There is a connection between our emotions and our money, a link that is preyed upon countless times each day by advertisers promising to trade us happiness for our hard-earned cash. Most of us have money, and all of us seek happiness; pushing the link between the two is a sure-fire way for a marketer to come up with earnings.

The real trick to spending less is to figure out how to feel happier about not spending money. We see people in advertisements looking beautiful, young, sexy, and happy while using various products – and we want to feel that way too. Effective ads are so good that they often leave us feeling inadequate if we don’t spend the money and buy the product. This is a big trap that many of us fall into – we begin to feel sad if we don’t spend money.

Here are several techniques to use to bring about positive feelings about being frugal.

Remind yourself of your goals as often as possible. For me, I’m saving money so my wife and I can retire early and travel. We went on a wonderful honeymoon to England when we were first married and I long for us to be retired so we can do more international traveling. I realize that every time I don’t spend money and instead save it, we’re a step closer to this dream. So, I’ve posted pictures of the dream everywhere: pictures of places that I want to travel to, along with pictures of our honeymoon to London. I used a few inexpensive techniques to make these pictures into home decor, so that they remind me in multiple ways of positive feelings related to my commitment to saving.

Keep visual reminders of your progress, not of how far you have to go. I check the balances of my savings and investment accounts daily – and I enjoy watching their balances go up. Every once in a while, I’ll print off the balance of my savings in huge, bold numbers and post it somewhere where I can see it regularly. I also like to print signs that say “In the last month, I saved $780 by not spending money.” It’s a visual reminder of what I’m doing that’s positive – and a constant reminder that I don’t need to spend money to feel happy.

Ask yourself why. I do this in two ways. First, I ask myself why I want to buy something. It is almost shocking how often I can’t come up with a real reason – the truth is that I’m being compulsed to buy the item due to an advertisement. Second, whenever I see an ad, I ask myself why it’s put together that way. When I make myself consider why an ad that could be attractive to me actually is attractive to me, the power of it just seems to disappear. I often find myself laughing at (and on some level admiring the skill behind) advertisements that used to sway me to buy.

Keep up my personal appearance without spending money. For me (and for most people, I believe), there is a strong connection between positive feelings and personal appearance. Whenever I start feeling like I need to buy something, I go take a shower. Seriously. I shave, put on some clean clothes, brush my teeth, put on deodorant and a bit of cologne, and suddenly the whole world feels better to me – a more manageable place where I’m in control.

Turn to what you already have. When I have a desire to buy a new book, I go look at my bookshelves at the books I already have and pick up one of those. When I want to buy a CD, I shuffle through my music collection, find an old favorite CD or one that I’ve not listened to much, and listen to that instead. When I want to buy a new geek toy, I go play with some features on my laptop that I haven’t explored yet. This scratches that itch and gives me a happy feeling as I’m discovering (or rediscovering) something great.

Get some exercise. Endorphins are an incredibly strong uplifter. Find a method of exercise that is appropriate for your level of fitness and for your interests. For me, it happens to be Dance Dance Revolution on nonstop exercise mode (meaning the game plays in such a way as to maximize your workout). If I feel the urge to go shopping, I start dancing instead and I suddenly get a big mood boost.

Do fun things that are free (or close to it). For me, I’m lucky: I have a nonstop source of fun in the form of my one year old son. I also derive a lot of joy from the act of writing. Find those things that make you feel good that don’t cost anything and spend your spare time focusing on those things. Not only will you be happy simply enjoying what you like, but you’ll feel good later realizing that you didn’t spend any money.

These are the most effective tactics in my repertoire in terms of deriving ways to find happiness from not spending money.

As I’ve mentioned, I recently began investing in the Vanguard 500 as an individual investor outside of the “walls” of a retirement plan. Prior to this, my experience with such plans was with retirement accounts: put in the money before it was even taxed, let it sit there and earn, and not really think about it. Now the situation is a bit different.

On Thursday, I checked my account and noticed that my number of shares had gone up by a fraction of a share. I looked around a bit and noticed that I had been paid a dividend, which I had instructed to be rolled over into more shares of the Vanguard 500. It was a small amount, but still quite interesting, so I began to research how dividends work. You’ll either find this information painfully basic or interesting, depending on where you are in your investments.

Dividends are monies paid out by companies to their shareholders out of their after-tax profits. Basically, if you own a share of stock in a company and they pay a $0.20 dividend, you get $0.20. Pretty basic. In a mutual fund, you get a dividend based on the combined dividends of all stocks owned by the fund; the fund adds up all of the dividends it earns, then divides it by the number of shares of the fund outstanding. Thus, for a Vanguard 500 share this month, the dividend was $0.65.

