Book Review: "Debt-Proof Your Marraige" by Mary Hunt

The subtitle of "Debt-Proof Your Marriage" is "How to achieve financial harmony: become effective money partners; create a get-out-of-debt plan that works, be prepared for unexpected expenses; slash mortgage payback time in half; deal effectively with roller coaster income."  Quite a mouthful, but I'd say it pretty much delivers.

Apparently she wrote a book called "Debt Proof Living" and this is the revamped and remarketed version that throws in marital advice.  I think it's great.  With very few exceptions I agreed entirely with all of her prescriptions.  I sometimes call things by different names, but she is describing the same organs in this financial body as I see, and solves the same problems in the same way that I solve them.

There were only two or three places where I'd diverge from her, so let me get those out of the way.

First, she writes from (and for) a Christian audience and has a few compartmentalized sections that are aimed at that market.  One is about gifting, the other is about trusting in God.  To be honest, I do the same functions without God in the mix; I think you need to gift for psychological reasons; if you say "I am too poor, I can't afford to give" then it becomes true.  You're the one who decides what "too poor" means.  If you say "I am well off enough that I can afford to share" then it ALSO becomes true.  It's a binary switch and the person who flips it is you.  I tell all my clients to find a charity that reflects their values and then give money in such a way to "make the world a better place because you exist by funding your values."  She says it's because God wants you to.  Whatever, same diff to me.

The trusting in God thing goes like this: just give this system a try.  Don't worry about how it will work out, just do the right/smart/hard thing for a bit and maybe God will rescue you with a lottery winnings or a raise or an inheritance.  Because God's a cool dude and it could happen.  I see this as a trick to get you to start rescuing yourself.  If you need to feel like the rescuer is just around the corner, that there's a deux ex machina intervention to this story, that's fine by me.   But, uh, in the meantime how about just getting started.  You know, while you wait.

So, yeah, I'd agree with what she says and leave faith out of it, but a great many people have faith as an important central source of power in their lives and it's fine with me if they want to tap that.

I also thought her insistence on binders and pieces of paper was too old-fashioned, but am fine about giving her the benefit of the doubt on this one.  Not everyone has a free app on their smartphone for tracking spending, and I've certainly seen how having Quicken just be on my laptop saddles me with being the 100% of the time bill-payer/financial-partner in a marriage.  Maybe she's right on this one.

The only other place I might have differed is on her insistence on closing out credit cards.  She has a great section on reading credit reports - very useful.  But she also talks about sending certified letters and checking credit reports to make sure they're closed, etc.  I do not see the point in this.  She also mentions elsewhere that you can "put your credit on ice" by putting them in a block of water and keeping them in the freezer.  I think this is a fine idea for all your credit cards.  Closing accounts can actually HARM your credit rating!  This is because one of the metrics for how well you handle credit is how much of all your available credit lines are currently used.  So if you have a cumulative of $9K in credit card debt and three cards with $10K credit lines, you go from 9/30 ratio from 9/10 ratio if you close two of those cards.  Better to have the credit line and not use it!  That actually reflects credit maturity, in fact.

But I say this as someone whose roofer wants to do a $10,000 improvement this winter and I do *not* have $10K in my home improvement pot.  (Yes, this is the same scenario as this time last year, it's a reoccurring problem.  This house swallows $10K in home improvements a year and I had "decided" I wouldn't do it for a few years when I had two kids in college but, uh, my "decision" turned out to not be pertinent to the house's needs.)  So here I am needing to come up with $10K again and I'm awfully glad I have a couple of 0% cash advance offers on my credit card.  Maybe this reflects that I'm a lousy manager of debt, but I don't think so; I'd say instead that I'm an advanced user of debt.  I'll pay down that credit card in full before the 0% rate expires.  This is a $30,000 home improvement and I'm doing it $10K/year over three years rather than getting a home equity loan of $30K with closing costs and 10 years of repayment.  Point is, there are times when having a credit line available with no fees and no requalifying is awfully useful.  Her advice is really only useful here for the people who really are rank amateurs.

Which brings me to the other issue: this book pretty much assumes you're not unemployed, and there's only a tiny lip service at the end to being self-employed.  She makes a good, albeit brief point that you can standardize your cash flow as a self-employed person and this will illuminate if your business is failing, i.e., if you feel you need to get $3,000/month and your business cannot handle paying you $3,000 every single month then you need to go get a better job.

