book review

Learning How to Become a Money Master From Author David Bach

Chrissa Hardy — Fri, 26 Apr 2019 18:13:05 +0000

Entering the working world is particularly harsh nowadays, and twenty-somethings trying to juggle their student loan debt, possible credit card debt, and low wages understandably feel discouraged and exhausted. While debt can become isolating, it's important to remember that you're not alone, and The Latte Factor (available May 7), by best-selling author David Bach is the perfect companion for those struggling to make ends meet.

We had the honor of chatting with author David Bach about The Latte Factor, and he offered some additional financial wisdom for people young and old trying to manage their money.

Wise Bread: David, THE LATTE FACTOR, Why You Don’t Have To Be Rich To Live Rich is your 13th book. You've written nine consecutive New York Times best-sellers, including your most popular book, The Automatic Millionaire, which spent nearly a decade on the best-seller list. You have over 7 million books in print. Why this book now? Also, THE LATTE FACTOR is written as a parable. What made you, for the first time ever, want to write a story-based book?

David Bach: I've been wanting to write this book for well over a decade, ever since I went on The Oprah Winfrey Show with The Automatic Millionaire and shared the power of the latte factor on her stage. Since then, I've wanted to put out a short book that told a story people could read in 90 minutes to learn the most important principles about money.

I've always been inspired by parables and short books that are easy to read. One great example is The Alchemist by Paulo Coelho, which is one of the greatest books ever written. Other examples include Who Moved My Cheese by Spencer Johnson, who also wrote The One Minute Manager with Kenneth Blanchard. Those books have touched tens of millions of people all over the world. That's my goal with The Latte Factor.

I want this book to inspire the 98 percent of people around the world who want to be smarter with their money, who want to buy their financial freedom, but because they're living paycheck to paycheck, they don't know where to start. I want this book to reach the 98 percent of people who wouldn't normally read a book about money. Even though I've sold 7 million books, I know I haven't even scratched the surface of reaching the number of people who need to be reached. I believe this book, in particular, will connect with the 100 million young people in this country who are Millennials and Generation Z. These young people want to live the American dream, but many are starting to lose hope.

Don't get me wrong, this book also applies to the Baby Boomers. But I believe a lot of Baby Boomers will buy this book for themselves and then turn around and give it to their children and grandchildren because they know it's so much easier to become financially free when you start young. The number one thing people always say to me is, "I wish I had known how to do this when I was younger." I think this book will be a popular gift, especially around graduation time, and it's written in such a way that even a teenager could understand the important financial lessons that are being communicated.

WB: The Latte Factor comes out on May 7. Before it's even been released, what are some things that excite you about this book and its potential?

DB: As a matter of fact, the greatest personal satisfaction for me with this book has already happened, and that is I got my 15-year-old son, Jack, to read it. Keep in mind, he's never read any of my other books because he's not interested in them yet. Since The Latte Factor is a story, he gave it a shot and ended up reading it cover to cover in two days. When he finished it, he turned to me and said two things, the first of which was, "Dad, is this real?" He was pointing to a chart in the book that showed how a young person could have over $1 million by the age of 65 if they started saving at age 19.

I told him it was real thanks to the miracle of compound interest. His next question was, "When do I pay taxes on it?" I explained that with a traditional IRA account, he wouldn't have to pay taxes on the money until he took it out. His eyes lit up at that point, and he asked, "How do I get one of these accounts? I can have way more than that because I’ll be starting at 15, not 19." So, at age 15, my son is asking all the right questions and he's motivated to be financially free because of this book. That's a huge victory.

Another thing to know about this book is that it's not just about money, which is where the second victory comes in for me. You see, this book is also about going after your dreams and the need to take risks to reach your dreams. When I asked my son the biggest takeaway he got from reading the book, he said, 'When I got to the end of the book and read the story about your grandmother, I really thought about my life. I realized I'm going to need to take risks in life to go for my dreams."

We recently decided to move to Florence, Italy, as a family. I gave my son the choice to come with us and he decided he would. Here's what he said about that decision after reading the book: "I realized that not only was going to Florence the right decision, but it was really the right decision. If I had decided not to go with you, I think I would look back on my life later and my biggest regret would be not taking the risk to move to Florence."

That blew me away. If my 15-year-old son can come away with those two lessons, I've achieved everything I wanted to achieve with this book. If this little book can do that for thousands, maybe even millions of other people, it's just going to be incredible.

WB: Can you explain the latte factor for those who aren't familiar with it?

DB: The latte factor is a phrase that has gone all over the world and impacted millions of people. I've talked about it in all of my books and shared it everywhere from Oprah to NBC, CNBC, CNN, Fox, and CBS. Everywhere I've gone and in every speech I've ever done, I talked about the latte factor. Here's why: The latte factor wakes people up to the fact that you don't have to be rich to live rich, which is the subtitle of the book. The latte factor shows you that small amounts of money can truly change your life.

When I first started teaching the latte factor, I told the story of a young woman named Kim, who worked at The Gap and didn't believe she had the money to save. I showed her that by going through her expenses and cutting out her latte, muffin, and some snacks she was eating before lunch, she could save $10 a day. If she invested that $10 instead of spending it, she could be a multimillionaire by the time she retired. That little story went viral as I shared it over and over again all over the world. It woke people up to the fact that, in all likelihood, they do have the money to start saving.

Again, the key is that small amounts of money can change your life. Starting with $5 a day may not seem like a lot, but if you combine that savings with 10 percent annual interest, you'd have $948,611 40 years later. That's the power of the latte factor.

WB: How does the latte factor play into the story you tell in the book?

DB: Throughout the book, you follow the journey of Zoey Daniels as she learns all these important financial lessons. Zoey is 27 years old, she lives in Brooklyn, and has a dream job working in the Freedom Tower as an editor for a travel magazine. It's exactly what she wanted to do with her life when she moved to New York and yet, when the story picks up, Zoey is stressed out because she's not getting ahead. Even though she's gotten raises at work, she's still living paycheck to paycheck. Like so many young people, she's beginning to lose hope that she can live the American dream.

One day, as she's coming out of the subway station at the Fulton Center and walking through the Oculus, she sees a message displayed on a massive LED screen:

If you don’t know where you’re going, you might not like where you end up.

Seeing this phrase starts her on a journey of questioning the path her life is on, which is something that many of us do. We stop and wonder where our lives are going. As she begins to share her pain with others, her boss introduces her to a mentor named Henry who works as a barista at the coffee shop Zoey stops by every morning for her latte and muffin. Henry takes Zoey by the hand and begins to teach her some principles of life that she needs to learn in order to really go after her dreams. Through these mentors and the lessons they teach — including the latte factor — Zoey begins to realize she's richer than she thinks, she's stronger than she knows, and that her dreams deserve to come true. We watch Zoey go from lacking confidence and hope for her life to putting in place a system where she begins to create financial freedom.

It's an incredibly uplifting, inspirational story that also tugs on your heartstrings. We have a couple thousand people on our Latte Factor Insider Team who received preview copies of the book and the initial reviews have been off the charts. A lot of people have told us the book made them realize there's so much more they can do with their lives, but they have to go for it. Wherever you are in life, if you're living paycheck to paycheck, you're behind on your retirement plan, or you simply want to wake up the dreams that have become buried in the background of your busy life, this book will give you the direction, the hope, and the road map to focus on what matters most to you.

WB: David, you're also known for the phrase "pay yourself first." Can you talk about what that means and share with us the way you look at that?

DB: The three most important words you could ever hear when it comes to personal finance are "pay yourself first." That's the way ordinary people with ordinary incomes all over the world become millionaires: they pay themselves first.

Before we get into what it means to pay yourself first and where the money should go, I want to share some startling statistics. The average American is going to work over 90,000 hours in their lifetime, and unfortunately for most Americans, they're going to have nothing to show for it financially. According to the Federal Reserve, nearly half of Americans can't get their hands on $400 for emergency purposes.