Most countries tax dividends, but at a lower rate than normal income tax. The reason for this is that any taxes on dividends are in fact a double tax: the dividend money has already had taxes paid on it by the corporation. In the United States, the dividend tax is currently 15% for almost everyone, so I’ll have to pay a very tiny dividend tax this year (a few dollars).

In the United States, dividends are usually paid out quarterly. Of course, quarterly merely means every three months, not necessarily the same day for every company. Most mutual funds seem to pay dividends near the end of a calendar quarter, thus dividends appear near the ends of March, June, September, and December.

I won’t get into the business implications of whether or not to pay out a dividend or how much of a dividend to pay other than to say there are widely different philosophies and thus different stocks that seem to have roughly the same value may pay dividends at wildly different rates.

I could also see that a frugal investor could end up with several million in stocks and could use the dividends to cover living expenses, particularly if they focused on buying stocks that paid good dividends. This, presumably, is yet another way for your money to make money for you.

Now that you’ve calculated our net worth, you’re probably excited about seeing that number go up, and once it starts going up, you’re going to want to see it keep going up, faster and faster, rocketing to the moon. For my net worth growth, I have a thumbnail goal of a 2% increase per month in the coming year, which amounts to a 29.4% increase over the course of the year.

Here are the ten methods I plan to use to increase the velocity of my net worth growth. I recommend focusing for a while on each item before moving onto the next one.

1. Pay off all debts, starting with high interest ones
I started doing this during the past year by paying off all of my credit cards and eliminating my truck loan. Right now, I’m focusing in on the smaller of my two student loans, which I hope to wipe away by mid-2007.

2. Maximize employee matching of retirement investments
You should claim every single extra dollar that your employer offers you as a matching amount in your retirement account. If you don’t, you’re basically telling your employer to keep part of your salary and actively choosing to stunt your net worth growth.

3. Max out a Roth IRA
A Roth IRA is an unbelievably good way to shelter some money for retirement. You can contribute up to $4,000 a year, you can withdraw what you contributed at any time, and when you retire, you can withdraw your earnings tax free. It’s a complete gravy train.

4. Trim expenses
The key here is to eliminate “bad” expenses: ones that don’t do anything to increase your net worth. For example, dining out is almost always a bad expense, as is extra clothes shopping and almost every electronics purchase. Cut out these extra expenses from your life and suddenly the margin between your income and your expenditures becomes a whole lot fatter. That margin is your net worth growth, and you just made it bigger.

5. Keep money you’re not spending in a place where it earns
Your savings account should be earning a bare minimum of 4.5% APY. If you’re not earning more than that, you’re denying yourself some automatic net worth growth. Also, you should find out if you’re eligible for a high-interest checking account, like the upcoming ING Electric Orange checking, which offers a 3.0% APY on your checking balance.

6. Start a portfolio
Once you’ve built up an emergency fund, you should consider starting an investment portfolio. Once you begin to accumulate a lot of money in savings, investing is the next logical step for helping your money grow.

7. Reinvest income from investments
Once you begin investing, you’ll find that you may receive income from these investments, such as dividends. Instead of pocketing that money, roll it back into the investment until you have a real reason to take it out. It’s just more net worth growth acceleration.

8. Invest all windfalls
If you suddenly get a windfall due to an unexpected gift or an inheritance, don’t think about buying a flat panel television or a swimming pool. Invest that money as soon as you can. You can start buying such perks when your net worth is growing at a rapid pace by itself. I like the campfire analogy: if you’re trying to start a campfire and someone hands you some wood, are you going to use it to build the fire or are you going to whittle yourself a new toy?

9. Buy only late model used cars
Late-model used cars, ones that just finished out their leases, are the best deal on an auto lot. Buy one and drive it until it’s about ready to fall apart, then trade it in for another one. But don’t forget the tenth suggestion…

10. Pay for things only in cash
If you can’t get your hands on the cash to buy something, wait until you can. This includes everything short of a new home, including automobiles. The only auto loan you should ever take out is your first one.

If you follow these rules, you’ll watch your net worth slowly begin to accelerate and take off like a jet going down the runway and lifting into the air.

As you continue to blog, your regular readers will eventually grow accustomed to your voice as a writer, even if you write in a mostly factual fashion. Over time, you’ll come into contact many of your readers by email and comments and you’ll begin to establish a relationship of sorts with them.