I liked this book quite a lot.  I liked it a lot better than Elizabeth Warren's "All Your Worth", although Warren had good ideas about how to set up a budget that I haven't seen elsewhere.  It was more useful for people early in the accumulation years or anyone seriously in debt, but I'd prefer Henry Hebeler's "Getting Started in a Financially Secure Retirement" for anyone really trying to get a budget nailed down in or near retirement.  If you are self-employed without marriage problems you can skip this book entirely, though, and go straight to "The Money Book for Freelancers, Part-Time and the Self-employed"by Denise Kiernan.  I liked it a whole hell of a lot better than anything by Suze Orman (I'm not going to bother searching back through my reviews to link to that) and it was similar, but slightly nicer, than Dave Ramsey, and slightly different than Jean Chatsky's book, although it covered mostly the same things.  (Chatsky talked more about insurance.)  Fact is, the basic elements of how to have a good financial life don't really differ that much.  It's like fat loss methods; what ever method of eating less and exercising more works for you is fine.  The basic problem with all of these methods is that none of them "work".  YOU have to do all the work.

It's been a while since I read "Your Money or Your Life" by Dominguez (I can't find the review?  Did I not tag it?  Or not review it?  Could this pre-date my book reviewsl?!?) but that is a more essential book than this one.  You need to really grasp what money *IS* before you can feel sufficiently motivated to bother to manage it, in my opinion.

What really stands out in the Mary Hunt book, though, is the wise and kind and useful marital advice.  It's slapped on the front of a money management book a bit disjointedly, but the chapters don't have to be long to be right, and they certainly belong here.

Recommended.

Book Review: Julie Jason's AARP Retirement Survival Guide

Julie Jason's book is entitled: "The AARP Retirement Survival Guide: How to Make Smart Financial Decisions in Good Times and Bad".  It's a title done by committee.  Really it's a guide to avoiding the sharks swirling around you in retirement.  It's filled with hints of things to watch out for, with sections called "Julie's Don't-Be-Fooled Rules".   I liked her clear explanations and approved of her hints and warnings.  I think it did good coverage of the issues and clearly specified which issues she was NOT covering as beyond the scope of this book.  I appreciated that and approved of the scope she chose as wide-ranging enough for most people.

There was not enough about budgeting.  Budgeting skills are HUGE in retirement, and having a decent handle on your budget is the foundation of all the other pieces.  (How much annuity should you buy?  Depends on your budget needs.  Should you take that lump sum or a pension?  Depends on your budget needs.  Should you delay taking social security?  Yes, if you have assets to plug the budget gap until you're 70.  Should you get Medicare Part D?  Depends on your medical spending habits.  Budgets are HUGE and she did a very cursory version of this.  I preferred "Getting Started In A Financially Secure Retirement: Pre- and Post-Retirement Planning In a Time of Great Uncertainty" by Henry Hebeler for a more thorough treatment of budget issues including potential budget busters to watch out for.

My other quibble with Julie Jason's book is that her guide to finding an advisor would find only her.  She's a "Retirement Income Advisor". Huh?  Personally, I'm a CPA.  My clients come to me each year to discuss their finances in the context of paying taxes on their income.  I expand on that service to offer them advice on how to get a handle on their budgets, how to build net worth by managing debt and saving and investing, and keeping an eye on financial planning issues like saving for college or planning for retirement, disability or death.  I do not sell securities.  Many of my clients do their own investing and I guide them in asset allocation buying low cost index mutual funds or ETFs, although some of my clients also have a financial advisor who gets a fee for assets under management who might do budgeting and planning, I don't know.   Some do, some don't.  A few of my clients have brokers who just get paid on commission and never talk to my clients.  I advise my clients to save the money and just invest it themselves.  Some do, some don't.  (Store-front commission-based advisors are lacking in fiduciary responsibility, I've noticed.)

Most of my clients also have a lawyer to draw up wills and POAs and possibly estate planning documents like bypass trusts.  But a "retirement income advisor"?  Seriously.  I'm glad she has a niche clientele in her Stamford Connecticut practice.  But 99% of the readers of this book aren't going to find a "retirement income advisor".  Sheesh.  Ask the CPA or personal financial planner or lawyer you already USE these questions!

But I liked her writing style and I'd read other books by her.

Book Review: "All Your Worth" by Elizabeth Warren

I've heard wonderful things about Elizabeth Warren and I was intrigued by the concept of this personal financial husbandry book.  The title of the first books I read, "All Your Worth", made me cringe as it makes me think of a misspelled contraction.  But it's not a pronouncement or a discussion of what you are worth.  Instead, it is a suggestion that you might be better off if you built some net worth.