According to GOBanking, 66 percent of Americans can't get their hands on $1,000 in case of an emergency. Seven out of 10 working men are living paycheck to paycheck, as are eight out of 10 working women. The average American has just six days of expenses set aside. We have to do something to fix this. What we should be doing is teaching our kids about money in middle school and high school, but until then, my hope is The Latte Factor will provide young people with a financial education.

So, what does it mean to pay yourself first? It means you have to get financially selfish and set yourself up so that you're the first person paid when you earn a paycheck. I recommend at a minimum that you save the first hour a day of your income and have it moved automatically from your paycheck into a retirement account. If your employer offers a 401(k) or 403(b) plan, you can have your employer move the money into that plan for you. If you don't have either of those, you can set up an IRA account.

Whichever account you choose, the key is that the money gets moved without you having to touch it. We're not talking about budgeting or discipline here. We're talking about automation. In The Latte Factor, Henry shows Zoey how much money she could save if she earned 10 percent annual interest. We have other charts in the book that show what the savings would be with interest rates ranging from 2 percent to 12 percent. But the number that matters the most when it comes to saving and investing is your savings rate.

In other words, how much are you saving?

You should start by saving one hour a day of your income. That comes out to 12.5 percent of your gross revenue. If you're using a 401(k), then hopefully there;s a match. Most employers offer one and it's usually around 4 percent, so now you're looking at saving 16.5 percent of your annual income. If you're in your 20s or even your 30s, that's a fantastic place to start working toward financial freedom when you retire.

WB: It's well-known that you hate budgets. In the book, Zoey also hates budgeting. Can you explain why you hate budgets so much?

DB: I've been involved in financial services and financial education for 26 years and what I can tell you is that budgets are difficult to set up and people don't stick to them. It's a lot like a diet. People tend to start out strong, but after a while, they fall off the wagon.

Budgets also lead to a lot of fights in marriage because we tend not to marry someone who's our financial equivalent. If you're a spender, you’ll fall in love with a saver. If you're a saver, you fall in love with a spender. When you have two people who view money differently trying to create a budget, it can actually pull them apart.

If you want to build wealth for retirement, a college education, a dream home, or a nice family vacation, budgeting does not lead to success. The secret is automatic savings. In my other books, including Smart Women Finish Rich, and Smart Couples Finish Rich, I break savings down into three baskets: a retirement basket, a security basket, and a dream basket. That's what I recommend: move savings automatically into those three baskets.

WB: Let's talk about three myths of money you discuss in the book, one of which is that if you make more money, you'll be rich. Why is that a myth?

DB: For most of us, we're making more money today than we did 10 years ago. The question is: Are you saving more? The answer in most cases is "no." As our income grows, our expenses tend to grow along with it. It's this idea that when the tide goes up, the boat goes along with it. This is what's known as "lifestyle creep."

Basically, when you make more money, you desire more things and you spend more money to have those things. That's the American rat race. Everything in front of us is designed to separate us from our paycheck. But what people eventually realize as they make more money is that having more things actually provides less freedom.

What I teach people is that it's not about having a certain amount of money so that you can stop working. It's really about having a lifestyle of freedom and choice. But if you believe this myth that you need to make more money to start saving and investing, you'll never start saving and investing. You're only going to see your lifestyle costs increase as you earn more, which means you'll never get to a place where you feel free.

The message of The Latte Factor is that you can live rich now. You don't have to wait 40 years to feel free and have less stress and anxiety. You can live that way today.

WB: What about the myth that it takes money to make money?

DB: The common misconception from people living paycheck to paycheck or even middle-class people is that the reason the rich get richer is that they have money. The truth is most people in the U.S. were not born with money. Sure, there are millionaires who were born with a silver spoon, but most made their money through saving and investing.

Tied into that misconception is this idea that you need a lot of money to start investing. That's simply not the case anymore. Today, you can start investing your spare change. There are robo-advisors and financial service companies that will help you invest as little as $1 a day. So, no, it doesn’t take a lot of money to start investing. But if you get stuck believing that, you'll never start investing because you don't see the point. Saving a small amount of money can transform your financial life. Even if you can't save the first hour of income you earn every day, start where you can.

The smallest amount, even if it's spare change, can make a huge difference.

WB: Let's tackle the myth that someone else will take care of you.

DB: I've been an advocate and crusader for women’s financial empowerment for 25 years. We've had over a million women read Smart Women Finish Rich. My fundamental message to women is based on what my grandmother, Rose Bach, taught me.

She was a self-made millionaire who started with nothing at the age of 30. By the time I was seven years old, she was teaching me how to buy stocks. But the biggest lesson I took from her was, as a woman, you have to take charge of your family's financial future. That's what my grandmother, who was married to my grandfather, Jack, did, and thank goodness for that. She changed the entire destiny of our family. I may not be doing what I do if she hadn't made that choice and taught me everything she did.

The thing that I want women to know is that you need to be involved in your family's finances. Statistics tell us that 80 percent of men die married and 80 percent of women die widowed. What that means is you can't afford to be in the dark and delegate your financial well-being to your spouse. You have to be in charge of your money.

WB: David, your tagline has always been live rich, finish rich. When you say "live rich," what does that mean to you, and how should we be thinking about it?

DB: For me, living rich means that I'm in a position of freedom, that I'm able to do with my life what I want to do. Now, that doesn't mean every day is rainbows and sunshine, but it means I get to spend my life on my passion, my purpose, and my family. I get to focus my time and energy on the things I love the most. That's what it means to me.

The whole idea of living rich is looking at what parts of your life aren't working and figuring out what can you do to get rid of those things as fast as possible. By doing that, you open up room to get more of what is working and what you really want. What I've seen time and again is that the fastest way to fix your life is to fix your finances.

Just the other day, a woman posted in our Facebook group that she decided to start saving and investing after reading The Automatic Millionaire. With that one change, she was able to get herself out of a neighborhood where she didn’t feel safe and out of a job that she didn’t like. Today, she lives in her dream neighborhood and has her dream job. She changed her whole life by reading one book and deciding to live rich and taking action!

Living rich means freeing yourself. You've got one life to live and you deserve to live your dreams. By fixing your finances, you set yourself up to live the life you want.

You can pre-order the book at TheLatteFactor.com. When you do, send the receipt to teamdavidbach@gmail.com and you’ll get a slew of bonuses worth over $500!*

*This is a limited-time offer that expires May 12th. Act Now.

This article is from Chrissa Hardy of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Working on the Road: A Book Review for Professional Nomads

Philip Brewer — Fri, 01 May 2015 17:00:25 +0000

Nora Dunn's new Working on the Road may not be the right choice for those looking for a vicarious thrill, fantasizing about a more free life. But for those looking for actionable information — who are ready to make the jump and are looking for practical tips for avoiding missteps as they change their lives — it's worth the read.

And I should know: I took several different stabs at arranging my life to enable living as a digital nomad. (For more, see my Three Paths to Being a Digital Nomad, which ought to provide some context as a reviewer of this book. See also the disclaimer at the bottom.)

The Guide to Working on the Road

The book is very much aimed exactly where the title suggests — at someone working on the road, or planning to. If your plans are for merely going on the road or living on the road, there will still be useful material here for you, but you'll be wasting more than half the book.

On the other hand, the book's focus on work is by no means limited to any stereotype of the sort of work that's typical for the digital nomad. No kind of work is excluded, meaning that this book would be ideal for anyone whose goal is to be productive on the road. For example, I think it would be excellent for someone preparing to take a sabbatical (a sabbatical in the traditional sense — taking six to 12 months away from a regular job in order to undertake a significant piece of research or complete a major project). It would also be excellent for someone who thinks getting away for a year would help them finish a novel.

With working on the road being the focus, you won't be surprised to learn that's where the book starts — with a look at two big categories of working on the road: location-independent work, like freelancing or writing, and then work that needs to happen in a particular place, but where the places are accepting of people who come from afar and plan to move on, such as teaching English or working in the many branches of the hospitality industry.

There are sections on brainstorming for the sorts of things that you might need to do, and on how you might quickly develop a few extra skills that would enable working on the road (either as a complement to the skills you have, or as a whole new thing). There's also a good section on the sort of abilities, work habits, and self-knowledge you need to have if you're going to be successful.