What does this mean? When a major event occurs in your life and especially in relation to your blog, don’t be afraid to share it. If you purchase a house or have a child, share your joy with your readers. If you’re linked to by a major site or reach a certain threshold that you set as a goal for yourself (500,000 visitors or 1,000 posts), let your readers know about it.

To put it bluntly, if something fills you with joy, share it. The optimism and happiness that comes from the event will flow out of your writing right to the reader and they will feel a bit of joy as well.

This doesn’t mean that you should flood your blog with stuff like My child just said “poop” for the first time! (unless you’re running a parenting blog or something). Save celebratory posts for truly major events, or semi-major events that relate to your blog.

Here are some tips about celebratory posts that will maximize their effectiveness and impact for the reader.

Mention events that match the theme of your blog. For example, since this is a personal finance blog, I’ve mentioned significant debt eliminations on here, such as the paying off of my truck better than a year early. It’s something that excited me greatly and it also fit the theme of this blog. I also plan on blogging (in detail) my first home purchase, which is coming in the next year.

Include a picture if possible. If you have a new house or a new child, a photo or two can really show the excitement of the moment. You can even post a video if you want; stick it up on YouTube and include that video in your post.

Don’t overdo it. If you experience a life-changing event, it’s great to mention it once in a celebratory manner, but don’t let it take over your blog. Your readers are there to read about the topic at hand, not your new child. A celebratory post is a great way to build attachment between the reader and the writer, but only if done occasionally. If the life change causes you to have a new major interest, start another blog. Very few blogs can make such a transition; dooce is the only one I can think of, as it changed from a professional rant blog into a parenting blog.

If you met a goal, set a new goal and talk about it. If you’re posting to announce your site has had 100,000 visitors, state what your next goal is, what you learned, and how you’re going to get there. If you’re posting to celebrate losing ten pounds, talk about how you did it and what you plan to do next. Make it about more than just meeting that specific goal and tossing confetti in the air.

And with that, the Building a Better Blog for 2007 series is finished. Let’s celebrate!

Building a Better Blog for 2007 is a month-long series at The Simple Dollar, outlining steps you can take to build a long-term healthy blog that will attract readers. This is the final post in the series; you can jump back to the previous entry, Don’t Forget the Fundamentals.

After posting a series of savings plans this week, I received the following email from a reader:

I was wondering, could you also do an entry in that series if someone puts $50 away? I’ve shown the article to a few people, and their incomes gravitate to more of $x per month, and around $50 max to do this.

So, here it is, an additional installment in the Presidential Savings Plan series, the Ulysses S. Grant Plan.

These calculations take advantage of offers and promotions available in December 2006 and also use interest rates from that time to calculate returns. While the plan still works, the exact dollar amount returned will differ.

Ulysses S. Grant. Does a name conjure up images of smoldering Civil War battlefields more than his? He led the Union to victory in the War Between The States, and his countenance issues a challenge: what happens if we can save fifty dollars each month this year? Where will we be at the end of the year? Let’s take a look.

How can I save $50 a month? To save $50 a month, you just need to live a little more frugally, since $50 in a month boils down to about $1.66 a day. Some great ways to do this are to eat out less often, buy fewer frivolous items (music, games, etc), and so forth. If you do these things, or evaluate your own life to find areas where you’re spending too much money, you should be able to free up $50 a month for building your future.

What are the rules? Each month, you put away $50 towards an investment goal. The goal is to not risk any principal in this investment, to keep it liquid, and to have it set up so that the investment is as easy as possible. To do this, we will be using two online savings accounts in tandem: HSBC, because of the 5.05% APY interest rate, and ING Direct, because of the solid 4.5% interest rate and the $25 signup bonus.

How much can we turn $50 a month into by the end of the year? You’ll need to immediately sign up for an account at HSBC Direct. They offer a 5.05% APY interest rate on their basic savings account with no minimum. You’ll also want an ING Direct account later in the year, because when you make a $250 opening deposit into an ING Direct account with a promotional code, they’ll give you $25 just for signing up. After the two week waiting period is over, you can transfer the $275 back into the HSBC account.

On January 1, we start saving $50 a month. We set up an account with HSBC Direct, make an opening deposit of $50, and set up an automated plan to withdraw $50 from our checking account each month.

On February 1, we have $100.15 in the account. Not a bad start, but we’re just getting going.