The basic breakdown of this book is that you should set up your personal financial situation so that your "must haves", non-discretionary stuff that you couldn't cut back on if your paycheck went away for some reason - should be no more than 50% of your income.  Savings and other things to build net worth should be 20% of your income.  And, voila, now you have 30% for fun money.  See, wasn't that easy?  Don't try to arrange your budget by cutting out the fun stuff, arrange it by cutting out the FIXED NECESSARY stuff.  Get a room-mate.  Drive an old car.  Don't send your kid to private pre-school.  Don't buy a house you can't afford on just one salary.

The premise here is that if you stay in these guidelines you won't have problems with debt or feeling deprived.  It's a workable budget.  I like the premise and have loosely followed it my entire life, although we did it slightly differently: I always saved 10%, not 20%, and we more or less set up our finances so that the fixed stuff was covered by my husband's regular salary and all the intermittent (and largely discretionary) stuff was covered by my intermittent income (combine with occasionally discretionary extra hours).

It's a nice idea.  I liked this book, although I felt a lot condescended to by the crooning voice.  (I listened to it as a book on tape as well as read the hard copy, depending on my location as I read/listened to it.)

Then I went on to read her "Two Income Trap".  It's more the research version that lead to her upbeat positively framed prescription of how to live your life in "All Your Worth".  The "two income trap" is the results of her in depth multi-year research project into why people declare bankruptcy.  What went wrong?  Why are the middle class in such awful shape? 

Her conclusions are that we raised the ante on what we wanted and expected when we had two available workers, and therefore went off and bought higher priced homes and more effective (and expensive) health insurance and paid through the nose for expensive education.  And at the end of the day we have less savings and less discretionary spending than ever because more of the expected income is dedicated towards these big three things and now we're more vulnerable because we need BOTH workers to be working and we've doubled the chances that one will be injured or die or be laid off in any given year.  At the same time we've lost the safety net of having a spare worker that can swing into action and/or provide necessary care-giving and home economics chores.  This is the main insight into this book and is an interesting concept worth pondering.

But she doesn't just illuminate, she pontificates.  Her solution is to suggest that women should stay home and live a reduced lifestyle because if something happens then they will have to live the reduced lifestyle anyway.

I boggle at this conclusion at many levels.  So, since there's a 1 in 7 chance of financial failure from this arrangement we should make it a 100% chance of failure by not engaging in it at all?   Does this make sense to anyone?  And where is the acknowledgement that we are actually spending our money on extra things we WANT?  Buying more effective health care, larger more comfortable houses and more specialized education are actually things we WANT!  Want bad enough to send the second spouse into the workforce to get!

And why must the WOMEN stay home?  We live in a world where men's skills and strengths are not as valued anymore, where the majority of the good jobs are more in line with women's skills and education.  Where in all of her points does she make the leap that suggests that stay-at-home spouse should be the women?  This really bugged me at a very deep level: it's not just the weird sexism, but also the total lack of grasp of the nature of the 21st century workforce and/or distribution of educational achievements.

A lot of the book is designed to push policy objectives, some of which make sense.  I found her to be fairly independent-minded politically - she said things that would piss off both Republicans and Democrats - but even though I largely agreed with her main points (regulate interest rates that banks can charge) I still found myself irked with the conclusion that people are stuck because of the system that leads them astray.  It's like blaming McDonald's for obesity.  Her refrain of "there oughta be a law" started to bug me.  (Perhaps, to be fair, it bugged me because of my own personal belief that our political system is completely incapable of effective solutions to any problem and you just waste time and energy by pursuing that.  I acknowledge that my cynicism isn't universally shared.)

I like her compassion.  I like her scholarship.  I like most of her common sense advice.  But in the end I find her solutions to be annoyingly flawed primarily because they ARE so close to the truth.  No, you should NOT pledge all your income to fixed expenses precisely BECAUSE stuff will come up that you didn't expect.  I think she would have done well to devote more attention to outlining for people the things that they should attempt to put in their budgets rather than just wave hands and say, "shit happens".  In my experience a whole lot of the shit that happens can be reasonably predicted: cars will need repairs, dogs will need vet visits, Christmas presents will probably be purchased again this year.  Intermittent expenses creep up on people and a decent budget accounts for them.  She just called for  50% for fixed, 20% for savings and 30% discretionary and done.  It has beauty in simplicity, but also stupidity in simplicity.

But, still, it's a reasonable concept and worth consideration.  I like rules of thumbs for people with thumbs, i.e., they do tend to work most of the time.

All in all, "All Your Worth" was a lot more useful than the "Two Income Trap".

