratch is a much different story.  In any event, it does make for a decent read, so pick it up and enjoy some of the commentary from the financial professionals included.

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Welcome again to another edition of the Amateur Financier book review.  Today, we’re going to cover a book written by a professional in the financial arena, one whom I had never heard of prior to getting his book.  Ric Edelman is a financial advisor, who runs his own financial services firm, writes a syndicated advice column, and has a radio show.  The fact that I missed hearing about him is apparently more my lack of a truly wide financial reading list.

He is quite passionately opposed to investing in regular mutual funds, a point made though out his book, The Lies About Money.  This book attempts to correct, well, the lies about money we are told by most financial advisers attempting to sell us a bill of goods. Of course, being a financial adviser himself, perhaps Mr. Edelman is attempting to sell us on his particular products and services.  So, is there useful information to be found in The Lies About Money, or is it a thinly disguised sales pitch?  Let’s find out.

Overview

The first few chapters introduce Mr. Edelman’s investing philosophy, which should be familiar to most personal finance readers: Save regularly, hold your investments for the long term, diversify, and occasionally re-balance when things get too far out of whack.  The first chapter introduces the concepts, the second covers some of the statistics behind the strategy, and the third notes that the easiest way to invest is to use mutual funds.  So far, pretty much par for the course, right?

Well, that’s where things start to get interesting.  Chapter four covers the problems with mutual funds, listing no less than twenty five individual flaws surrounding retail mutual funds, from closet indexing to holding excessive cash to illicitly steering trading business to select brokers in exchange for payments.  If that wasn’t enough, it’s followed by a time line of illegal and morally questionable actions by mutual fund companies, from late 2003 to mid 2007 (and continuing online), that includes every major (and a few minor) fund families and impugns most of the retail mutual fund market.

Luckily, chapter five brings us a solution: use institutional mutual funds, mutual funds designed for large institutions (think: college endowments, pension funds, etc.).  This way, you can avoid most of the troubles with mutual funds, while still investing in a way that leaves you properly diversified; although, you have the problem that institutional shares can only be purchased through approved financial advisers.  Chapter six briefly covers ETFs as one possible solution for an investor of more modest means, who wants to save the fees charged by advisers.

Chapter seven starts the process of helping the reader figure out the best portfolio for them (of the forty-three examples listed in the book, in a full-color section included in the middle).  After answering the questions in chapter seven, you will led to questions scattered throughout the rest of the book (which kind of reminds me of the old ‘Choose Your Own Adventure’ books).  The results you get from all these questions will tell you which of the example portfolios is most appropriate for you.  Chapters eight and twelve list a total of six insights into investing that should help guide you through the investing process, including not letting fees or taxes dictate your investment choices and not to overestimate your investment returns.

The rest of the book is composed of fairly short chapters that touch on a number of side issues.  Chapters nine, ten and eleven cover how to modify the techniques previously covered in the book to save in an employer’s retirement plan, to save for college, or to invest for income.  Chapter 13 cover how to invest through life insurance (hint: just buy a term policy and invest the rest), Chapter 14 covers how to invest through (deferred) variable annuities (hint: they are the best choice in only a limited number of circumstances) and Chapter 15 attempts to deflate concerns that retiring Baby Boomers will cause a stock market crash in the next few years.  The book ends with an Epilogue that reviews the main points made earlier.

Review

Pros: The book is fairly easy to read, with more than a touch of humor.  The investment guide listed in chapter seven can help you to find a highly differentiated portfolio that should be right for you.  The advice provided is general, but should be appropriate for most investors.

Neutral: There are numerous references to other books by Mr. Edelman and comments about his investment planning company, which could be seen as shilling for his company.  Some of the humor also comes across as rather unfunny.

Cons: The suggestions given seem rather self-serving, including to invest in institutional funds primarily.  There is no discussion of alternatives besides ETFs (index funds are glossed over, with a comment to check one of his other books), leaving the reader with the assumption that the only way to avoid the problems of the mutual fund industry is to use a financial planner (like him) who can buy institutional funds.

Overall: The advice in The Lies About Money is largely good, if biased in favor of having you approach a financial adviser to run your investment portfolio.  If you’re a do-it-yourself investor, you’ll likely be put off by the tone of this book as well as some of the specific suggestions; you can achieve most, if not all of the benefits outlined by putting your money into  index funds.  If you lack the time, knowledge, or inclination to run your money yourself, Mr. Edelman makes a good case for hiring a financial adviser, and reading through this book will help to reinforce that idea in your mind.