On March 1, there is $150.51 in the account. We’ve already socked away $150 and our earnings are going to go up greatly in the coming months. It will be a fun ride.

On April 1, the account holds $201.05. Overall, we’ve now made over a dollar in interest for the year. Considering the short term of investment, that’s a very good return.

On May 1, the account holds $251.62. It’s now time to open an ING Savings account, using $250 from this account as an opening deposit. Then, in two weeks after the initial waiting period at ING has expired, you can transfer the money back to HSBC.

On June 1, the account holds $327.47. Ah, yes, that nice $25 bonus rewarding us for careful saving. We’ve also made $2.47 in interest so far this year, but it’s about to start getting sweet.

On July 1, the account holds $378.78. We made $1.31 in interest over the past month alone, meaning the account is now earning more than a dollar a month.

On August 1, the account holds $430.26. The account earned $1.48 in interest over the previous month. Slowly and steadily, the amount is building up.

On September 1, the account balance is $481.99. We’re basically halfway to a grand in the bank, as the interest will help us make up the difference. If you can make the $50 goal for ten more months, you’ll have a grand in the bank!

On October 1, the account balance is $533.95. You cracked the $500 mark! At this point, the account is earning enough interest each month to match what you’re saving each day. Your money is really starting to work for you!

On November 1, the account balances at $586.06. The money is steadily rising, like rainwater in a puddle. Keep it up!

On December 1, you make your final $50 payment for the year, and the account balances out at $638.45. This month alone, you made $2.39 in interest. Every single day, the account is making $0.08 for you, without you lifting a finger.

On January 1, 2008, the account balance is $640.48 (if you elected to continue the plan, the balance is $690.48). During the year, the account earned $40.98, and that’s with your money slowly being deposited throughout the year, not sitting in the account at the start. You’ve probably also noticed how easy it is to trim $50 from your monthly spending, so you’re likely to stick with the plan for the future. About six months from now, if you continue with this plan and just let it sit at HSBC, your balance will creep over the thousand dollar mark!

Amount Saved: $600.00
Amount Earned: $40.98
Percent Return: 6.83% (boosted by that nice ING bonus)

As I mentioned earlier, I recently bought into the Vanguard 500 using part of my emergency fund. Since then, I’ve set up a monthly deposit into that fund, intending mostly to focus on building up the balance to a sufficient level. The real purpose of the fund is to enable my wife and I to do some interesting things when our children leave for college, such as quitting our “normal” jobs and focusing on public service at the local level.

What I realized is that using an automated investment system amounts to dollar cost averaging. By doing it this way, I’m basically committing myself to a dollar cost averaging approach to my investment.

If you’re unfamilar with dollar cost averaging, it’s an investment philosophy that involves you buying into a particular investment over time with an equal amount of cash each time. When the investment’s value is high, you don’t get as many shares; when it’s low, you get more shares. Over time, this can reduce the pain of a down market. Here’s an example of dollar cost averaging if you’d like to see it worked out. Essentially, because of my monthly investment plan, I’m now doing dollar cost averaging into the Vanguard 500, buying the same dollar amount in shares each month and riding it through the ups and downs.

Here’s the question: is this a good thing? Lots of financial advisors think that dollar cost averaging is the cat’s banana, but I’m not entirely convinced. Let’s look at a year in which the value of a stock starts at 100, goes up 10 a month until June (the peak), then stays steady for the rest of the year. You paid $134.94 per share with dollar cost averaging. If you instead bought in at the start of the year with your complete investment, then you paid only $100 per share.

On the other hand, let’s look at the reverse market: the stock starts at 100, goes down 10 a month until June, then stays steady the rest of the year. If you invested it all right off the bat, you spent $100 a share for stocks now worth $50, but if you used dollar cost averaging on a monthly basis, you only paid an average of $58.66 per share.

Dollar cost averaging is good if you think there’s a good chance that the market will see turbulence or go down. It will reduce the impact of the collapse on your investing. On the other hand, dollar cost averaging doesn’t do so well if the market is going crazy.

Since I think the market is going to be turbulent, but not go up or down a whole lot overall in 2007, I think that dollar cost averaging is fine for me in the short term.

I received an email from Edward today, who had this to say:

I love your site. I have a question. I have read a lot of posts about people’s net worth. How do you calculate your net worth?

Calculating your net worth really isn’t all that hard. It just takes a bit of time, some scratch paper, and a calculator.