Book Review: "The Money Book for Freelancers, Part-Timers, and the Self-Employed"

A Money Book for Freelancers and the Self-Employed  

A friend mentioned that I ought to read something by Bogle so I trotted down to the library to fetch one the other day.   Our library didn't have any in stock so I ordered it through inter-library loan, but in the meantime I picked up a few books from the same section of the library shelves.

So I just finished reading "The Money Book for Freelancers, Part-Timers, and the Self-Employed: the only personal finance system for people with not-so-regular jobs."  It's a nice little book, compactly throwing in nearly every lesson I would want my clients to have as a foundation.  It talks about fixed monthly expenditures and how to get more aware of the monthly discretionary expenditures.  It talks about the need to address savings AND debt repayment at the same time while keeping in mind that quarterlies are a fact of life.  It talks about using cash in the envelope method but updates it to the 21st century with references to Get Rich Slowly,  mvelopes.com,  mint.com, irs.gov and online banks. 

I'm trying to think if I learned anything new from this.  Maybe just the link to mvelopes and that I could rename my IngDirect sub-accounts.  But that's sort of the strength of this book: there is no hook.  It's just the plain unvarnished truth laid out in a well-written readable fashion.  You have to set up your finances as a self-employed person in essentially this way, with very little variation possible.  Essentially, if you are not already doing this then you're doing it wrong.  This book could serve as mandatory financial literacy for anyone who has a variable cash flow.  As such, it could be enormously important to someone who hasn't figured this all out yet... like, say, anyone in business who doesn't happen to already be a financial advisor themselves.

I could find a few things to add to this, but nothing to take away.  And the things I could add are things that a reasonable editor might cut for brevity or to keep me from sounding too insane a Doomster.  But that's okay, this means that I can still add value to my clients even AFTER they've read the core of my teachings that this book neatly lays out.

Recommended for anyone who feels their finances are mysterious or out of control or who suffers from a variable cash flow.

Book Review: Richest Man in Babylon

"The Richest Man in Babylon", or "Wisdom Through The Ages"  

I had originally meant to review both financial books I've just read in the same post, but The Richest Man in Babylon by George S. Clason  deserves its own review. It's a slim volume and the copyright is expired so I will make this easy and link to a PDF you can download. There. Consider yourself led to water.

Have you ever noticed how movies set in the seventies seem dated, but if they were set in the distant past they don't? For example, compare "All The President's Men" to "Butch Cassidy and the Sundance Kid". Point is, if you put something back in time it stays fresh. The author, George S. Clason does this by setting his lessons in the ancient times of Babylon. The language is vaguely King James-ish but it's not hard slogging once you listen to his voice. He's amusing and immediate, actually. This is one of those classics that is a classic exactly because it's worth reading.

The rules themselves are self-evident. The parables that illustrate the rules are what inspire you to adopt these rules for yourself. It's like learning that the way to fat loss is to eat less and exercise more. It's not enough to KNOW that, you've got to visualize integrating it into your life, you've got to make positive steps to make it happen, you've got to actually DO it. This book is helpful with THOSE pieces.

Nevertheless, I'll tell you the rules just because I want them in my notes.

Don't be a slave, use determination to get out of debt in three easy steps

1.  Stop living on the edge and get some savings.  "First, the plan doth provide for my future prosperity.  Therefore one-tenth of all I earn shall be set aside as my own to keep."

2.  Budget to live on 70% of what you bring in. "Second, the plan doth provide that I shall support and clothe my good wife ... Therefore seven-tenths of all I earn shall be used to provide a home, clothes to wear, and food to eat, with a bit extra to spend, that our lives be not lacking in pleasure and enjoyment. But he doth further enjoin the greatest care that we spend not greater than seven-tenths of what I earn for these worthy purposes. Herein lieth the success of the plan."

3.  Put together a payment plan with 20% of your earnings and start someplace.  Anyplace.  Just get started.  "Third, the plan doth provide that out of my earnings my debts shall be paid.  Therefore each time the moon is full, two-tenths of all I have earned shall be divided honorably and fairly among those who have trusted me and to whom I am indebted. Thus in due time will all my indebtedness be surely paid. Therefore, do I here engrave the name of every man to whom I am indebted and the honest amount of my debt.  I visited my creditors and explained to them that I have no resources with which to pay except my ability to earn, and that I intent to apply two tenths of all I earn upon my indebtedness evenly and honestly. This much can I pay but no more. Therefore if they be patient, in time my obligations will be
paid in full."