Cost of Living on the Road

One of the few bits of the book that I have a beef with — and only because it's a personal peeve of my own — is the section on the cost of living on the road. Nora points out that, "Traveling full-time can actually cost far less than it does to live in one place."

This is true in the strictly technical sense that you can always find a more expensive way of life than the one you want to call less expensive. (It's exactly the same, except we buy three times as many toothbrushes.) It's also true in the deeper sense, that almost anyone can live a lot more cheaply if they're prepared to dramatically change how they live, and the shift to living on the road is going to be the sort of dramatic change that enables all sorts of economies.

I just always bristle at the implication that you couldn't just as easily — in fact, more easily — find all those economies without going on the road if you're prepared to make the same sort of dramatic change in the way you live. Let your lease run out, sell your car, donate all your stuff beyond what fits in a suitcase, and then rent a cheap room a few miles from your old neighborhood.

There are other savings besides those that come from choosing to make a dramatic change toward a cheaper lifestyle. One big one that is often a source of savings for people going on the road is that if you travel to a place where people are poor, things are going to be cheap.

However: I'd be willing to bet that there are places where people are poor very close to where you live now.

Most of the other sources of cost savings for being on the road are very specific as to time or place. For example, favorable exchange rates can make particular places very cheap, if your income (from your work on the road, or your savings and investments) is in a strong currency but your expenses are in a weak one. There can be some large tax savings, but they are highly dependent on exactly where you live and exactly how you earn your money.

Finally, there's the fact that being someplace that's really different provides novelty that can substitute for entertainments that you'd otherwise spend money on.

I've written about all this before, in an article called Live Abroad for Less (Also at Home). As I say, it's peeve of mine.

But the fact that Nora manages to push this precise button of mine should not be held against the book, which actually has a great section on managing your expenses. It presents examples of several different households — single folks and families, people who travel a lot and those who have a home base for extended periods, all at a range of different income levels.

Work-Life Balance on the Road

The section on work-life balance while on the road is excellent. In fact, it takes exactly the tone I'd have liked to see Nora take for the section on how it can be cheaper to live on the road. Working on the road does not magically give you work-life balance. Whether you're on the road or not, work-life balance comes from the choices you make about what work you do and what you expect from yourself. Just like with living cheaper, choosing to work on the road is inevitably a dramatic change in your life, and making a dramatic change gives you space to choose a better work-life balance. But it still comes down to your choices.

The stories Nora tells about her successes and failures along the way to work-life balance are instructive. She provides good tips on striving for a proper balance. (The tips are not much different than you'd come up with for someone who's not on the road, which is kind of my point, but they're good tips.)

There's a section on dealing with the fact that you'd probably had great expectations for the magic improvement in work-life balance that was supposed to come from working on the road, and dealing with the disappointment you'll probably face. There are specific tips for people on the road with kids, covering things like education.

There is some advice that's very specific to being on the road — for example, suggesting that housesitting can provide welcome relief for someone who's been staying in hotels or hostels or tents or RVs, and praising the advantages of slow travel.

Heading Out

There are two sections on things to do and how to do them, roughly divided into things to do when heading out and things to do before heading out.

This one section alone may make the book worth buying, for a certain class of reader. If you know you want to hit the road, know what kind of work you're going to do, and know how to support yourself on the amount of money you're going to have available, there are still some practical issues to sort out, and this chapter provides a solid overview of a bunch of them:

Dealing with official documents when you're halfway around the world from your file cabinet
Deciding what kinds of insurance you need
Managing your cash, and paying your bills when you don't have a local bank
Managing your investments when you don't have a fixed address
Figuring out visa rules as they apply to people who will be doing work of one sort or another

The material is nicely organized with a good focus on the arrangements to be made before you head out.

There's also a focus on things to do that will help enable a return to working at a fixed location, because you might want back into the world of working at a regular job for a regular paycheck. There are things you can do up front that will make this step easier, and this section mentions some. (I wrote an article with my own suggestions, aimed at people who were going to be working on the road for a specific length of time, who know they will want to option to return, called Fund Your Own Sabbatical.)

And there's a good list of things that are easier to do while you still have a day job, such as applying for credit cards.

Tools

There are two sections on tools, divided between regular tools and business tools.

The first is about the tools you'll want for everyday stuff (such as a phone) and for work stuff (such as a computer). It's about figuring out what you need, pros and cons of various choices, practicalities (like cables), and so on.

This section covers things like:

Backups for people working on the road
Information security
Getting paid on the road

The second section covers the broad category of things that working on the road make less predictable, more necessary, or more expensive than they'd be for someone working in a fixed location — internet fees, hiring an accountant, shipping and receiving, etc.

Expanding the Package

The review above covers just the book. There are additional resources that can be purchased with it, including some special-topic articles on things like dealing with your stuff, paying your bills, working on the road with a family, and dealing with property. There are a couple of interviews by Nora (one of someone who built up and then sold a personal finance blog, one of parents working on the road with kids), provided in both MP3 and transcript form. That material is all good. Whether it's worth the extra cost depends on whether it addresses something you personally really need to know.

This book is perfect for someone who has gone beyond the stage of just thinking that working on the road sounds cool, but who has not yet figured out any of the details — what they might do, how they might live, and where they should start.

Buy your copy of Working on the Road today!

Disclaimers

Nora Dunn is a fellow Wise Bread writer, and a friend of mine. The publisher provided a review copy of the book, and Wise Bread paid me to write this article (same as they pay for other articles I write). Wise Bread policy does not allow writers to benefit from affiliate links (any payment from the affiliate link will go to Wise Bread, not to me), and I have no other financial interest in the success of the book.

This article is from Philip Brewer of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

3 Steps to Building a Financial Safety Net From “The Economy of You”

Meg Favreau — Wed, 29 Jan 2014 19:03:13 +0000

Nobody should have only one source of income.

That’s what financial writer Kimberly Palmer claims in her new book, “The Economy of You: Discover Your Inner Entrepreneur and Recession-Proof Your Life.” And she makes a compelling argument — in a time when the word “recession” is still wafting through the air and it seems like full-time jobs are constantly cutting benefits and hours, one of the most powerful things you can do to gain financial independence is create more than one source of income for yourself. Not only does it allow you to save more now, but if you do lose your full-time job, you have something you can fall back on.

Thus, Palmer’s book is a guide to starting your own side business, and she is both inspiring and realistic about the rewards and challenges. One of the most interesting things about Palmer’s book is that it fills a very particular niche. In a world where people celebrate the entrepreneurs who go out and become their own bosses full-time, Palmer’s book targets people who want to start side gigs but not necessarily to replace their full-time jobs. And Palmer doesn’t just interview others about their experience doing this, but she also did it herself — she launched a successful financial planner business in addition to her full-time job with US News and World Report.

Steps to Building Your Financial Safety Net

I strongly recommend reading the entire book — not only does Palmer outline stories from people who have made the leap to successful side gigs already, but the back section is a workbook that helps you figure out what kind of side gig would fit your personality and how to get started. Here are a few of the most important takeaways from the book.

Be Passionate

This is a key idea that Palmer hits on again and again — if you’re going to take on a side gig in addition to your full-time job, it needs to be something you’re passionate about, whether that’s helping others, creative work, or something else.

It also helps if you’re passionate about the reason why you want extra money as well. Palmer notes that many people start to earn more side income after they have children, so they can provide more stability for their families. She says that focusing “on the big-picture reason for those goals -- the specifics behind financial security or a better family life — actually improves on the chances of making them happen.” Many of the side gigers that Palmer profiles wake up early — some as early as 4:45 — to work on their side job before going into their day jobs. You need passion to make that work.

Start Now

If you wait to start a side business until you really feel like you’re ready, you could be waiting forever. Palmer writes that “Many side-giggers in this book discovered their side gigs almost by accident… Instead of slowing down and first building a Facebook page or stocking up on inventory, they said ‘yes’ to the opportunity in front of them.” Don’t wait. Look for opportunities in front of you — or make your own.