First, make a list of all of your assets. This includes retirement savings, your current checking and savings account balances, any bonds you might have, the total value of any stock holdings you might have, your home, and your automobiles. I usually don’t include any physical assets less valuable than my car, but you can do this if you wish.

I usually make a list that says ASSETS in big letters at the top. Underneath that, on the left, I list what the asset is and on the far right, I list the value of that asset so that the decimal points of all of the assets line up. This makes the calculation of your total value much easier.

Once you’ve listed every asset you can think of, write TOTAL in big letters over on the left, then add up the numbers. Once you have this total, you’ve got the total value of your assets.

Now, make a list of all of your debts. You should list all of your credit card balances, personal loans, student loans, auto loans, home loans, and so forth. Much like with the assets list, I recommend a big header that says DEBTS, with each debt listed below that on the left side and the amount of the debt over on the right, with the decimals lined up for easy figuring.

Once you’ve listed all of your debts, write TOTAL in big letters on the left, then add up all of the debt numbers. This total is the total amount of all of your debts.

Once you have these two numbers, the net worth calculation is simple. Take your total assets and subtract from that your total debt. The resulting number is your net worth.

What does a negative net worth mean? Some people panic when they calculate their net worth and discover that it is negative. This is usually the result of a young earner with a substantial amount of student loans and also a loan on a rapidly depreciating automobile. Why is your net worth negative? You simply haven’t earned enough money yet to overcome the weight of the debt. Don’t worry, it will come.

How can I make it bigger? Every time you make one of those debts smaller or one of those assets larger, your net worth will increase. So, you can increase your net worth by paying off your debts, saving and investing money, and reducing your spending.

On the other hand, your net worth goes down when you spend money on “small” things, such as clothes, food, and even interest on loans. Whenever you buy something frivolous, your net worth goes down.

I find it useful to calculate my net worth every month. My goal each month is to increase my net worth over the previous month, which means my expenses for the month was less than my income. I use the excess to pay down debts or increase personal savings.

I largely elected to read Rule #1 because of the professed simplicity. I’ve read a lot of investment books over the last year or two, but they all fell into one of two categories: either they required a huge investment of time or they had flaws so large that even I could see them from a mile away.

This one stood out from the others that professed simplicity in one key respect: it professed to be heavily based on the investing philosophy of Benjamin Graham, David Dodd, and Warren Buffett. In fact, the titular Rule #1 comes straight from Buffett: don’t lose money.

The book does succeed in laying down a simple investment philosophy that makes a good deal of fundamental sense. It recommends heavy use of the internet for acquiring basic pieces of financial information, then using these to easily calculate basic metrics with which to judge whether a company is going to return a strong investment or not.

This system focuses on finding sure bets and, having played with the numbers a bit, it does a great job of finding very healthy companies. There’s only one problem: the book also seeks out stocks that are undervalued and investors have gotten sophisticated enough that finding undervalued sure bets is almost impossible.

In other words, like any other financial book, this book will not make you immediately rich, but it does succeed in other areas. Let’s take a walk through it and find out more.

The Four Ms

The central philosophy of Rule #1 revolves around identifying companies that are poised for growth using various metrics. At the center of these metrics is a set of four criteria for any company that you might invest in. Phil Town refers to these metrics as the four Ms. What are the four Ms?

The first M is Meaning. Does this business have meaning to you? Identifying businesses that have meaning to you boils down to making a list of your professional interests, your personal passions, and the areas where you spend excess money. Areas where these lists overlap are hot areas; areas where all three overlap are industries to look for companies.

The second M is a Moat. Is this business difficult to get into? For example, businesses such as gas stations are easy to get into because they’re simply selling commodities, but businesses such as the oil industry are hard to get into because of the resources and intellectual property required. The book provides a set of five numeric tools for identifying whether or not a company has a large moat; we’ll discuss these tomorrow.

The third M is Management. Is the company under strong management? Basically, if a company has a leader who is primarily in it for himself, you shouldn’t invest. How do you know? First, read a few puff pieces on the CEO to generally see if he or she is driven by big goals. Do they want to achieve something amazing or merely “increase shareholder leverage”? Second, see what their compensation is like. Is it tied to stock options that break open on short term gains? Is the compensation highly exorbitant? Those are red flags. Third, take a peek at what they’re doing with their own stocks. If they’re dumping excessive amounts (and the other company heads are, too), avoid this company.