LO, MONEY IS PLENTIFUL FOR THOSE WHO UNDERSTAND THE SIMPLE RULES OF ITS ACQUISITION
(Seven Cures for a Lean Purse)

1. Start thy purse to fattening.  For each ten coins I put in, to spend but nine.

2. Control thy expenditures.  Budget thy expenses that thou mayest have coins to pay for thy necessities, to pay for thy enjoyments and to gratify thy worthwhile desires without spending more than nine-tenths of thy earnings.

3. Make thy gold multiply.  Put each coin to laboring that it may reproduce its kind even as the flocks of the field and help bring to thee income, a stream of wealth that shall flow constantly into thy purse.

4. Guard thy treasure from loss by investing only where thy principal is safe, where it may be reclaimed if desirable, and where thou will not fail to collect a fair rental. Consult with wise men. Secure the advice of those experienced in the profitable handling of gold. Let their wisdom protect thy treasure from unsafe investments.

5. Make of thy dwelling a profitable investment.  Own thy own home.

6. Insure a future income.  Provide in advance for the needs of thy growing age and the protection of thy family.

7. Increase thy ability to earn.  Cultivate thy own powers, to study and become wiser, to become more skillful, to so act as to respect thyself. Thereby shalt thou acquire confidence in thy self to achieve thy carefully considered desires.

THE FIVE LAWS OF GOLD

 The First Law of Gold
Gold cometh gladly and in increasing quantity to any man who will put by not less than one-tenth of his earnings to create an estate for his future and that of his family.

"Any man who will put by one-tenth of his earnings consistently and invest it wisely will surely
create a valuable estate that will provide an income for him in the future and further guarantee safety
for his family in case the gods call him to the world of darkness. This law always sayeth that gold
cometh gladly to such a man. I can truly certify this in my own life. The more gold I accumulate, the
more readily it comes to me and in increased quantities. The gold which I save earns more, even as yours will, and its earnings earn more, and this is the working out of the first law."

The Second Law of Gold

Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field.

"Gold, indeed, is a willing worker. It is ever eager to multiply when opportunity presents itself.
To every man who hath a store of gold set by, opportunity comes for its most profitable use. As the years pass, it multiplies itself in surprising fashion."

The Third Law of Gold
Gold clingeth to the protection of the cautious owner who invests it under the advice of men wise in its handling.

"Gold, indeed, clingeth to the cautious owner, even as it flees the careless owner. The man who
seeks the advice of men wise in handling gold soon learneth not to jeopardize his treasure, but to preserve in safety and to enjoy in contentment its consistent increase."

The Fourth Law of Gold
Gold slippeth away from the man who invests it in businesses or purposes with which he is not familiar or which are not approved by those skilled in its keep.

"To the man who hath gold, yet is not skilled in its handling, many uses for it appear most
profitable. Too often these are fraught with danger of loss, and if properly analyzed by wise men, show small possibility of profit. Therefore, the inexperienced owner of gold who trusts to his own judgment and invests it in business or purposes with which he is not familiar, too often finds his judgment imperfect, and pays with his treasure for his inexperience. Wise, indeed is he who investeth his treasures under the advice of men skilled In the ways of gold."

The Fifth Law of Gold
Gold flees the man who would force it to impossible earnings or who followeth the alluring advice of tricksters and schemers or who trusts it to his own inexperience and romantic desires in investment.

"Fanciful propositions that thrill like adventure tales always come to the new owner of gold.
These appear to endow his treasure with magic powers that will enable it to make impossible earnings.  Yet heed ye the wise men for verily they know the risks that lurk behind every plan to make great wealth suddenly."

There are quite a series of parables.  Other morals crop up:

MEN OF ACTION ARE FAVORED BY THE GODDESS OF GOOD LUCK

BETTER A LITTLE CAUTION THAN A GREAT REGRET

WE CANNOT AFFORD TO BE WITHOUT ADEQUATE PROTECTION

WHERE THE DETERMINATION IS, THE WAY CAN BE FOUND

'Thou can't get ahead by shirking,' Megiddo protested. 'If thou plow a hectare, that's a good day's work and any master knows it. But when thou plow only a half, that's shirking. I don't shirk. I like to work and I like to do good work, for work is the best friend I've ever known. It has brought me all the good things I've had.'

This book was originally published in the high-flying days before the Great Depression.  It is worth reading at least once and won't take too long.  If you know all this stuff already it will re-enforce it.  If you don't know this then this sort of information can save your life in hard times and make it easier in good times.  That's as strong an endorsement as I've ever given a book.  A free book.  That I linked to.  Drink up!