Personally, as I lean towards running my money on my own, I doubt I’ll be following all of the advice contained within.  But, it was rather eye-opening about some of the problems with mutual funds, including index funds, and I gleaned some insight nonetheless.  So, let’s call it a tentative recommended read, overall.

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If you do much investment reading, you’ve probably noticed that many, if not most, financial writers focus on investing in mutual funds, particularly creating allocations of index funds and only altering them slowly as you age, shifting the allocation to be more conservative over the decades.  From Suze Orman to Ben Stein, the emphasis from financial advisers is almost overwhelmingly on creating a portfolio of index funds and slowly shifting it over time.  Which is a perfectly acceptable plan; but, what should you do if you want to invest in individual stocks?

Enter the Gardner brothers, the founders of the Motley Fool website.  They make the case that not only can you safely invest in individual stocks, but by doing so, you can do better with your investments than possible with index funds.  How is this possible?  Well, to find out more about the Motley Fool philosophy, we can pick up The Motley Fool Investment Guide and find out.

Overview

The Motley Fool Investment Guide is divided into nine different sections (ten if we include the appendices).  The first section starts with an introduction to the Gardners and the Motley Fool website before covering some of the common mistakes made by investors.  (These include both buying stocks without doing your own research as well as not investing in stocks because you feel they are too risky.)  The section concludes with an exhortation for the reader to get online to take advantage of all the resources available to investors on the internet (which is probably second nature to anyone reading this blog).

The next two sections get into the Foolish (a term used in the book to describe the Gardner investment philosophy, and thus, the ‘wise’ course of action) investment philosophy.  The second section covers mutual fund investments, noting that the best choice for a fund investor is an index fund (particularly, they recommend one that mimics the S&P 500).  After spending three chapters building up to this conclusion, the third section of the book then tears it down.  They raise some issues with the Efficient Market Theorem (a major underpinning of index investing) and start to cover some of the sources of information that can be accessed when attempting to research stocks (including Securities and Exchange Commission (SEC) Filings, such as 10-K and 10-Q forms).

The fourth section is a brief introduction to the two types of stocks in which you are encouraged to invest: blue chip companies (large, established companies that offer stability and some growth potential) and small-cap growth companies (with high possibility of future growth and little institutional interest, yet).  In both cases, the Motley Fool guide recommends growth stocks, and the fifth section of the books goes into depth as to how to evaluate stocks for their growth potential.  This section gets a bit deep into valuation principles and calculations; the evaluations listed for stocks require some math, but everything is clearly spelled out (and with the SEC’s online website, the needed fillings are easy to find).

In part six, the book gets more into the qualifications they have set out for investing.  They describe how to find their Rule Makers (the blue chip companies that dominate their field) as well as the Rule Breakers (the strongest contenders in emerging fields).  They then provide reasons to sell, both for reasons of company fundamentals and for portfolio management and diversification purposes.  The section concludes with an example of mechanical investing, the (now defunct) Foolish Four.

The next three sections cover some other topics important to would-be investors.  The seventh section discusses the use of margin and short selling.  The eighth reviews some of the reasons and motivations to invest in stocks.  And the ninth serves as a farewell, as well as encouraging the reader to manage their own money, be aggressive, and give back to society.

The last part of the book is a serious of appendices.  There’s an introduction to stocks, a description of a penny stock scam/April Fool’s gag run on the Motley Fool website, and a carnival themed guide to investment scams and schemes.  It provides an interesting introduction to several issues that weren’t covered earlier in the book

Review

Pros: If you are looking for a book that covers the often tricky subject of investing in individual stocks and does so in a way that is both informative and entertaining, the Motley Fool Investment Guide is a pretty good option.  It provides an informative introduction to the subject of stock investing which focuses on evaluating the stocks for potential growth.  It covers how to read through a company’s corporate filings and evaluate them in a way that is largely understandable.  The attempts to spice up the material with humor come off rather well, in an area that can be tough to make humorous.