The fourth M is Margin of Safety. Is the value of the company’s stock much lower than it should be? The book suggests a pretty cut-and-dried method for calculating what a stock’s price should be. Dig into a company’s data sheet on Yahoo! Finance and get the current EPS, the 10 year equity growth rate, and the average of the high and low P/E ratio. Take the current EPS and figure that it grows for ten years at an annual rate equal to the 10 year equity growth rate. Once you have that future price for ten years down the road, shrink it by the rate of return you want (say, 15%) ten times to return it to today’s values. If this calculated price is more than double the current price of the stock, you should buy in.

If all four of the Ms are telling you to get into a company, that’s a sure sign you should be getting into the company.

In Rule #1, the author, Phil Town, is pretty adamant about ensuring that any business that you invest in be surrounded by what he calls a Moat. In other words, you should only invest in businesses that have a track record of stability and show no signs of losing that stability over time.

In order to ensure that the business that you’re considering an investment in has a large moat, Phil recommends that you look at five key numbers, which he refers to as “The Big Five”:

1. ROIC (Return On Investment Capital)
2. Sales growth rate
3. Equity growth rate
4. EPS growth rate
5. Cash growth rate

Each of these numbers should be above the 10% margin over the past year. In addition, the average of each of these numbers over the past five and the past ten years should be over 10%.

Why are these numbers important? Together, they indicate the health of a company. Is the investment of capital returning anything? Are the sales growing? Is it earning more per share? Is the company building up equity and cash? All of these questions should be answered with a clear “yes” if your company is doing well.

It’s important to note that these numbers really only serve to ensure that the company is in fact stable, not answer whether or not the company is a good investment. Town’s philosophy is that you should always invest in stable companies that you like, not chase after the pot at the end of the rainbow just because the numbers look sweet.

Implementing the Rule

So, how do you get started implementing the investing program found in this book? Most of the latter half of the book focuses on just this issue.

First, take it slow. Don’t bet the farm on the first stock you find that seems like a good deal under this system. Keep your portfolio diverse and don’t bet everything on the first thing you see.

Second, use the three tools for identifying when to get into or out of a stock. Phil recommends using MSN’s Money Central for doing your research and finding out the values of these three tools; they’re all available on the site. If they all indicate “buy,” then buy; if they all indicate “sell,” then sell.

The first one is the MACD, or moving average convergence divergence. It identifies money coming into or out of a stock. If there’s money going in, then go in. If there’s money coming out, then go out.

The second tool is the Stochastic, which seeks to indicate major spikes in stock activity, which usually indicate great news or a major problem. You should follow the direction of these spikes.

The third tool is the moving average, which simply indicates whether the stock is currently moving in a healthy direction. If the current price is leading the moving average by quite a bit, it’s a good time to buy; if the current price is lagging the moving average by quite a bit, it might be time to get out.

The final step to implementing this plan is to overcome obstacles. Phil lists five major obstacles that hold back investors: bad debt (i.e., consumer loans), taxes on gains (he recommends shielding them in a Roth IRA or a 401(k)), overdiversification, fund managers (if you know how to invest, why let them have a cut?), and fear. If you can overcome all of these, you’re ready to go.

Buy or Don’t Buy?

To put it in a nutshell, Rule #1 is a simplification of the investment philosophies of Benjamin Graham and Warren Buffett. Phil Town basically takes their ideas, strips away almost all of the nuances, and leaves behind the bare skeleton of how Graham and Buffett invest. It’s simplified to the point that almost anyone could do it, for better or worse.

Of course, with such simplification comes some problems. The book’s philosophy is very good at finding companies that are going to be successful. However, it’s basically impossible to find companies this good. Companies that are so good that this method will find them are companies that large money managers have long ago discovered because they use nearly identical methods.

So here comes the recommendation: buy this book if you’re a beginning stock investor or a conservative investor. This book is loaded with great, simple metrics for finding great companies to invest in. If you follow Town’s philosophy as closely as possible, you will eventually find good companies for your money and you will make money.

However, I don’t recommend this book to experienced or risk-taking investors. Phil Town’s plan is focused on easy methods for finding good, stable companies that will make strong money over the long haul. If you’re looking for huge returns immediately and are willing to gamble to get them, go elsewhere; similarly, if you’re already familiar with Graham and Buffett, this book will be a simplification for you.

Personally, I enjoyed the book quite a lot, and I think you will too if individual stock investing is of interest to you.

I originally reviewed Rule #1 in five parts, which you can find here, here, here, here, and here if you would like to read the original comments.

Rule #1 is the eighth of fifty-two books in The Simple Dollar’s series 52 Personal Finance Books in 52 Weeks.