Don’t Undervalue Yourself — in Any Way

When starting a side gig, it can be easy to lowball your worth because you’re trying to get your business launched. One great thing Palmer pointed out is that this doesn’t just mean your worth in terms of money — it’s also your worth in terms of time. If you completely sacrifice things that really matter, like spending time with family, your side gig ultimately won’t be worth it.

There are a couple of changes I’d make to the book — some chapters have more example stories than necessary, and the section on common pitfalls to avoid when starting a side gig is a short appendix stuck in the back (it would be great if this section was much meatier). But overall, “The Economy of You” is a great starting point for anyone who wants to gain financial independence with a second income stream but hasn’t been sure how to begin.

You can buy The Economy of You” on Amazon.

Do you have a side gig? Why or why not?

This article is from Meg Favreau of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Book Review: Debt Free for Life

Philip Brewer — Wed, 13 Apr 2011 09:48:19 +0000

Debt Free for Life: The Finish Rich Plan for Financial Freedom by David Bach

There are really two steps to getting out of debt. First, cure whatever problem lead to you getting into debt. Second, pay down the debt.

David Bach's new book seems to be aimed at people for whom taking the first step is mainly a matter of exhortation — that is, people who are in debt primarily because they've been unable to resist the lure of easy credit. The right message for them is simply "don't do that," and the book does a good job of delivering that message, hitting all the right notes — how expensive credit is, how risky it is, how dangerous it is, and how it utterly thwarts your ability to build capital. (See also: Good Debt, Bad Debt)

Having delivered that message, Bach goes on to walk people through the second step — getting the debt paid down — with careful attention. He calls his procedure the DOLP method, short for Done On Last Payment. (He says that it was formerly Dead On Last Payment, but that readers suggested that Done was more motivating than Dead).

The DOLP method is a variant of the classic debt snowball, where (after making the minimum payment on each debt) you apply all your additional cash to one debt. (The name comes from the way your additional cash snowballs as you extinguish each individual debt and are able to add its minimum payment into the additional cash to apply to the next debt.)

The two main variants are:

Pay down the highest-rate debt first.
Pay down the smallest debts first.

Option two is often recommended as "more motivating" because you can see some early success (the first debt quickly paid off) and you get to see the snowball effect in action — that minimum payment getting added to the additional cash to apply to the next debt.

Bach's DOLP method aims to improve on option two by arranging to pay off whichever debt can be paid off most quickly (not necessarily the smallest, because different debts have different minimum payments).

Option one (highest-rate debt first) is generally the cheapest way to get out of debt, if you can manage it. But Bach makes a good case that his DOLP method may well be cheaper in practice, because the more debts you have, the more opportunities you have to miss a payment, pay the wrong amount, or have a payment go astray — and just one late fee can easily eat up all the savings from getting the high rate debt paid off first.

There's a lot to like here.

I particularly like Bach's look at student loan debt, with a careful analysis of just how pernicious that system has become in the United States (leading so easily to the wage-slave, debt-slave trap), with the bad news nicely ameliorated by a thorough look at the various alternatives for dealing with student loan debt. If you've got debt problems and any of it is from student loans, that chapter alone could be easily worth the price of the book.

Bach also has a good chapter at how to find any money that you've misplaced — forgotten bank accounts, lost tax-refund checks, savings bonds that have gone astray, etc. (See Lindsay's post on Everything You Need to Know About Unclaimed Property for a quick look at the same topic.)

The sections on credit counselors and debt-settlement companies are also very good and well worth reading if you're considering using either one. (There's nothing they can do that you can't do yourself, if you're willing to put some effort into learning how such things work.)

Two things in the book struck wrong notes for me.

The first has to do with what Bach chooses to present as unbreakable rules versus what he presents as suggestions. There are unbreakable rules in personal finance — for example, you have to live within your means — but many other things are just a matter of style. When Bach suggests — in italicized capital letters — that to succeed "you must make your plan automatic," I know that he's wrong. (I've never made an automatic payment in my life, and yet here I am: debt-free, with enough savings and investments that I can afford to be a full-time writer.) I don't doubt that he's speaking from experience, having seen many people who had failed in the past succeed once they put their bill payments on automatic, but it would work better for me if he'd just said that.

The second has to do with that first step for getting out of debt — curing whatever problem got you into debt in the first place. As I mentioned above, Bach's audience seems mainly to be people whose problem with debt comes from the fact that they overspend. All you have to do is look around to see that, even as the great recession winds down, there are a lot of people who need that message. But there are also people who don't fall into that category. For example, people who borrowed perfectly ordinary amounts of money, and then suffered a loss of income, need to take a different approach to curing the problem — as do people who are in debt because of huge medical bills.

It's worth comparing this book to Feeney and Connolly's Road Out of Debt that I reviewed last month. That book, written by a bankruptcy judge and a bankruptcy attorney, is probably a better choice for someone whose debt is so large that it cannot be paid back (although Bach's book also has an excellent chapter on bankruptcy).

For its target audience, though — people whose debt problem is mainly a result of overspending — Debt Free for Life is a great choice.

Disclosures: I received a free copy of Debt Free for Life for review. This post contains affiliate links, and I will earn a commission for any purchase made through these links.

This article is from Philip Brewer of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Living the Savvy Life: A Review

Sarah Winfrey — Fri, 11 Feb 2011 13:00:16 +0000

Living the Savvy Life isn’t strictly a personal finance book, though it includes tips for spending less, saving more, and achieving your financial goals. The focus of the book is on helping readers overhaul their lifestyle based on their personal goals and values (this is what the authors call “the savvy life”). If there are things you’ve always wanted to achieve but haven’t found the time and money to get started, this book can give you both the kick and the tips you need to begin today.

Frugality with a Purpose

The authors of Living the Savvy Life, Melissa Tosetti and Kevin Gibbons, don’t advocate spending less for it’s own sake, but so that you can do the things you really want to do and achieve goals that are meaningful to you. For instance, many people say they want to travel but also say that they don’t have the money or the time to do it. Tosetti gives real-life examples of how she and her husband cut specific expenses and used the money they saved to pay for trips all over the world. (See also: How to Save Without Goals)

The authors don’t just propound this principle, but show you how you can apply it throughout your life. They discuss it in terms of finances, and in terms of time and possessions, too. And once they’ve talked about their ideas, they give you tips for actually cutting back. They offer strategies for getting rid of clutter so you can highlight the possessions you truly value, and they talk about choosing clothes that flatter you and will continue to be in style, and choosing items that complement the wardrobe you already have.

Even if you’re not quite sure what you’d like to spend your time and money doing, Tosetti and Gibbons have something to offer. In addition to their money and time-management tips, they have resources to help you determine where you want to focus your energies. By answering some simple questions, they help you decide what you’re passionate about and what doesn’t matter so much.

With its helpful-but-unassuming tone, Living the Savvy Life isn’t a book that you’ll hate, even if you’ve somehow heard everything it says before. In fact, you may find yourself wanting to befriend the authors simply because they seem like warm, interesting people. This lends itself to the book’s overall usefulness, because no one likes to feel preached to. It’s much easier to hear some of the things Tosetti and Gibbons have to say from people you’d invite into your living room for a chat.

A Renewed Focus on My Goals

Since it’s easy to get derailed when you’re living a savvy life in a culture that wants you to spend, spend, spend, they also offer some insights on staying motivated, focusing on your own goals, and getting back on track when things fall apart. They even offer tips on how to evaluate purchases when you’re standing in the middle of the store, unsure about the items you’ve brought to the checkout stand.

As someone who knows a lot about how to save money and who practices frugality as a matter of habit, I didn’t expect too much from yet another book about personal finance. However, Living the Savvy Life surprised me. It articulated many of the principles I’ve always lived by (saving in one area to spend in another), and it helped me put words to some of the things that I want to focus on. All of this has provided me with motivation that I didn’t have before, so I feel renewed in my efforts to be deliberate about where I choose to spend my time and money in order to focus my efforts and achieve my goals.