Neutral: The book focuses exclusively on growth investing, not really touching on the possibility of value investing or any other investment philosophies.  Furthermore, it takes swings at other investment possibilities, including mutual funds.  The suggestion to invest in an S&P 500 Fund as the best alternative to individual stock investing also barely scratches the surface of mutual fund investing.  If you are looking for a book on pure stock investment with a focus on growth, this is a good place to start; if not, you might be better served elsewhere.

Cons: This book understates the amount of research that needs to be done for individual stocks, even after they’ve been purchased.  The risk of individual stocks compared to mutual funds tends to be understated or completely ignored.  Lastly, the more technical chapters on evaluating stocks for possible investments tend to be over stuffed with information and figures, which might be a bit difficult to read through.

Overall: The Motley Fool Investment Guide is a pretty good introduction to stock investing from a growth perspective and understanding .  If you are seeking to invest in individual stocks, it’s certainly worth a look.  That said, if you are only planning to invest in mutual funds, or want to follow a more value based approach to investing, this book is probably not for you.

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I’ll let you in on a little secret: whenever I am trying to learn something new, from using my computer to drawing, my first choice for a how-to book is the Dummies series.  They tend to be very clear, well written, full of useful information, and just humorous enough to make even the duller topics interesting.  So, when I was first trying to learn about investing, the rather extensive library of books for Dummies is one of my first choices.

In this way, I came across Investing Online For Dummies.  It was one of the first books I read about investing, and I still use the information included in order to improve my skills and knowledge.  So, let’s take a look inside, to see what we can glean about investing from Investing Online for Dummies.

Overview

Online Investing for Dummies is broken down into four different sections, covering the whole range of information available about investing online.  The books starts, as many beginning investment books do, with a primer on getting yourself financially ready to invest (by doing things like eliminating high interest debt).  Since this is a book about online investing, the second chapter focuses largely on the many sources of information about individual stocks and companies you can find online.  The next few chapters provide an overview on the different types of investment accounts and a brief summary of the brokerages you can choose for your accounts (very helpful, if you’re trying to decide where to start your investing career).  To finish off the first part of the book, there’s information about how to buy and sell stocks, the different types of orders that can be placed, and information about using margin.

The second part of the book helps you to find all the resources available for the online investor.  There are chapters that cover the basics of stocks (including how they move in the short term as well as longer term shifts in stock prices), how to find out information from other investors (hint: blogs are helpful), and ways of measuring your performance.  In this section, there are a lot of web addresses listed, most which I haven’t had a chance to review yet, but all of which seem to provide good information for anyone looking to learn more about investing.  The last chapters in this section cover asset allocation, mutual funds, and ETFs.

The third part of the book covers more advanced topics, from evaluating individual companies to determine good stock valuations, to using stock screens to narrow your investment possibilities.  There’s also some other advanced topics, such as buying individual bonds online, that are covered in the course of these chapters.  Most interesting (to me, at least) is the chapter on evaluating stocks, which provides a pretty decent introduction to value investing.

The last section of the book is the Part of Tens, a common feature of the Dummies series.  This section serves to sum up some of the pertinent points covered in the rest of the book, as well as going into depth on other topics that weren’t already covered.  Here, there’s a list of ten common mistakes made by online investors and a list of ways to protect your investments and identity while you are online.  But wait, there’s more: there’s also three chapters of the book available online, covering supplemental information about investing online, technical analysis, and initial public offerings.  You can view them here, if you’re curious.

Evaluation

Investing Online for Dummies has plenty of good attributes. It’s easy to read, written in a hand holding fashion, and provides plenty of outside resources.  If you’re brand new to the world of investing, particularly if you want to do so primarily online, it’s a must read.  Even if you’re a more experienced investor, the sheer number of resources available means there’s almost certainly something in there that you haven’t considered.

On the negative side, the number of links provided make the book feel a times like nothing more than a jumble of websites.  Furthermore, it’s sometimes overwhelming, reading through such a large collection of links and wondering which will be the most helpful to you.  While the books is very good at directing you where to seek information, if you’re just starting out, the nonspecificity will make it harder to determine where to get started with your investments.

Overall

I like this book; it was one of the first investing books I ever read, and I continue to glean new information each time I reread it.  I highly recommend it, although it’s best taken in a little at a time.  Attempt to visit all of the sites listed in a short time, and you’ll be overwhelmed.  But if you’re not sure how to get started, or want a guide to the myriad information online that concerns investing, be sure to give it a thorough read.

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