Who Should Read Living the Savvy Life?

It’s not too often that I find a book I would recommend to almost anyone, but Living the Savvy Life seems like one that nearly everyone I know could benefit from reading in one capacity or another. For the people who have already discovered most of the practical savings tips it contains, it offers motivation for pursuing financial and personal goals that are meaningful. Even for those with a lot of self-knowledge about what they value and why, it offers the chance to articulate these things again, perhaps in a new way, and to recommit to focusing on the things that matter.

P.S. If you haven’t heard of TheSavvyLife.com, you should check it out, too. The site offers articles and resources that aren’t in the book, but that will help you move towards the goals the book puts forth.

Disclosure: I received a free copy of Living the Savvy Life for review.

This article is from Sarah Winfrey of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Book Review: Off the Grid

Philip Brewer — Thu, 16 Dec 2010 13:00:13 +0000

Off the Grid: Inside the Movement for More Space, Less Government, and True Independence in Modern America by Nick Rosen.

I've always used the term "off the grid" in a literal sense to refer to houses that aren't connected to the electric, gas, water, or telephone systems. When Nick Rosen uses the word "grid" he means more than that — something closer to what the 1960s counterculture types meant when they talked about the system or the machine.

The book is fascinating. It's not at all a how-to manual. It's more an anthropological study of people who chose to live off the grid, together with some history of the grid itself.

In the history, Rosen makes no attempt to present a balanced view. To him, the history of the grid is largely a history of corruption and cronyism; a history of monied interests using government influence (and often violence) to seize what belonged to ordinary people.

In looking at the ordinary people who — for a myriad different reasons — have chosen to make their homes off the grid, though, Rosen shines.

People choose to live off the grid for many reasons — several of which echo concerns that I've heard many times from Wise Bread commenters:

Some want to own land, and land on the grid is too expensive.
Some want to live very cheaply and would rather make do than pay the monthly bills for gas, power, water, etc.
Some are so wealthy they can choose not to depend on polluting sources of power, building homes that are self-sufficient on solar and wind power.
Some fear society is about to collapse and want to be self-sufficient when the grid goes down.
Some fear the government and want to keep off its radar.
Some hate the government and choose not to be complicit in its misdeeds.

The book is a gentle, often almost loving look at individuals with all these motivations (and others). Rosen talks to (and often spends a night or two at the homes of) all manner of people: rich folks, their caretakers, poor folks, right-wing wackos, left-wing kooks, homeless people living in their cars, pot farmers, their neighbors, and ordinary, sane Americans who just want to live as best they can according to their own values.

Having said that, Rosen does seem to have some odd reactions. He always notes whether the people he's interacting with are good-looking or not — and somehow the good-looking ones seem much more likely to come across as sensible, reasonable people. Perhaps related to that, his overall sense of his subjects' reasonableness is sometimes quite at odds with my own — but in a way that does no harm, because he clearly makes an effort to lay out their stories in a plain fashion before he presents his conclusion, leaving the reader free to draw his or her own.

I was particularly interested in Rosen's take on Eustace Conway (having previously read Elizabeth Gilbert's book The Last American Man, which is about Conway, the noted naturalist and self-sufficiency educator) and was pleased to learn that Conway has come to have more nuanced views on community sufficiency versus self-sufficiency.

The scope of the book is broad enough that anyone with an interest in self-sufficiency or self-reliance will find things of interest. As I said, this book is not a how-to guide. Don't expect to learn how to size a solar power system or how to hook up a 12-volt inverter. But do expect to come away with a new appreciation for the many ways to live Off the Grid.

Disclosure: This post contains affiliate links, and I will earn a commission for any purchase made through these links.

This article is from Philip Brewer of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Book Review: Early Retirement Extreme

Philip Brewer — Wed, 24 Nov 2010 14:00:05 +0000

Early Retirement Extreme: A philosophical and practical guide to financial independence by Jacob Lund Fisker.

If you live cheaply enough, you can chose to do whatever work you want (rather than whatever pays the most). That's been my message here on Wise Bread right from the start. Jacob's message is much the same. He's just more extreme about it.

I like to point out that there's value in having some income-earning capital even when the income is fairly small. Investment earnings that come to just one-tenth of income from employment open up a world of possibilities: They could be spent to raise your standard of living or reinvested to compound your way toward retirement; they definitely provide a great cushion if your earnings fall.

Jacob prefers to point out that if you can live on a tenth of the income from your job, then as soon as your investment earnings add up to that much money, you can go ahead and retire.

Faced with the suggestion that they could live on a small fraction of their income, most people simply throw up their hands and call it impossible. Jacob points out that it's not impossible at all. It's simply extreme.

It's a bit hard to summarize Jacob's model, but very briefly, there are several pieces that interlock:

Don't specialize.

Instead, develop the skills to do many ordinary things yourself. It doesn't take nearly as much effort to develop and maintain a basic level of competence as it does to become good enough at something that you can do it professionally. This cuts costs and provides additional sources of income.

Develop a new understanding of needs.

Many people own homes with numerous rooms that are vacant almost 24 hours a day — rooms that are unused except to store stuff that the owners hardly ever use. Getting rid of stuff you don't use enables the option of moving to a smaller, cheaper space.

Lose the car.

As long as you're moving anyway, move someplace close enough to where you work and shop that you don't need a car. You will quickly and easily save a small fortune while becoming thinner, healthier, happier, and wealthier.

Invest the savings from these cost-saving moves.

In as little as five years, you can be generating enough investment income to cover your living expenses.

Yes, it's extreme — but really, only in the sense of being very different from what most people do. It's not difficult or mysterious. It requires little more than a willingness to be unconventional.

There are a lot of things to like about Jacob's book. I like the way he proposes achieving the cooperation of a spouse who is uninterested in being different: "Unless you possess superior persuasive skills, it's no use arguing. Most people (and especially children) will follow your example rather than your suggestions, if they follow at all." He then goes on to suggest that once your emergency fund has grown large enough to support you over a five-year job hiatus, your spouse may start thinking his or her regular ol' six-month emergency fund looks kind of meager.

I like the way he points out that there is a vast range of choices for every decision, running the gamut from vastly excessive to utterly minimalist — a much wider range than most people recognize — and how he proposes that frequency of use is the right criterion by which to select from the list.

For example, he proposes that a stand mixer is perfectly appropriate for a professional baker who uses it multiple times a day. If you use it just once a day, a hand mixer is entirely good enough. If you use it less than daily, you can probably get by with a whisk. And if you use it once a month or less, even a whisk is overkill — he suggests that two forks rubberbanded together is the right tool for the job.

He offers a similarly graded range of suggestions for housing — roughly in the middle of the list, with three steps between them, he includes "living in a shack or cabin" and "living in an RV."

I like his whole "renaissance man" conceptualization of someone who chooses not to specialize, and his "businessman, working man, salary man" conceptualization of the alternative choices.

I particularly like the way he explains that having a flexible household cost structure is much more important than having low costs.

It's a point I've tried to make — I've called it the best way to avoid the worst financial problems. But I've usually couched it in terms of avoiding recurring monthly expenses. Jacob puts it in terms of the size of your emergency fund: If most of your money goes for wants rather than needs, then even a low savings rate can keep your emergency fund topped off — because during an emergency, you only need to pay for your needs. (Plus, your standard of living is higher, because so much of your income is available to pay for wants.)

I love the fact that he derives the equation for determining how long your capital will last at a given withdrawal rate.

Probably the best thing about the book is its moral center. It's a book about making the personal choices that lead to freedom, health, being able to support your family in changing circumstances, and being able to help others.

One thing a book like this always has to deal with is the argument, "What if everyone lived like you? Wouldn't the economy collapse?" Jacob points out that there's essentially zero chance of everyone making that choice. Even if they did, after a period of adjustment the economy would be just fine — and the people (who, after all, matter a lot more than an abstraction like "the economy") would be better than fine. Households that follow his plan are more stable; they're much less likely to need help from the government (or anyone else).

One thread that runs through the whole book, but mostly lingers just below the surface, is that living this way is lighter on the planet. Consuming less means that the earth's resources don't need to be depleted on your behalf. Further, consuming less leads directly to producing less waste, further reducing your impact on the planet.

Another book that describes a similar path — the classic Your Money or Your Life — is careful not to advocate any particular level of spending. Instead, it just advocates that you start being thoughtful about your choices — about just how much time and energy it takes to earn enough money to buy yet another thing that you'll use a few times and then store in an otherwise empty room. Although the author's own choices were just about as extreme as Jacob's, the book made a pretense of being neutral about how extreme your choices ought to be. Jacob, on the other hand, makes no such pretense. He's a strong advocate for being extreme.

If there's a downside to Jacob's book, it's that it's probably only going to useful to people if it falls into their hands at just the right moment. Give it to people three years before they're ready, and they'll dismiss it as preposterous. Even one year before they're ready, they'll dismiss it as interesting but impractical — too extreme. Give it to people eighteen months later, and they'll say, "Gee, this would have been useful a year ago."

But if you give it to someone when they're ready for it, I have no doubt that Early Retirement Extreme will change that person's life.

Note: I received a free review copy of the book, and links to the book title are affiliate links.

This article is from Philip Brewer of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Review of Women Empowering Themselves: A Financial Survival Guide

Linsey Knerl — Tue, 23 Nov 2010 13:00:08 +0000

This past month, I had the opportunity to read a book co-authored by one of our guest posters, Hollis Calquhoun. Hollis has years of financial experience and presents some much-needed info in a portable paperback you can read in one weekend. While the premise of the book is designed to appeal to women going through divorce or separation, there is so much value beyond that, and I’ll share my favorite parts of Women Empowering Themselves: A Financial Survival Guide here.

The tagline of the book is “For women at risk of drowning financially, before, after, and during a divorce” and as a woman who has — gasp — experienced this personally, I can attest to every piece of advice offered. But let’s not assume that the book is only for those at risk of divorce. Even if you never marry, believe that divorce couldn’t happen to you, or think that preparing for a divorce is somehow equal to putting a curse on your marital happiness, you can benefit from this book.

101 Financial Concepts and Budgeting

You need to know how to budget. That’s a simple fact of grown-up life. The book incorporates the terms used in creating a budget with an actual worksheet that you can recreate on your computer or make copies of for your own use. It includes virtually every spending category I could think of.

Tips for Organizing

If you’re prone to clutter, regardless of your gender or marital status, this book could help you out. With just the tips in this book and a weekend to get everything together, it’s possible to cut your clutter to a point where you could find any piece of detailed financial info at a moment’s notice.

Marital vs. Personal Net Worth

Even a homemaker has value. If your husband were to leave or pass away suddenly, could you replace his worth or rely on your own in a way that would be sufficient for you and your kids’ survival? Figuring your net worth both as a part of a partnership and as a single person is important to planning for issues that could occur down the road.

In addition to the concepts reviewed above, Hollis and her co-author, Antoinette Babek, discuss how to accurately analyze household expenses, review your debt and credit snapshots, and calculate your personal income. I really enjoy how “matter-of-fact” the tone is, but even more impressive are the Q&A’s that are presented throughout, asked by real people and answered tactfully. Divorce, after all, is a sensitive issue.

Being unprepared for going it alone could not only be devastating emotionally, it can be financial suicide. If you depend on another person for a portion of your livelihood, whether you’re male or female, married or just living together, this book (and the excellent list of resources in the back) will be useful for you.

This article is from Linsey Knerl of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

The Brag Book for Job Hunters: E-Book Review and Tips

Julie Rains — Mon, 01 Nov 2010 13:00:13 +0000

Some of my career-services clients have had tremendous success with “brag books" (professional portfolios of career highlights and areas of expertise), propelling them from good-but-average positions to the next level of leadership with accompanying salary and commission increases.

Those in pharmaceutical sales are likely familiar with brag books; candidates may be asked to bring them to interviews. Outside of this industry — in fields as diverse as transportation and speech-language therapy — a professional compilation of achievements, acknowledgements, activities, etc. can also be valuable.

Years before the popularity of personal branding and social media for career building, I worked with clients to create presentations of their professional successes and styles, all in a simple-but-elegant binder (purchased at the office supply store). The books showed their qualifications for specific openings and positioned them as future superstars by showing not only results, but also their unique approaches to developing business, building a team, retaining key accounts, and more.

Getting a brag book ready is one challenge. Figuring out appropriate presentation is another.

In How to Design, Write, and Compile a Quality Brag Book, Teena Rose, CPRW (Certified Professional Resume Writer) guides job hunters through the basics of brag-book preparation and presentation. I found the casual tone of the e-book easy to understand, which is especially useful for those who need straightforward direction during the stress of the job search. She also offers valuable tips for senior-level candidates.

Great tips include:

Focus on quality and recentness when compiling a brag book. Choose the best of your accomplishments to highlight, ideally from the last few years.
Create categories with easy-to-find tabs for quick reference when making a presentation.
Develop a theme for your brag book. This theme may reflect your brand; for example, one of my clients created categories of professional strengths and then provided documentation to showcase these different capabilities (e.g., the presentations category included a list of public speaking engagements; the community outreach category had press coverage of special events).
Place items such as letters of recommendation, annual performance reviews, and thank-you emails in the brag book. Consider using these items as talking points during the interview.
Ideally, tailor the brag book to the hiring organization.
Avoid compiling a "catchall portfolio." Demonstrate that you are an outstanding candidate, not just that you have basic qualifications.
Think carefully about when to present the brag book. Take cues from the interviewer. Look for a natural break in the conversation or reference a page that reinforces a point about your qualifications.

Teena mentions that sales professionals and those who have quantifiable results can benefit most from brag books. I’ll add that those who have less opportunity to produce measurable results may also use brag books. Illustrate soft skills by packaging items such as notes of thanks for going the extra mile or emails recognizing the use of creative ideas to solve a problem.

Disclosure: I received a free copy of How to Design, Write, and Compile a Quality Brag Book for review.

This article is from Julie Rains of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Questions and Answers on Life Insurance: Book Review and Money Saving Tips

Julie Rains — Sat, 30 Oct 2010 17:00:13 +0000

Saving on life insurance without compromising your family’s future is doable. Figuring out how to get started evaluating alternatives and uncovering reasonable ways to save money without feeling pressured (either by your family or a sales agent) isn’t easy, though. A knowledgeable, experienced, and unbiased guide in the realm of life insurance is useful for this task and is precisely what I found in Questions and Answers on Life Insurance: The Life Insurance Toolbook by Tony Steuer, CLU (Chartered Life Underwriter), LA (Life and Disability Insurance Analyst).

The book helped me to:

Understand how insurance companies design, package, sell, underwrite, and even bill for life insurance policies
Find ways to get good value in an insurance policy
Discover techniques for approaching and interacting with insurance agents to protect your interests

Everyone’s situation is different, but these ideas may help you save on life insurance:

Research and analyze plans before you begin discussions with an insurance agent.

Talk with more than one insurance agent rather than picking the best policy among those presented to you by one person. Some agents will choose less attractive policies to present with the one they’d like to sell in order to make that one particular policy appear to be the most attractive available in the marketplace.

Don’t assume that highly-rated insurance companies automatically have higher prices.

In the life-insurance world, you can often get the best quality at competitive prices.

Buy what you need to take care of your survivors.

Do this rather than purchasing large amounts of insurance that may allow your family to increase its standard of living after your death. Determining the coverage amount isn’t simple. One approach is to purchase enough to cover outstanding debts, fund your children’s educational expenses, and replace your income for a period of time until your family members can support themselves.

Avoid policies that pay dividends, as premiums on these policies tend to be higher.

Dividends may offset the higher prices, but generally are not guaranteed. Dividends may also be taxable, adding to the overall costs associated with owning the policy.

Stay away from credit life insurance products.

These include products such as mortgage life insurance and credit card insurance. Initial pricing may seem attractive, but note that death benefits typically decline over the term of the policy aligned with presumed decreases in loan balances.

Make apples-to-apples comparisons among various types of policies.

Compare coverage, policy features (such as guaranteed renewability and rate guarantees), financial strength of insurance carriers (using resources such as A.M. Best Company, Standard & Poor’s, FitchRatings, and Moody’s), and more.

Buy a low-commission policy.

Some policies have first-year commissions that are higher than the first-year premium, and presumably these costs are passed along to the consumer. (Read more about low-cost life insurance.)

Pay premiums on an annual basis rather than semi-annually, quarterly, or monthly.

Most insurance companies charge extra for payment on a non-annual schedule. Tony recommends this APR calculator to determine the cost if you don't pay yearly.

Get the best possible report from your medical exam.

That way you will be charged a standard premium rather than a rated (or higher) premium associated with higher risk for the insurance company (and greater likelihood of paying a claim early in the policy period). Schedule a morning exam and take care of yourself before: lose weight now if you are overweight, avoid salt or use it lightly for 3-4 days before the exam, don’t drink alcohol 24 hours before the exam; avoid caffeine on the morning of the exam, and give a urine specimen before the blood pressure check, which may slightly lower blood pressure.

Be proactive about health issues that may result in a higher premium.

Ask your agent to recommend insurance companies that do not rate your disease (when you can qualify for life insurance but must pay a higher premium). Get your agent to talk with the underwriter and/or medical director to get an idea of how the disease may affect eligibility or additional charges for coverage; you may be able to show that your condition is under control and will have no impact on your life expectancy.

Reapply for life insurance if you have had improvements in your health.

Ask if the contestable period and/or suicide clause can be waived if you are replacing a policy in which the contestable period (generally two years) has passed.

Sign up for life insurance provided by your employer.

Do this especially if it is offered at no cost or low cost to you. Be forewarned that you may not be able to continue the policy if you leave the employer.

Note: I received a free copy of the book, Questions and Answers on Life Insurance: The Life Insurance Toolbook, to review. The author, Tony Steuer, holds the designation of Individual Life and Disability Insurance Analyst (one of about 30 in California). This book is an excellent resource for anyone who is considering the purchase of life insurance or who has a life insurance policy.

This article is from Julie Rains of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

New Rules of Budgeting: Focus on Your Dreams

Kimberly Palmer — Mon, 11 Oct 2010 14:43:45 +0000

The following post is an adapted excerpt from Generation Earn: The Young Professional’s Guide to Spending, Investing, and Giving Back, a new book by Kimberly Palmer.

Let’s face it, old-school budgets are boring. Numbers, restrictions, lists, blah. But the new rules make figuring out a spending plan almost as fun as catching an afternoon matinee. Okay, maybe not that fun, but they will guarantee you can afford that matinee, as well as a five-star restaurant meal afterwards.

Here’s how it works:

Prioritize what’s important to you, even if it’s unusual.

Not everyone wants a big wedding and a house, followed shortly by babies. (Although, if you do want that – and I certainly did – then go for it.) Some people dream of running their own business from their home. Or traveling around the world for a year. Or living on a sailboat. The best budgets start with a list of your wildest dreams. What would you do if you had limitless money?

Once you decide on that list, then do a little analysis on where your money is actually going. You might find that even though you dream of quitting your job, you spend $200 on work lunches each month instead of putting that money into a “job-free” savings fund. Or that you just spent $20,000 on a car when you should stick with the bus so you can take off for Guatemala in December.

Research recently published in the Journal of Consumer Research found that people actually miss out on spontaneous opportunities to save when they focus on logistics instead of their abstract goals. The lesson? Think big, and the money will follow.

Focus on your dreams, not your needs.

Every Sunday, my Dad used to ask us what our “rocks” were for the week. He would remind us to think of our time like a bucket: If we put the rocks, or most important things, in first, then the less important things – pebbles, gravel, and sand – would filter in around them. But if we put the less important things in first, the important ones would never fit. In other words, you can’t fit a rock into a bucket of sand.

The same concept applies to budgeting. We will find a way to buy toothpaste, lunch, and other daily necessities. But you might forget to invest in yourself. That’s why you have to put your dreams first. That might mean investing in a dozen books about your dream career, or signing up for a local university course.

Put your time ahead of “stuff.”

It’s easy to forget the power of outsourcing. After all, when you’re busy, you barely have time to think about what you could pay someone to do for you. But taking an hour to find a cleaning service and signing up for grocery deliveries will save you many hours, every week, going forward. And while coughing up the money for those services might seem wasteful, it’s not, because your time is more important. (Unless it’s not – but a quick cost-benefit analysis will tell you whether the price is justified. $5 for delivered groceries instead of two hours shopping? That’s an easy one.)

In fact, new research shows that maximizing our leisure time is the best thing we can do with our money in order to increase our happiness levels. Researchers at University of Wisconsin-Madison and the University of Chicago found that spending money on enjoyable activities, such as vacations, movie tickets, and hobbies improved happiness levels while spending on necessities such as clothes and cars did not. The reason appears to be that our happiness levels are tied to our “social connectedness” – and leisure spending improves our social connectedness.

One of my favorite interview subjects in Generation Earn is Kimberly Wilson, a yoga teacher and entrepreneur in Washington, DC. She not only runs one of the most popular yoga studios in the area, but she also writes books, sells her own line of eco-friendly clothing, and runs a foundation that introduces young women to yoga. She’s also great with money, largely because she refuses to play by the traditional budgeting rules.

When I interviewed Kimberly, she had recently borrowed $500,000 in order a build a new yoga studio. She was also saving to buy a cabin in West Virginia so she could escape from the city on weekends, and made frequent fashionable purchases from discount stories such as Target and H&M to help inspire her own designs. She also frequently indulged in little items that made her happy: fire logs, soy lattes, and bath bombs.

But there was also a lot she didn’t buy: She skipped shoe purchases and expensive jewelry. She rarely ate at expensive restaurants. And she was perfectly content sharing her small, raspberry-painted condo with a dog, two cats, and her boyfriend.

To me, Kimberly exemplifies this new style of budgeting. She invests in herself, doesn’t feel guilty about buying “luxuries” that make her happy, and skips traditional expenditures (shoes and restaurant meals) that aren’t important to her. As a result, she’s living her entrepreneurial dreams – and has enough money in the bank to back them up.

Guest Post Blurb:

If you enjoyed this excerpt, check out more great tips from Generation Earn: The Young Professional’s Guide to Spending, Investing, and Giving Back from Kimberly Palmer.

This article is from Kimberly Palmer of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Book Review - The Cheapskate Next Door: The Surprising Secrets of Americans Living Happily Below Their Means

Xin Lu — Tue, 29 Jun 2010 19:22:27 +0000

The Cheapskate Next Door is Jeff Yeager's sequel to The Ultimate Cheapskate's Roadmap to True Riches. In this new book, Yeager takes a bicycle tour across America and meets many like minded people.

I haven't actually read Jeff Yeager's first book, but I am familiar with his writing on Wise Bread and the Early Retirement forums. He kindly offered me a review copy of his new book and I jumped at the chance to read it. The Cheapskate Next Door is actually the result of Jeff's unconventional way of promoting his first book. Basically, he took off on his bike and couch surfed on his book tour across the country. Along the way he met kindred souls who shared their homes and cheap way of life.

The book is structured so that each chapter discusses one aspect of life such as food or transportation. Each chapter is full of personal stories and also has a few practical money saving tips called "Cheap Shots." Some of the cheapskates Yeager meets are out there even by the Ultimate Cheapskate's standards, and that makes the book quite entertaining.

Although Yeager does not have children, I thought that the most interesting and helpful chapter in the book was about how cheapskates raise kids. He wrote very little about kids in his first book, and that elicited a lot of responses which he compiled into this book. The main idea of the chapter is that you have to learn to say no to your kids and teach them delayed gratification. Children can be well cared for without all the latest gadgetry, and I totally agree with that sentiment. An interesting Cheap Shot in this chapter is that there are now toy libraries in America where parents can borrow toys. This chapter also goes on to talk about how to save on college costs, and shows that a child does not have to cost $222,000.

One of the shorter chapters is called "Break the Mortgage Chains that Bind Thee." The simple message here is that paying off a mortgage is the best thing one can do for their peace of mind. Of course, many would argue that today's low interest rates means that having a mortgage may not be a bad idea financially, but I agree with the fact that having one less payment per month is a great thing.

One thing that delighted me about this book is how the people Yeager met seemed extremely proud of their lifestyle. They revel in the fact that they have a minimum amount of debt and seem to love their lives. I liked the book quite a bit for its jovial tone and its message that you can live happily without being plugged into extreme consumerism.

Disclosure: This post contains affiliate links, and I received a free copy of the book reviewed.

This article is from Xin Lu of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Book Review: The Happy Minimalist

Philip Brewer — Wed, 09 Jun 2010 12:00:04 +0000

The Happy Minimalist: Financial independence, Good health, and a better planet for us all by Peter Lawrence.

Like frugality and simplicity, minimalism is both a means and an end. It's a way of living light on your wallet and light on the planet, and it enables certain choices (such as mobility) that are closed off to most people. The hows and whys of minimalism are the topic of Lawrence's book.

When Lawrence lays out his own path, the book is great. The story of how he came to minimalism and of how he lives his life is fascinating and compelling. He provides solid details on the specific choices he has made, in terms of what he finds he needs and how he gets by without many of the things that most people figure are needs.

I wish the book had more of that, because that's what Lawrence has to offer — his own experience told in his own words.

Unfortunately, that's only half of this rather short book. The other half is advocacy for minimalism, and that part reads as if Lawrence didn't trust the truth of his own words and his own experience. The advocacy part of the book is larded with quotes from Gandhi, Confucius, Socrates, Aesop's fables, the Bible, etc. There are literally pages of quotes. They're all fine statements of the value of living in accordance with your own values (rather than the values of society at large) and of minimalism as a pathway to doing so — but they're largely statements that everyone has seen before.

Nobody says it better than Thoreau, but rather than yet another repetition of "We are happy in proportion to the things we can do without," I'd have much preferred more of Lawrence's own insights:

I don't have a 42-inch flat panel high-definition TV. However, I take pride in my 120-inch high-definition view from my home of the mountain range. I get to see the sun rise every morning and moon rise every month.

Is there a danger of oversimplification or trying to minimize something that should not be minimized. Yes. Exercise is a good example.

We all live somewhere on the continuum from minimalism to maximalism, but where we are now is an artifact of our own history, social and family pressures, and mere happenstance. Unless we've lived a very thoughtful life, or been very lucky, we're probably not at the best possible point. Getting close to your own best point comes down to a thoughtful examination of your own values and a close look at how your life does or doesn't match them. Where a book like The Happy Minimalist can help is by illuminating one point along the continuum and saying, "Here's what it's like at this point! Here's what's good about it!" That knowledge can then inform us as we make the choices that move us one direction or another along the continuum. Despite its flaws, The Happy Minimalist does that.

Note: I received a free copy of the book for review. Links to the book are affiliate links.

This article is from Philip Brewer of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Book Review: Hot (Broke) Messes - How to Have Your Latte and Drink it Too

Xin Lu — Sat, 29 May 2010 16:00:03 +0000

Nancy Trejos is a personal finance writer for the Washington Post. While she was advising readers on financial problems, she was actually so broke that she had to ask her hardworking immigrant parents for money. Hot (Broke) Messes is Trejos's confession of all her personal finance mistakes, and how she Finally learned to manage her money.

If you want a detailed how-to guide to living well on a budget, this book is not it. But the author does give a great narrative of the big financial mistakes she made and gives some basic tips on managing one's finances. One of her biggest financial mistakes was to buy a home with her fiance with her mother's gift of a downpayment. Later she had to sell the home at a loss after she broke up with the man. This portion of the book is actually something I have seen happen over and over again to young adults with immigrant parents. In the immigrant community many parents push their adult children to buy a home because it means owning a part of America, and many of them fork over hefty downpayments out of love. Unfortunately, many of these children are just not ready for homeownership, and the parents' hard earned money is wasted. Trejos writes that she felt horrible for losing her mom's money, but she could not afford the mortgage on her own after her fiance left her. A significant lesson she learned from this trial is to not tie her financial wellbeing to another person.

Another one of Trejos's mistakes is to buy a new car just because she thought it was cute. She bought the car with a loan and it was immediately underwater. When she wanted to get rid of it she couldn't sell it for the balance of the loan. This is a good reminder that buying a new car with a loan is a horrible deal because as soon as the car is driven off the lot the loan is basically underwater. It was a little funny to read that she started to take the bus, but still had to keep the car.

There were several portions of the book where the author wrote about emotional spending. She spent money to recover from her breakups, and just to make herself feel a bit happier. She finally hit bottom when she had to call her parents to ask for money even though she made more than $80,000 a year as a writer for Washington Post. Eventually she realized that her way of life is not sustainable and found herself a financially planner and worked out a budget. Towards the end of the book Trejos writes a diary of her financial "hits" and "messes." I thought this portion was quite funny because many of her "hits" were summaries of how she did not have to spend money for food and booze because her friends and family paid for her.

There are a few pages of concrete tips on saving money in this book, but they were very brief. I think the main value in this book is that it is a story many young adults can relate to, and perhaps by reading this book many young people can avoid the mistakes Trejos made. Although the book sports a hot pink cover and is targeted towards young women, I think many young men could learn a few things from the author's experience. If you enjoy stories of personal finance trials and errors, then this a great light read. However, if you want real tips on how to "have your latte and drink it too", then you should definitely check out Wise Bread's 10001 Ways to Live Large on a Small Budget!

Disclosure: I received a free review copy of this book and this post contains affiliate links.

This article is from Xin Lu of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Book Review - Buying a Home: The Missing Manual

Xin Lu — Fri, 21 May 2010 19:57:52 +0000

Housing prices have dropped all across America in the past couple years, and more people are looking into buying a property instead of renting. If you are an eager house hunter and do not know where to start then Buying a Home: The Missing Manual by Nancy Conner(affliliate link) is the book for you.

The book is separated into four sections. The first is Preparing for Home Ownership. This section discusses the pros and cons of buying a home, and the financial implications of being a homeowner. In this section the author also gives some good tips on improving your credit and lowering debt so that it would be more likely that you will get a loan.

The second is Finding Your Home. This section zeroes into the house hunting portion of the home search. It included a good chart of common euphemisms real estate agents use to make properties sound better than they are. For example, "jewel box" and "cozy" both mean that the house is very small. This section also talks about finding a real estate agent and other professionals that would help with the home search.

The third section is Financing Your Home. This section is important to any home buyer because it discusses the different types of mortgages and closing costs with real numbers and examples. If you could fully absorb this section of the book then you would have a good idea of what to expect on your loan and closing documents. This section may be a little overwhelming to read for those who do not regularly deal with numbers, but it is very important to understand the loan you are getting into before signing the dotted line. The book also goes over the HUD statement so that a potential home buyer knows what the fees are.

The final section is Negotiating and Closing the Deal. This portion discusses what to offer for a home, and how buyers can negotiate with sellers on issues beyond price. For example, buyers could ask sellers to cover a part of closing costs. The book also discusses how inspections work and what happens if things go wrong.

I really liked this book for its straightforward and informative writing style. I also liked that the book was very comprehensive and covers the entire home buying process from beginning to end. When my husband and I purchased his parents' house I did a lot of research on my own and it took a lot of time to gather all the information that was covered in this book. I could have saved a lot of time if I had this book. One word of warning is that this book is definitely targeted towards American home buyers because the laws and procedures mentioned do not necessarily apply to other countries. However, the general advice on preparing for home ownership and negotiation are useful for any house hunter.

Finally, the book also has a companion website where readers can get updates to the book. Another book in the Missing Manual series called Your Money: The Missing Manual" was recently reviewed by Philip Brewer.

Disclosure: I received a free review copy of this book and the post contains an affiliate link.

This article is from Xin Lu of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: