If you’ve been reading The Simple Dollar for a while, you know that I love the “Little Book” series by Wiley Publishing. It’s a book series of small, relatively short hardbacks with about twenty short chapters. Each book in the series focuses on a specific personal finance or investment topic, striving to spell it out in plain English. Often, it’s written by a leader in the field, particularly by someone who believes deeply in the methodology being described. Almost unanimously, the entries in the series have been well worth reading, particularly if you have even a minimal interest in investing. The books do a fantastic job of breaking down ideas into little, comprehensible nuggets.

The most recent book in the series that I have yet to review (there are actually two more that have been published very recently that I’ve not even laid eyes on yet) is The Little Book of Behavioral Investing by James Montier, a renowned value investor. This entry in the series focuses on how normal human behavior often works against us when it comes to investing, a phenomenon that’s been covered in other personal finance books. Unfortunately, those other books have often been dry ones, often failing to relate the concepts they talk about to your day-to-day behavior.

Does The Little Book of Behavioral Investing succeed where the others fail? Is it a book worth reading? Let’s dig in.

One – In the Heat of the Moment
Poor decisions are made in the heat of the moment. Just think of impulse buying at your local supermarket. Montier proposes, sensibly, that the route to financial success is almost always preparation of and pre-commitment to a detailed, clear plan. Spend some time figuring out exactly what you’re going to do, what your goals are, and what your parameters are before you even dive in. It’s no different than writing a grocery list before you go to the store – you’re curbing impulse buys.

Two – Who’s Afraid of the Big Bad Market?
When people experience financial loss, they often react much in the same way they do when they’re bitten. They retreat. They certainly don’t want to invest more. Yet, quite often, the correct response to a loss in a stock investment is to invest more because you’re essentially paying a sale price on the same exact company that cost quite a bit more just a month ago. If your fundamental gameplan hasn’t changed, don’t react to a downturn by selling – react to it by buying.

Three – Always Look on the Bright Side of Life
On the other hand, when people see a positive trend, they tend to get overoptimistic. They believe that it’ll continue on forever and they dive in like crazy – often when things are hitting their peak. This is why bubbles form – a good investment reaches a reasonable peak, but keeps on going because the blind optimists dive in, driving the price far above what it should be rationally. When the blind optimists then try to sell, there aren’t enough buyers and the price collapses.

Four – Why Does Anyone Listen to These Guys?
Experts are not perfect. Although they might be more knowledgable about the market, they also tend to be overconfident, as they believe that they know more than the other investors. That’s a bad mix that often causes investment experts to do worse than the average person on the street. Overconfidence can completely ruin any advantage that you might have.

Five – The Folly of Forecasting
No one can predict the future, but lots of people certainly try. Unfortunately, past performance is never an indication of future results. The best thing an investor can do is understand where they are right now. Have they met their goals? If you create a plan in advance and stick to it, you don’t have to try to predict the future.

Six – Information Overload
There’s an overabundance of information available for investors. While on one level that can seem like a great thing, the truth is that it can actually be a terrible thing. People can get lost in the data. They can get sucked into “analysis paralysis,” where they won’t take action until they can analyze all the information – and by the time their analysis is done, the situation has changed. The key here is to focus your analysis on very specific elements that you understand.

Seven – Turn Off That Bubblevision
Many people obsess and stress over every little fluctuation in the stock market, and channels like CNBC fuel the obsession. Unfortunately, such obsession often leads to oversensitivity to little fluctuations and thus causes hair-trigger responses that are usually poor. Turn off the bubblevision and seek out real, hard information that matters to you instead.

Eight – See No Evil, Hear No Evil
Most people look for evidence that confirms the ideas they already have (think about talk radio, for example). However, doing that will often be disastrous for your investments. You should instead constantly look for information that disproves your assumptions. If you think a company is successful, for example, you should seek out signs that indicate that it’s not successful.

Nine – In the Land of the Perma-Bear and the Perma-Bull
Some people believe the stock market is always headed in the right direction (”perma-bulls”). Others believe that the stock market is always headed in the wrong direction (”perma-bears”). Obviously, neither one is right and, obviously, neither one of these folks can ever be a truly successful investor. Every market has ups and downs – if you constantly believe one or the other is about to happen regardless of what’s happening now, you’ll always make mistakes.

Ten – The Siren Song of Stories
A good story is incredibly appealing to us because it makes things that seemingly don’t make any sense make, well, sense. We do this all the time – our memories are a perfect example of this. We take random events in our lives and polish them until they make a coherent story. The problem is that with investing, the data rarely tells a simple story like this. When we try to mold it into a simple story, we overlook big parts of the picture and often end up making poor choices. Don’t worry about the story.

Eleven – This Time Is Different
All markets have bubbles – and those bubbles eventually burst. Every time, though, as people are buying in like mad, you hear stories about how this one is different than the rest because of some reason. That’s basically never the case. What happens, inevitably, is that too many people buy in because they believe they’re going to get rich. Suddenly, there are too many people holding the things they’ve bought and no one’s around to buy them. Every time a market begins to seriously diverge from long-established fundamentals, there’s usually a bubble involved and you’re better off avoiding it.

Twelve – Right for the Wrong Reason, or Wrong for the Right Reason
As was mentioned earlier, we tend to gloss over the past to create nice stories about it. That glossing, mixed with our optimism, often results in our blaming others for the mistakes we made in the past. The truth is much harsher: whenever we lose money, we’re at fault, and there are valuable lessons to be learned from figuring out what exactly went wrong.

Thirteen – The Perils of ADHD Investing
If you’re an attentive investor, it’s often tempting to jump in and make changes all the time. We hear some good or bad news and we want to react quickly to it by buying or selling. Unfortunately, our snap decisions are often absorbed right into the market and the only person that makes money is the stockbroker. If you have a plan in place – and you certainly should – stick to that plan. Don’t let a sudden piece of news or a sudden impulse steer you off of that plan.

Fourteen – Inside the Mind of a Lemming
It often can feel very uncomfortable to zig when others are zagging, particularly when we have money at stake. If we see lots of people doing a certain thing, it’s easy to convince ourselves that it must be the right thing to do. The key here is to step back and look at it objectively without the influence of other people. Make your decision based on the information, not on what everyone else is doing.

Fifteen – You Gotta Know When to Fold Them
A big part of your overall plan – remember, the one you decided on before you started investing? – is when to sell. You should decide before you even begin how much volatility you’re willing to accept and how big the losses have to be before you would sell. The decision needs to be made before you even put a dollar in so you can react in accordance with your plan, not in accordance to your nerves.

Sixteen – Process, Process, Process
What does all of this add up to? You need to always be examining the world around you and, most importantly, you need to try to remove the human element from your investing decisions. Come up with a plan, refine the plan, invest, then stick to the plan. Don’t let your nerves or the actions of others get in your way.

Is The Little Book of Behavioral Investing Worth Reading?
For the most part, The Little Book of Behavioral Investing reiterates much of the basic material on behavior and personal finance that can be found in other books. The Little Book of Behavioral Investing works, though, because it’s written in such plain language and, perhaps most importantly of all, it includes a lot of very vivid explanations and illustrations of our behavioral quirks.

A book on behavioral investing should be something that everyone reads before they jump into the investing pool. The Little Book of Behavioral Investing is as good a place as any to pick up that information. It’s approachable, clear, and, dare I say, fun.

If you’re interested in my reviews of earlier books in the “Little Book” series, here’s a list of those reviews. I’ve almost universally enjoyed them.
The Little Book of Bull Moves in Bear Markets
The Little Book of Common Sense Investing
The Little Book of Main Street Money
The Little Book of Safe Money
The Little Book Of Value Investing
The Little Book That Beats The Market
The Little Book That Builds Wealth
The Little Book That Makes You Rich
The Little Book That Saves Your Assets

The entire argument of Seth Godin’s book Linchpin is that there are no longer any great jobs where someone tells you what to do. That’s not to say there aren’t great jobs out there – there are many – but they now require the ability to basically blaze your own path, creating things and building connections that are indispensable to those around you. That person, in Godin’s terminology, is a linchpin.

I think, to a degree, this general argument is spot on. We live in a globalized world where most jobs can be shipped anywhere, from Mexico to Indonesia. Jobs in which people are merely following instructions all day are among the easiest to ship and the few that remain in America aren’t going to be strongly financially rewarding. Success comes from making yourself essential to the operation – and simply following orders, even if you do it well, keeps you firmly in the “replaceable cog” camp.

How do you stand out? What kinds of choices can you make to turn yourself into someone indispensable? Let’s dig in and see what the book has to say.

The New World of Work
Most jobs where you simply follow instructions and do a faceless job demean the real value you provide. They’re faceless jobs, but you’re not a faceless person. You’re not merely a cog in the machine of capitalism – but your job might be. The biggest difference between a follow-the-instructions job and a linchpin is that a linchpin creates his or her own value, whereas an instruction follower doesn’t add any value beyond a specified task that’s completed. A linchpin works in ways that improves those around him or her, while an instruction-follower simply follows the tasks at hand. I like to think of it this way: what’s the difference between a mediocre administrative assistant and the best administrative assistant you can imagine? That’s roughly the difference between a person who is a linchpin and a person who is not.

Thinking About Your Choice
The choice that’s on your plate is simple: do you keep merely following instructions and counting the days until Friday or do you look for ways to make yourself transcend those roles and become a linchpin? This is an urgent question, because a global marketplace makes the instruction-follower role more dispensable than ever. Some people are content to fill the role of instruction-follower – and that’s fine. However, the career opportunities for such people are simply shrinking – that’s a fact of life.

Indoctrination: How We Got Here
Most of what we learn in school serves one purpose – to make you an effective person at filling an instruction-follower job. Schools do not encourage creative thinking (which is an invaluable part of being a linchpin) – instead, they encourage lots of rote memorization and repetitive tasks which are scored on standardized tests. It’s a pretty neat trick to make school funding tied to these standardized tests, isn’t it?

Becoming the Linchpin
Every workplace has a few people that are simply indispensable. They take very challenging situations and make them work. They seem to solve tons and tons of problems. They’re the ones everyone goes to when there are crises. Those people are the indispensable ones – if you’re not one of them, you’re a lot more dispensable than they are. The question really is whether or not you’re willing to work to become one of those indispensable folks.

Is It Possible to Do Hard Work in a Cubicle?
Being a linchpin means a lot of hard work. The biggest part of it is being willing to give all of what you have to doing a great job. This does not mean just filling your hours with whatever task you’re assigned. It means bringing all of your passion, your ideas, and your creativity to the table whenever you work. It means taking on the hard problems that might scare you a little bit (or more than a little bit).

The Resistance
Our brains typically work in resistance to those kinds of tasks – we’re biologically wired to look out purely for number one. We avoid risk. We avoid anything that might be perceived as a threat. We avoid generosity. However, all of these things – risk, taking on threats, generosity – are key parts of being a linchpin. We have to work hard to overcome these resistances in order to become something greater.

The Powerful Culture of Gifts
Giving of yourself to others opens countless doors. Our brains often expect immediate reciprocity – if we give something, we want something in return and soon. The world rarely works that way. Our generosity – going above and beyond the expectations of others – builds a strong reputation for us, one that secures our work and builds positive relationships and interactions for us in ways we often never directly see. Quid pro quos rarely work – but building a strong reputation for great work and generosity certainly does.

There Is No Map
How do you do this? Unfortunately, there is no road map – and that’s a big part of the difficulty of it. You have to seek out the challenges in your own situation and take them on head first. You have to seek ways to up the quality of whatever it is you’re doing. In other words, you have to go off the instruction sheet – and that’s the real challenge.

Making the Choice
Linchpin value is created by what you choose to do, not by what you’re born with. Anyone can become a linchpin – it’s not an inborn trait, it’s a sequence of choices to step beyond the instructions and do things that improve everyone around you. It’s a scary choice, but it’s still a choice, one that offers a lot of rewards if you’re willing to take the leap.

The Culture of Connection
In order to succeed as a linchpin, you have to build a lot of connections with the people around you. Indispensable work is work that’s connected to the work that others do. You build on their work and they thrive on the work you’ve done. A big part of this is personality and attitude and a big first step is to recognize that negativity towards others will never, ever get you to being a linchpin. Positive relationships are the ones upon which you can build great things.

The Seven Abilities of the Linchpin
Here are the seven abilities, in a nutshell, from page 218:

1. Providing a unique interface between members of the organization
2. Delivering unique creativity
3. Managing a situation or organization of great complexity
4. Leading customers
5. Inspiring staff
6. Providing deep domain knowledge
7. Possessing a unique talent

Linchpins provide at least one of the things on this list and often provide more than one. It’s key to remember that these things are there to provide value to the people around you and make their work better, because in doing so you make yourself indispensable.

When It Doesn’t Work
If you’re trying to be a linchpin and it isn’t working, blind persistence is usually not the way to go. The value of a linchpin isn’t in repeating things that aren’t clicking or working. Instead, they constantly seek out new approaches and ideas and try them, instead. No one has a 100% success rate with their endeavors and ideas, but it is the successful ones that provide so much that they more than make up for the failed attempts.

Is Linchpin Worth Reading?
If I were to hand a recent graduate or a twentysomething a book on modern careers and how to succed in them today, I’m pretty sure that Linchpin would be the first book that I would grab.

The ideas in this book are reflected in virtually every workplace I’ve ever been a part of, from entry-level work to highly technical work. The people that stepped up to help others and solve problems were the ones that were indispensable, while the others merely hoped to hold onto their jobs. I also noticed that the people who stepped up to the challenge tended to be a lot more positive about their job, whereas the people who were dispensable were negative about their job and the people around them.

There are a lot of great ideas about the modern workplace in this book. If you’re struggling in your career, Linchpin is probably well worth a read.

Bargain Junkie is an unabashed frugality book, focusing mostly on maximizing your “bang for the buck” when spending money.

The book itself is broken down into a large number of very short sections covering specific frugality issues, often written in a humorous and often self-deprecating tone that’s pretty appealing.

Obviously, when you read a lot of frugality books, you begin to recognize that some of the central points in each book appear in all the books – which is fine, since there’s a very good chance that this is the first book on frugality that the person has picked up and many of the repeated ideas are the very good ideas that a person should use. Bargain Junkie follows this pattern and spends a significant number of its pages on what I would call Frugality 101, which makes it an equally good “starter” book as many other frugality titles out there.

What sets it apart, though? Instead of doing a section-by-section review of the multitude of short pieces in the book, I picked out ten short sections that really stood out to me.

Television Is A Model For How Not To Live
Instead of looking at how people live on television as something to strive for, use it as a guide for something to avoid. After all, do you want a unique and wonderful life or do you want to just be a pale imitation of that guy in the television commercial? Do you want to live by your own rules, or merely imitate the crass consumerism of The Real Housewives of East Overshoe?

Extended Households
Living quarters are one of the biggest expenses in our lives. Yet, quite often, large portions of our living quarters go completely unused as we often get into the routine of using just a room or two in our home for most of our activities. So why not share that extra space? Consider a more communal living arrangement, where you actually live with friends and family and split the housing cost appropriately. It works surprisingly well and it can save a truckload of money.

Collecting
Collecting can be a worthwhile venture for frugal people provided two things are true. First, you’re quite willing to sell off what you’ve collected. Second, you’re willing to keep up with the hobby and stay abreast of prices and information about it. If you do both of these, you can often find a very lucrative hobby from hitting thrift stores and the like. I actually have a friend who buys and sells vintage video games who claims to have bought games at many thrift stores for fifty cents and resold them for hundreds (think Chase the Chuck Wagon). I’ve even done it myself with trading cards of various types.

Try It Yourself Before Paying an Expert
Home repairs? Try it yourself by reading documentation online and giving it a shot. Exercise? Try home exercise before buying a gym membership and paying a trainer. Virtually everything you do that you hire someone else for can be done yourself. So why not try it and make sure you actually need to shell out the money for someone else to do it? Exercise at home first and make sure you’re willing to keep up some routine before hiring a trainer, for example, and you might find you don’t even need one.

Go Monastic
Why do you have to live the same life everyone else does? If you live cheap and build up a bankroll, there’s no reason you can’t sell everything and live out of your kayak for a couple of years. The only thing keeping you from doing something completely different in your life is your own fears. Most of the big dreams people have are usually really cheap when you get right down to it, so it’s rarely the cost that keeps us from doing something like driving around the country in a solar car talking at public libraries.

Buy Your Own Presents
Quite often, gift-giving occasions come down to giving other people stuff they don’t want and you receiving stuff you don’t want. Why? Sit down and have a heart-to-heart with the person and, instead of just exchanging gifts, pledge to do something fun and unique together that you both want to do. You’ll probably save money and almost always wind up doing something much more memorable, enjoyable, and long lasting.

Craigslist/Freecycle First
Whenever you need anything, it’s usually worth your time to check the local Craigslist or Freecycle before going out and buying it. You can often find great stuff for pennies or for free. Heck, I’m learning how to play the keyboard on a free Craigslist item. Similarly, if you have something you’re getting rid of, put it up on that list with a low price tag. Quite often, it’ll be off your hands without breaking a sweat.

Large City Travel
If you’re traveling to a large city, study the public transportation information for that city online before you go. In many large cities, you can have a wonderful trip there without renting a car or paying for a taxi by simply knowing and using their public transportation system. My wife and I spent a week in London several years ago without renting a car or taking a taxi, even from the airport.

The Biggest Element of Dressing Well
The biggest element in dressing well isn’t buying clothes from the expensive stores. It’s self-confidence. You have to be proud of yourself no matter what you’re wearing. If your confidence is the same no matter what you’re wearing, then it really doesn’t matter much at all what you’re wearing. A person’s confidence and personality always comes through.

I used to be fairly nervous wearing things bought at thrift stores. “Won’t people look down at these secondhand clothes?” I would think. I’d be more self-conscious and then I’d find that people did think less of me than I would have liked. But it wasn’t because of the clothes – it was because I was so self-conscious, nervous, and shy. The clothes don’t make the person.

Hit Ethnic Restaurants – Hard
This is something I did myself in college and still do on occasion. In terms of the quantity and quality of food you get for the dollar, few places beat ethnic restaurants. Go there, order something intriguing, and you’ll find yourself leaving with a doggy bag containing enough food for two more meals or so. I can’t tell you the number of times I’ve eaten leftover sauteed vegetables over rice where the price of each meal I actually got from the restaurant dish was cut down to the $2 level. I know some professors at my old college who almost exclusively eat (even to the exclusion of home food prep) at local ethnic restaurants.

Is Bargain Junkie Worth Reading?
Bargain Junkie feels very much to me like a collection of posts from a frugality blog with a very good writer and entertaining voice. The sections in the book are quick reads that usually each convey a central point or two or provide a checklist of highly specific tips and are packed with anecdotes that either make you laugh or breed familiarity with the reader.

Annie should start a blog, period. I would happily link to some of those entries and she’d probably end up earning more revenue from it than she would from this book over the long run. If you enjoy reading well-written, occasionally humorous blog post length articles about frugality and maximizing your buying dollar, you will enjoy this book.

My biggest problem with the book, actually, is in the design. To me, the design of the cover is poor to the point that I would have not picked up this book had I not had a vested interest in reviewing it. There are thousands of great books out there to read – I would probably walk on by this book on a bookshelf simply because there are so many other great books that I could be reading that didn’t give me a “go away, this book isn’t for you” vibe right from the cover. Yes, I know the cover was shooting for a certain demographic, but you can reach those people without giving a “go away” vibe to others outside that demographic.

Still, once I got past the cover, the book inside was quite worthwhile – an entertaining survey of frugal ideas.

A few years ago, I read and really enjoyed Phil Town’s first investment book, Rule #1 (you can read my review here). Town actually contacted me after reading my review and offered a few thoughts on my comments on the book and we exchanged a few emails over the years. Thus, when he finished his follow-up book, I was quite happy to give it a read.

Town’s basic ideas are pretty straightforward. He believes ardently in value investing, meaning that you look for good, healthy companies that are selling for much less than they should be when compared to similar companies. That requires a great deal of patience to do. In both this book and his last book, he goes over a straightforward formula for finding those companies and identifying whether they’re on sale or not.

So what makes this book different than the earlier book? Let’s dig in and take a look.

How the Wealthy Use Down to Go Up
Town opens the book by explaining the basic strategy Payback Time is focused on, which he calls “stockpiling.” To put it simply, a person buys stock in an individual company that they deeply believe in for whatever reason, then they just keep buying more and more of it. They then use the dividends from the stock to live off of or they reinvest them into more of the stock. So how does this strategy use “down” to go “up”? If you’re owning this for the long haul – basically forever – you actually hope for a down market so that the price of the stock you’re buying is lower. Price does not indicate value in any way – it’s no different than buying the same item at the store when it’s on sale instead of when it’s not on sale.

Mutual Fund Investing Makes No Sense
Here, Town basically writes off every kind of fund that’s not an index fund as junk and a waste of your money. In short, he defines such funds as being the bastion of the investor who really doesn’t have any idea what they’re doing with their money. Sometimes, that’s acceptable if people recognize that they truly don’t have the time to study such things with any detail. For those people, the only real bet is index funds, which are low cost and usually match the market. You can’t hit home runs with them, but you certainly won’t strike out by buying them.

Threee Ms Equal No-Risk Investments
There are a lot of traits that a “perfect” business would have, but there is no perfect business in this world – nobody’s perfect, after all. Instead, Town looks for wonderful businesses to invest in, and wonderful businesses are usually characterized by three criteria – they have great meaning to you (meaning you understand the company and fully approve of their business model), they have a big moat (meaning that it’s protected from competition in some key way, making it both durable and profitable), and they have great management (dedicated, passionate, and honest people running the shop). These are the kinds of businesses you should constantly be looking for and investing in.

Payback Time Means “No Fear”
Once you’ve identified businesses you want to invest in, you should wait until the time is right to buy – in other words, when they’re on sale. How do you know? It has little to do with what the overall market is doing. Instead, you want to watch the P/E ratio (price to earnings) of the stock. You can easily get this information online at pretty much any stock investment website. Just wait until that ratio is noticeably lower than usual without any real changes in how the company is performing (this often happens when it’s not being hyped up at all but is just trucking along, doing its business) and buy in. When the P/E ratio is high, don’t buy (and if you have a reason, it might be a time to sell). He goes quite in depth with this formula, but much of the information is very, very similar to his earlier book Rule #1, which I mentioned earlier and liked.

Eight Baby Steps to Wealth
What are the eight steps? Find it, value it, watch it, buy it, own it, stockpile it, sell it, repeat. In other words, look patiently for companies that meet your criteria (and never rush into buying). When you find the right one, buy it. Keep buying it whenever the P/E ratio (and other indicators) tell you to do so. Sit on the stock and collect dividends. When that ratio gets high, sell the stock. Then repeat. It’s pretty straightforward and actually makes a great deal of sense, particularly to a conservative investor like me.

Just the FACs, Ma’am
Here, Town talks about two methods for determining whether or not you should buy more of a stock once you already own some. He spends most of his time focusing on a method that centers on technical analysis (i.e., looking at charts), which is a method I find to be akin to voodoo. Instead, I prefer the other method, which basically means you pick one day a month to evaluate a stock. If it’s below the P/E ratio (or other similar indicator) you bought the stock at originally, you buy. Otherwise, you stick the money into a savings account and wait until a month when it’s low enough to buy.

A Tale of One Family
All of the information in the previous few chapters is combined together into a real-world look at how a family invests. Basically, it’s a series of real-number examples of the ideas from the book, showing how they all work together and click.

Free Money with a Berky
The final chapter (or at least the last one that’s not functionally an epilogue) contains a brilliant idea that Town calls a “Berky” (short for Berkshire Hathaway) that answers the question of how people come up with the money to actually do this kind of investing. It’s actually simple: automatic savings. You should set up a savings account for the sole purpose of investing according to the ideas in this book (or your own principles). Have your bank put some amount automatically into this account each week (or each month). Then, invest solely from that account. This way, even if the investment tanks, it doesn’t affect your day-to-day personal finances – it’s just an exercise in building wealth. This is absolutely the way people should start investing if they’re tempted.

Is Payback Time Worth Reading?
As with many follow-up books, Town takes the content of his very good earlier book, Rule #1, and places it in a broader context. If you want to know more about the investing part of the book, I’d suggest reading the earlier book as well.

One common complaint about Rule #1 that I would anticipate with this book is that people ask where the details are on past results, as Town doesn’t dwell on this for any significant length. My thought is this: past performance is no indication of future results. Much like any other investment strategy book, it’s simply a tool in your arsenal, one you can use in your own investigations to figure out what works. There are lots of investment schemes that have great results for a period in the past but are awful today (that’s why fund managers never have long strings of success). The system that Town espouses is incredibly simple, can be easily tracked over a long period using pretty much any investing website, and is backed by a good idea (value investing). Does it mean it’s the be-all-end-all of investment strategies? No. But it has enough going for it (simplicity, logic, and clarity) that it’s worth at least paying attention to.

All of that being said, I did feel in the end that I learned more (or at least was provoked into more thought) reading Rule #1, but that may have been that the meatiest parts of this book often just rehashed that information. Both books are worthwhile reads, however, and present interesting ideas, which is all I can really ask for in an investment book.

For a long time, I avoided reading this book. The title seemed unnecessarily fear-mongering and apocalyptic to me and that’s a subgenre of personal finance books that I really have no interest in. Personal finance has such a profound power to improve people’s lives and give them hope that selling the ideas with a big spoonful of fear and paranoia is something I have no interest in.

However, the author, Ed Slott, has a point. Rather than focusing on a fear of the unknown, which is what many personal finance books do, this one focuses on a known concern. If you have a bunch of money stored away in your 401(k), it’s simply a fact that the government is going to take some of that in taxes. If you haven’t thought about that and planned for that, then, yes, retiring can be something of a time bomb.

Once I got past the overly dramatic title and actually read the book, I realized that there were a lot of good points in it. The entire focus of The Retirement Savings Time Bomb… And How to Defuse It is minimizing the tax impact on your retirement savings without giving up returns along the way. This way, you don’t have to worry about tax guesswork in your retirement planning, especially when taxes are very easy to miscalculate.

What does Slott suggest? The book boils down to a five point plan that focuses on the biggest objectives that people mention with their retirement money: protecting it from taxation, using it for emergencies without tax penalties, and passing on as much as possible to descendents. Let’s dig in.

The Crime of the Century
There are lots of horror stories of people attempting to make major moves and withdrawals, only to see them backfire in their face. Slott relates several of them here. The rule of thumb I learned from them is simple: if you’re going to make a move involving a large sum of cash, consult a tax attorney first. Most of these stories seemed to revolve around people simply making moves with a lot of money on their own because they seemed straightforward, then realized they hadn’t thought about the tax consequences of them.

What’s Your Risk IQ?
Here, Slott runs through some of the “mis-steps” that people make in their retirement planning that often creates a tax burden: putting most of their money into a 401(k), for instance, or not specifying an appropriate plan as to who actually is the beneficiary of the money once you pass on.

Roll Over, Stay Put, or Withdraw?
Whenever people leave a job where they have a retirement savings plan in place, they often have three choices: roll it over into an IRA, stay put in that plan, or withdraw it now. Each choice has benefits and drawbacks, but those benefits and drawbacks often shift based on changing tax rules. The best solution if you have a significant amount of money, from my perspective, is to consult a fee-based financial planner to make sure you’re not making a big tax mistake. Remember, all you’re trying to do is to maximize the amount of money you retain in your pocket from your savings.

Step #1: Time It Smartly
The focus here is the required beginning date (the date by which you must start taking money out of your retirement savings accounts) and the required minimum distribution (the minimum amount you must withdraw each year). Usually, the best method for minimizing your taxes on that money is to start withdrawing as close to the required beginning date as you can without going over and withdrawing just the minimum amount.

Step #2: Insure It
You should always back up your retirement plan with a healthy term life insurance policy. This way, if you pass away before you’ve spent your money, your family isn’t required to make a sudden decision to withdraw your retirement money in order to survive – a withdrawal that would cause a big, panful tax penalty.

Step #3: Stretch It
You should take the minimum distribution you can along the way, leaving as much as possible in the account. This way, the remaining amount has much more of a chance to grow and benefit from the power of compound interest, meaning it could last throughout your life and the life of your children, too.

Step #4: Roth It
A Roth IRA is a very strong place to put your money each year as the normal (appropriately timed) withdrawals from it have no tax penalty whatsoever for you. If you are eligible (if you earn under $100K a year, you likely are), a Roth IRA should be part of your retirement planning, according to Slott. I can say that I have one that’s fully funded and it makes me feel a lot more secure about retirement.

Step #5: Avoid the Death Tax Trap
In the end, though, it’s about your plans. Do you want to leave something long-lasting for your children and other descendents (or maybe for charities and causes that you leave your money to)? Or do you only care about covering for your spouse if you pass away? In each case, you should set up beneficiaries quite differently, and Slott walks through each of those options. For us, the biggest concern is to ensure that our partner is fine if one of us passes on later in life, so we’re planning for that outcome. Of course, a lot of these rules only apply if you have a reasonably large estate – for small estates, it’s much more straightforward.

What to Do When S[tuff] Happens
This chapter mostly covers a lot of the current loopholes for using your retirement money in certain situations (disability and so on) and how to handle mistakes you’ve made in your past with converting IRAs and the like. Most of this material is fairly complex – the average person would be well-served by consulting a fee-based financial planner if they’re in such a situation.

Is The Retirement Savings Time Bomb… And How to Defuse It Worth Reading?
If you focus on the core principles talked about in the book – save plenty, get life insurance, use a Roth IRA – you’re going to have a leg up in retirement. Those ideas are valuable parts of protecting your retirement savings from the taxman, regardless of whether you want that money for you or for your descendents.

The trickier part is the specifics. Right on the cover, it says “Revised and updated for the new tax rules” – and that’s the problem. You should never, ever bet on a specific minor rule or loophole to get you through your retirement, because such individual loopholes open up and close all of the time. Much of the content of this book is based on those individual loopholes.

Thus, the specifics of this book are bound to become dated quickly, and the more general advice is stuff that can be found in other very solid investment books that focus on more timeless advice.

That’s not to say there isn’t a role for this book. If you are thinking about retirement concerns in the short term, such as making withdrawals and the like, this can be a valuable read. It’s also a great primer on the things you’re going to need to think about as retirement nears.

I just wouldn’t bank a whole lot of money on the specific rules cited here, simply because such small tax law issues change so often. I’d read this book and know the scoop, but I’d talk to a fee-based financial planner who can assess your situation before making a move.

1/2 Price Living by Ellie Kay has a particularly noteworthy subtitle: Secrets to Living Well on One Income. A quick read of the back makes it clear who Kay is talking to – people who want to give stay-at-home parenting a go.

I picked up this book (off of PaperBackSwap) because my wife and I are discussing the possibility of trying out stay-at-home parenting for a year – the year in which we have three preschool aged children at home. According to our math, after all of the tax implications and the like, our finances would only slightly be better if my wife worked full time during that year. Of course, the math rebounds strongly after that one year (when our oldest goes to school) and the year after that (when our daughter goes) and, add on top of it the fact that my wife really loves her job, we’re still not fully committed to a plan yet.

Thus, as we often do when we’re piecing through such decisions, we turn to the books, and 1/2 Price Living was one of them.

Did the book provide any lasting value for us, or did it just repeat ideas found elsewhere? Let’s dig in and find out.

1. Mommy’s Gone Wild: Why Live on One Income?
An awful lot of parents wish they had the financial wherewithal to stay at home with their children, particularly when they’re young. Ellie quotes a survey by ClubMom that indicated that 89% of mothers would choose to stay at home if it was financially feasible for them – and there are an awful lot of dads who would do the same. Ellie doesn’t really dive into the issues of whether or not stay-at-home parenting is the right choice, instead focusing on making the book a guide for people who have already made that decision. This is a wise choice, because the actual decision-making process concerning stay-at-home parenting is fraught with a lot of emotion for a lot of people, an element that doesn’t belong in a book that needs to be breaking down some hard facts.

2. I Can’t Afford to Stay at Home: Working Girl vs. Girlie Mom
The big block that most people find in their way when they consider being a stay-at-home parent is the financial question. How can they possibly afford to stay at home? Two big factors pop out here. One, work is often not as lucrative as we think, once we subtract taxes, commuting costs, eating out costs, clothing costs, and so on. Two, staying at home trims your family’s budget substantially because of the home economics of it – meals are made at home, for example, and more planning and thought can be put into grocery trips.

3. Half the Income, All the Benefits: Seven Steps to Come Home
The big key to making all of that work, though, is to plan, plan, plan. If you don’t have a clear gameplan in place, it’s very hard to make the financial transition to one income successfully. Ellie has a nice set of worksheets in this chapter to help guide through the transition, but the big idea is that you need to do a before-and-after budget and carefully think about the real changes to each category. What will change? How can you make that happen?

4. The Family Meeting: Half the Work, All the Fun
One big part of this process is regular family meetings. There will be a lot of changes in your life if you choose to do this and many of them will involve all of the family members. Set aside a meeting time to discuss all of this stuff. Lay everything you can think of on the table and let everyone else do the same. Talk through this – it’ll help you see things you hadn’t thought of.

5. Chopping on a Chewstring: How to Cut Your Food Bill in Half
Ellie advocates “layering” for savings, using a large number of techniques to apply them all to the same item (store coupons, manufacturer coupons, store flyers, and so on). That works to an extent, but the real winners (in my experience) involve figuring out which store is the best to shop at and also, perhaps most importantly, using a grocery list.

6. Three, Four, or More: A Clotheshorse’s Guide to Outfitting Ponies
Start at the secondhand stores – and plan ahead. These are two key pieces of advice for dressing your family on a budget. We take these both deeply to heart already. Many of the clothes my family wears come from secondhand stores – in fact, my daughter’s favorite dress is a secondhand one. If you spend some time actually doing it, you’ll be amazed how many great items are stuck in there alongside the overly-worn stuff.

7. Scrambled Nest Eggs: How to Make Cake When Your Savings Takes a Beating
This chapter mostly just reviews various places families can sock away their money, from retirement accounts to certificates of deposit. Having a cash reserve can be a make-or-break thing for stay-at-home parents, so the advice in this chapter is useful in a very basic way, but it shouldn’t be substituted for any sort of thorough money management primer.

8. The Wednesday Factor: Half-Price Shopping to Maximize Savings
If you’re going to spend money on stuff – from amusement parks to travel to eating out – Wednesday is usually the best day of the week to do it, for several reasons. Many places cut prices on “hump day” to try to spur business in the middle of a work week. Similarly, many competitive businesses operate on a weekly cycle and Wednesday is usually the best day to jump in on that cycle. If you’re going to do something, do it on Wednesday.

9. Taming the 800-Pound Gorilla: Ten Steps to Simplify Home and Hearth Savings
The biggest step? Pay everything on time. After that, the keys to housing savings revolve around saving, saving, saving and spending as little as you can. Why? You are far better off writing a check for home improvements or other such big expenses than taking out debt for them. If you keep on top of the little things each day, it’s easier to stay on top of the big things.

10. That’s My Business: How to Own a Home Business That Doesn’t Own You
Many stay-at-home parents engage in starting a side business to fill in the time gaps they sometimes have during the day. This chapter provides a huge list of ideas for starting such a business and offers some general advice on how to make it work. It can work – among the stay-at-home parents I know, at least two of them have some sort of side business that they’ve started.

11. Fiesta or Famine: How to Finish Great, No Matter Where You Start
Here, Ellie goes down a spiritual path, citing how her faith played a central role in making stay-at-home parenting possible for her. While that’s admirable, the intense focus on specific Christian ideas and texts could be a bit alienating to non-Christian readers.

12. The Porpoise-Driven Life: How to Restructure Vacations and Build Memories
The good financial advice returns here with a detailed discussion of how to have low-cost vacations on the cheap. The biggest piece of advice in the chapter is to “double-up” – traveling with others can almost always drastically reduce the cost of a vacation, assuming of course that the people you travel with are of a similar mindset as you .

13. The Sowing Club: The Benefit of Sharing and Stewardship
The book closes with a discussion of the value of good character and being an active part of your community. I find that, time and time again, being involved in the community in a positive fashion goes a very long way toward building a successful financial life, because the support of others around you makes all the difference in the world.

Is 1/2 Price Living Worth Reading?
If you’re considering being a stay-at-home parent – and troubled by the financial and other personal implications of that – 1/2 Price Living is a really worthwhile read. It gave us quite a lot to think about as we puzzled through our decision. If you’re in a similar boat, I would consider this a nearly essential read.

I had one big quibble, though: most of the book assumes that it will be the mother that chooses to be the stay-at-home parent. I actually know more fathers who are doing the stay-at-home parenting right now. Assuming that the mother will be the one to do this is a bit… outdated, I think. If this book gets a revised printing, I would strongly suggest toning down the “mommies club” language in the book, as it could be pretty off-putting for fathers who are considering staying at home.

That’s not to say that the advice isn’t spot-on, useful, and thought-provoking, because it is.

Over the last few years, I’ve come to believe that the biggest key to personal finance success is controlling your own psychology and impulses.

Our entire lives are filled with quick decisions we must constantly make – and, for the most part, we’re good at it. We commute to work without getting in an accident. We make constant little decisions at work – and at home, too. We’re able to effectively take several pieces of information, combine them together, and make a pretty good choice based on the result – and we do it over and over again.

Unfortunately, that same ability often doesn’t serve us well at all when it comes to personal finance. The ultra-quick decision making process that leads us to making great little choices in everyday life often leads us to making disastrous financial decisions. Very rarely do snap decisions work out well in the financial world.

This concept is the central focus of Snap Judgment by David Adler. He makes a two-fold argument. First, such snap decisions fail us financially and, if we’re able to get control over them, we’re much more likely to find financial success. Second, understanding how people make such snap decisions can help us to predict and prepare for the choices that other people will make, pushing us to further success.

Sound interesting? Let’s dig in.

I: The Psychology of Financial Decisions
The basic rule of thumb for success in any financial arena is “buy low and sell high.” It rings true in everything from stock investing to grocery shopping. The problem is that most of our normal financial cues tell us to do virtually anything but that. For example, we often believe there must be value to be found if everyone else is buying something, but quite often that means that it’s the opposite of a bargain – the price is overinflated.

Similarly, we are often wired to overlook what we view to be small amounts of risk – if we didn’t, we’d never leave our house in the morning. However, when we apply the same philosophy to investing, we overlook those seemingly small risks and chase what looks like the biggest returns – and then we get bitten by those risks. That’s why so many people got caught losing big chunks of their retirement in 2008?

II: The Track, the Stock Market, and Other Types of Gambling
Our brains are wired to see patterns in our lives, from traffic to grocery shopping to financial markets. Most of the time, when we act based on how we think things will go based on those patterns, we guess right.

The problem is that the stock market and most forms of gambling present false patterns to us, ones that have nothing to do with what happens next. People stare at charts and sit at slot machines because our minds are convinced there’s a pattern in the chaos and that a big winner is about to emerge. Quite often, though, it’s not coming down the pipe.

III: Personal Decisions, Personal Safety, Personal Finance, and Health Choices
Another method in which people falsely assess risk is in our own health and mortality. Many, many people don’t have life insurance because they simply see the risk of their own death as being too minute to really concern themselves with, whether in a conscious or subconscious way. For the same reason, many people don’t bother with annual checkups at the doctor.

In each case, the concern isn’t the chance of the risk, but the severity of the event when risk comes to call. We assess the chances themselves quite well, but we’re poor at assessing the consequences of the bad event actually occuring and whether or not a small cost now is worth covering that big bill later on.

The latter three sections of the book are much shorter and focus on very narrow issues, mostly ones that have really popped up as a result of the 2008 financial crisis.

IV: CEO Behavior
CEOs rise to the top of the corporate ladder by taking risks and having those risks pay off. That’s how a future CEO stands out from the pack – they stick their neck out and succeed. When they get to the top, they often have huge confidence in their abilities, whether it’s warranted (Jack Welch) or not (Bob Nardelli). Often, one sign that a company is either going to succeed wildly or utterly fail is in the behavior of the CEO: are they full of their own hubris? Do they hold onto stock options too long? Good signs include a laserlike focus on their company. Bad signs include self-promotion, like writing books and going on book tours.

V: Psychology and the Credit Crisis
Investment bubbles happen for the reasons outlined above: people see others rushing in and making good money and decide to rush in themselves. Inevitably, though, any market eventually runs out of buyers, at which point the bubble pops and people lose big. The opposite is also true – think of someone shouting “fire” in a theater or a bank run. Quite often, that kind of trampling panic can cause far more damage than is warranted in the situation.

VI: Debiasing
How can you avoid all of this stuff? First of all, slow down. Very few financial decisions have to be made in a “snap” context. Second, communicate. Talk it over with others. Have a “money buddy” or even a group of people to talk decisions through with. Third, cover your risks. Don’t invest in stocks unless you can afford the losses and have insurance unless you’ll be fine without it.

Is Snap Judgment Worth Reading?
Snap Judgment is a thorough and interesting review of how psychology affects investment and financial choices. It’s written approachably and thoughtfully and does a good job of covering the 2008 crisis in the latter sections of the book.

The only real drawback with the book is that the topic area has been covered by a lot of other books, many of which are very, very similar.

If you’ve read a book on financial psychology, Snap Judgment probably isn’t a necessary read, but if you’ve never read one, you ought to, and Snap Judgment is a pretty fine place to start.

The title of this book pretty much sums it up.

One Year to an Organized Financial Life by Regina Leeds basically lays out a week-by-week plan for getting your financial house in order. The book is divided into twelve chapters (months), each containing four subsections (weeks in a month), and each of those sections details how to take control of a specific aspect of financial life.

The end result is something that feels very much like a detailed plan to follow. Personally, such a plan gives me mixed feelings – while it’s great for a person who just wants to be told what to do, I’m a big believer in understanding your finances and your motivations and, at times, this book feels more like a “just follow these steps” kind of guide than a “understand what you’re doing” book.

The big question, though, is whether the information is worthwhile. Let’s dig in.

January: Take Control
More than anything, this opening chapter focuses on information management. Quite often, people’s personal information is in a very unorganized state, with cards and receipts jammed in purses and papers tossed into boxes and filing cabinets. The solution? Start from scratch. Clean out your purse and figure out a good place to put that stuff. Start a real financial filing system. Even more important, go through your mind and start asking yourself why you make the choices that you do.

February: Assess Your Finances
This month is all about creating a budget. The process is standard by now: record all of your expenses, then parse them into groups that make sense to you, then from there figure out what you should be spending in each category and shoot for that new target. My concern here, though, is that to set up a really accurate budget, you need more than just a month. You have to record your expenses over a longer period of time than a mere month to get an accurate grasp on your money. Although the procedure here makes sense, stuffing it into such a short timeline does not.

March: Get Ready for Taxes
This chapter summarizes the process of doing your taxes. Collect your documents and your relevant receipts. Decide whether or not to use a professional or do it yourself. Then, take the plunge – fill out the paperwork and file. It’s a process that most of us (painfully) have to go through each spring. A big key suggested here is to start a filing system now to store all tax-related documents throughout the year so that when you do your taxes the following year, all of the receipts and other materials you need are ready to go.

April: Spend Less, Save More
Frugality is the buzzword here. This chapter focuses strongly on cutting your expenses – much of the advice is right in line with the ongoing “Trimming the Average Budget” series on The Simple Dollar. Hand in hand with that kind of trimming, though, is the need to actually save what you’ve been cutting, because the tendency often is to take that money and spend it on things that you seemingly couldn’t afford before, thus raising your standard of living and sticking you right back in the spot you started in.

May: Borrow Smart
Leeds covers the ins and outs of borrowing money here, largely supporting the good debt, bad debt dichotomy. The advice is smooth and straightforward: trim the “bad debt” (high interest debt) as quickly and efficiently as you can and don’t take on any more of it. Leeds does subscribe to the idea that “good debt” is largely good and mostly focuses on shopping around for home loans and auto loans, but as time goes on, I’m less and less of a fan of any kind of debt.

June: Build a Nest Egg
Retirement savings are next. Leeds’ advice is pretty straightforward: max out your 401(k) and then run the numbers to see if you need even more using a reliable retirement calculator. She also advises against underestimating what you need for retirement, making it clear that you’re better off with more than you need at retirement time than not enough.

July: Make Long-Range Financial Plans
What about your other long-term savings goals, like saving for your dream home? Leeds encourages most people to get a financial advisor for this task. On the other hand, given the great tools available on the internet, I think that most people today can actually handle their own long-term savings. The big keys are to make sure you’ve clearly specified your goals and to automate your savings so that it’s building on a regular basis over time without your manual intervention.

August: Refinance and Downsize Options
Sometimes, the old home mortgage gets to be overwhelming. In those times, refinancing and downsizing are two choices that people usually consider, and Leeds walks through these optiosn here. Ideally, of course, the tactics from the earlier chapters have put you in a better place with your money so that this isn’t a worry. A big key: maintain your good credit. Put a priority on maintaining a high credit rating and things like refinances will go much easier – plus you’ll find that your insurance rates are lower.

September: Children and Money
This chapter is of particular interest to me, since I’m a parent and I enjoy reading ideas for teaching good money values to my kids. Leeds suggests giving your child as much practice as possible with managing their own money, from an allowance to a job in their teen years. For college, parents should start a 529 as soon as possible and, perhaps more importantly, should get their children actively involved in saving and preparing financially for college.

October: Protect Your Assets
Here, the book felt perilously close to insurance salesmanship, as several different types of personal insurance are pushed hard. Leeds also encourages people to pay more in order to lave lower deductibles on their medical bills, which actually is a policy that I feel runs contrary to the advice given elsewhere in this book. After all, when you have your financial house in order with a nice emergency fund, you can afford the higher deductibles, so you should save on the premiums if you can on your health insurance.

November: The Season for Sane Spending
How do you keep your holiday spending under control? The best way to do it is to plan your shopping carefully. Instead of heading into the store with a head of steam and a big list, spend some time coming up with great gift ideas for each person you need to buy for, then researching how to get those items for a great price. Don’t let your impulsiveness run the day or you’ll find yourself spending a lot more than you ever intended to spend.

December: Year-End Money Moves
Most of the year-end money moves involve reviewing your spending and financial activity over the course of the past year (an awesome idea) and preparing for your taxes by doing things like harvesting any investment losses by selling now and making sure your charitable contributions are taken care of and adequately recorded (another great idea). In short, you should end the year by making sure all of your ducks are in a row and ready to set sail for the next year (and the coming tax season).

Is One Year to an Organized Financial Life Worth Reading?
One Year to an Organized Financial Life doesn’t offer many new ideas, perspectives, or angles on personal finance. Instead, what it offers is a clear organizational scheme – a very thorough step-by-step plan for people who simply prefer to have a plan to follow. In that regard, One Year to an Organized Financial Life is a home run.

I think what it comes down to is this: do you learn better by figuring things out for yourself, or do you learn better by following the patterns that someone else has set in place? If you’re in the former group – and I’d put myself there – One Year to an Organized Financial Life won’t do much for you. If you’re in the latter group, One Year to an Organized Financial Life will be an incredibly useful read.

One Year to an Organized Financial Life depends more on the reader than on anything else, as it provides exactly what the cover promises: a one year, step-by-step plan to financial organization.

One of my favorite books I’ve ever reviewed for The Simple Dollar is Twyla Tharp’s excellent The Creative Habit. In fact, it’s one of the few books that’s found a permanent place in my home after having read it for a Simple Dollar review.

Naturally, when I found that Twarp had written a follow-up of sorts, entitled The Collaborative Habit, I couldn’t resist. Simultaneously knowing the high esteem I gave to her first book and also recognizing the ever-increasing importance of collaboration and collaborative work in modern personal and financial success, I couldn’t wait to tear it open.

Much like its predecessor, The Collaborative Habit is notable for its exquisite design and layout. It’s crisp, clean, easy to pick up, and incredibly easy to annotate with your own personal notes and thoughts. Also like its predecessor, it’s not terribly long – it gets right down to the point and the only anecdotes it offers up are ones that get right to the heart of the matter.

The $64,000 question, though, is whether or not it really says anything useful to us. Let’s dig in and find out.

What It Is, Why It Matters, Why It’s the Future
In its simplest form, collaboration means working with others towards a goal that would be difficult to complete without multiple contributions. It goes beyond that, though – collaboration also has the potential to improve what we ourselves individually contribute to the goal. Many people resist collaboration because interacting with people can be difficult, but that in itself can be a reward if we step back and ask ourselves whether we might be the ones at fault – at least in part – and work ourselves to overcome those faults.

Collaboration Is Second Nature
The core of any great collaboration is, in her words, “a clearly stated and consciously shared purpose.” In other words, collaborations work best when you all have the same end result in mind. Collaborations are often undermined when others are secretly working towards other goals and purposes. How can you overcome this? The biggest step anyone can take to make collaboration work well is to establish a routine of work in which each member contributes – without that, collaboration falls apart. Set that before you ever continue or else you will either fail or have to run a marathon to achieve some semblance of success. Another important element is a champion – someone who pushes and inspires the members of your team.

Partnerships Challenge and Change Us
Many collaborations are merely partnerships of two people. A marriage is one such collaboration, as are dance partners and, often, tech startups. The key to a successful partnership is to not have a partner that’s just a duplicate of you, your ideas, and your perspectives. They should be different than you. They should challenge you. They should regularly see things in a different way than you. This forces you to grow and gain something personal beyond the mere outcome of the collaboration.

Working with a Remote Collaborator
The vast majority of my own collaborations are with remote collaborators – and they can be difficult. The key, I’ve found, is communication – and it’s a key that Twarp strongly agrees with. However, that communication shouldn’t boil over into dealing with the individual problems of your collaborator. Instead, focus on maximizing what you are bringing to the table and focus entirely on what your collaborator is bringing to the table. If they produce something that’s subpar for their portion of it, do your thing with what they’ve brought to the table. The other option is to slam on the brakes – and that ends in disaster almost every time.

Collaborationg with an Institution
When you collaborate with an institution, it’s often important to lead with exactly what you need from that institution in terms of resources. State it up front and clearly, so that they know exactly what you will need to carry out your parts of the collaboration. Also, continuing the thread of working with people who aren’t producing at first, if you give your best with what they’ve provided, you’ll often push others to step up their game as well. Your peak performance is a motivator for others to bring out theirs.

Collaborating with a Community
A community is a group of impassioned people. When you collaborate with them, the trick isn’t so much finding good output, it’s channeling that output into something usable that pushes both you and the community forward. In general, the more you ask – and the more you produce in response to their requests – the more you’ll get back from the community. This chapter is really spot-on for anyone who is involved with interacting with a large community – like a blog readership, for instance.

Collaborating with Friends
The biggest key to collaborating with friends is precise communication. Why? Without it, it’s easy to miscommunicate something and, because you’re friends, the other person will attempt to pick up the slack and quite possibly move in the wrong direction with things. Not only that, a collaboration gone bad between friends can often strain a friendship, something that isn’t a desirable outcome for anyone.

Flight School: Before Your Next Collaboration
The biggest thing to think about before you collaborate is whether or not you’re really up to the collaboration and what it will take to make it succeed. We’re very good at deceiving ourselves – it’s easy to just blow this off and just believe we’re completely up to it. Spend some time and ask yourself – seriously – whether or not you’re capable of giving what needs to be given to pull off the collaboration.

Is The Collaborative Habit Worth Reading?
Tharp’s writing is incredibly strong in one key category: it makes you completely rethink what you’re doing in your normal course of activities. Rather than just giving me a checklist to follow, The Collaborative Habit really made me re-think some of the collaborative projects I’m working on – and the results have been profound.

I made the choice to back out of at least a few collaborations and focus more intently on some others. In one collaboration, I’ve adopted a much clearer communication policy because I found that at times we were going in different directions. I’ve also started scheduling more phone calls with people I’m working with remotely on various things.

If the measure of success of a book is whether or not it causes you to rethink things you’re doing in your life and to actually take action and make changes, then The Collaborative Habit is definitely a success, at least to me. If you’re involved with many collaborations in your own life, I suggest picking this one up.

The Elements of Investing by Burton G. Malkiel and Charles D. Ellis is a nice small volume, reminiscent in size and length to one of the Little Book investment volumes. I chose to pick this up because I highly respect Malkiel’s books A Random Walk Down Wall Street and The Random Walk Guide to Investing (click on the titles for my reviews) and I was looking for a succinct collection of the main points in those books (which are a little dense – and perhaps a little long – for the typical reader).

That’s pretty much exactly what The Elements of Investing delivers.

Malkiel and Ellis break down the … well, elements of investing down to five key principles, which make up the five main sections of the book. Given that this book isn’t excessively long, each of these sections gets straight to the point, making it clear what you need to do.

This book doesn’t offer (much) specific investment advice. Instead, what the book focuses on is the foundational elements you need to have in place in order to make good specific investment choices, along with a few very general principles on how to invest. If you’re looking for a list of hot stocks or other specific investment choices, this isn’t the place for you.

Let’s dig into the five key principles that make up the book.

I. Save
The book opens with what I consider to be the key of successful investing: saving your money, living without personal debt, and spending less than you earn. If you’re not following those principles, you’re giving money you could be potentially investing to financial institutions in the form of finance charges, unnecessary insurance, and so forth.

Before you begin to invest (outside of matched retirement savings and the like), get your personal finances in order. Eliminate all of your high-interest debt, as investing in such debt payments has a very high rate of return. Get into the practice of spending less in your personal life than you’re bringing in, because the less you spend, the more you have to invest. Live frugally. Build up a nice cash emergency fund to handle the curveballs life will throw at you so that such curveballs don’t disrupt your investing plans. Set goals for yourself and know why you’re investing.

II. Index
Malkiel and Ellis recommend investing your money in index funds rather than in individual investments (like individual stocks or individual commodities) or in mutual funds. First, investing in individual investments requires a substantial amount of research and access to information in order to compete – something not available to the average investor. Second, investing in mutual funds means paying substantial fees – and even after you do that, you’re still merely betting that, after you pay the fees, the fund manager can still beat the market, something no fund manager (other than arguably Peter Lynch, who retired about two decades ago) has ever done with any consistency.

Index funds simply buy a little sliver of everything and rides the market as a whole, doing it for an extremely low cost. You won’t beat the market – but you’ll match it without worry and extensive research. For the average investor who doesn’t have unlimited time and resources, that’s a pretty strong deal.

III. Diversify
Putting all of your eggs in one basket might get you rich, but it might also cause you to lose everything. For example, if you put everything into tech stocks in 1998, you were riding very high in 2000 – but in 2002, you were in an apocalyptic situation.

Instead of falling into this trap, diversify. Spread your money across a lot of different investments – domestic stocks, international stocks, bonds, cash, real estate, and even a bit of commodities, too. Buy index funds for all of these markets and spread your money across them. This way, you’re protected if any specific market collapses, but you also get some benefit if any particular market goes crazy.

IV. Avoid Blunders
Don’t get overconfident – no one can predict the future. Don’t try to time markets because, again, no one can predict the future. Be careful about fees and don’t invest in things that charge you a lot simply to invest in them.

To put it simply, be careful. Take your time. Your goal is to succeed in the long run – it’s not some sort of mad dash to the finish line. Besides, those who sprint often fall flat on their face when they’re in the investing game.

V. Keep it Simple
If things are getting too complicated and confusing and you’re finding that you’re having a hard time keeping track of your investments and properly following them, simplify. Move into fewer investments while still keeping as much diversity as possible. Instead of having your fingers in twenty different stock investments, invest in a much smaller number of index funds, for example.

Simplicity enables you to actually keep track of and understand your investments in a reasonable period of time. Without this, you’re essentially leaving your investments up to serendipity – which is never a good decision.

Is The Elements of Investing Worth Reading?
The Elements of Investing is an excellent first book for people to read once they begin to think about investing. Instead of drowning the reader in specific investment advice, it focuses on foundation materials. Why are you investing? How do you get ready to take advantage of the financial rewards of investing? How do you begin to invest if you barely know how to read a prospectus? How can you avoid some of the most obvious blunders that beginners have?

This isn’t a be-all end-all guide to investing, nor does it claim to be. If you want a deep, technically rich guide to investing, read The Bogleheads Guide to Investing. If you’re just starting to think about investing, read this one instead – it’s a truly great beginner’s book written by a author with a great reputation.

Silas Marner is a tale of the ups and downs of the life of the titular character, Silas, over the course of his adult life.

The middle part of the book is the part that consistently sticks in my head. After being falsely accused of theft and basically run out of his town, Silas becomes a miser, hoarding every dime that he earns. He keeps the money under his bed and counts it every night and, because he has become a social outcast by a mix of fortune and choice, the money is the center of his life.

One night, the money is stolen – all fifteen years’ worth of it. Silas is completely shaken by this, as you can well imagine. He doesn’t deal with it well and eventually becomes completely hysterical, having a breakdown in his home. As he is passed out from this episode, a woman and her small child are walking in the snow near his home. The woman takes a draught of opium, passes out, and dies in the snow. The child, looking for warmth, finds her way into Silas’s cottage and falls asleep near the fire, almost exactly in the spot where Silas last left his money before it was stolen.

Silas awakens to find that his gold has been replaced by a golden haired child. Eventually, he adopts her and takes on the role of her father, which gives him an entirely new lease on life.

On the surface, Silas, in his miser years, is following good financial practice. He’s completely financially independent, he saves his money, he is an independent businessman (he’s a weaver), and he spends much less than he earns. This is often the very goal that many of us strive for.

Yet his life is so single-focused that one unfortunate event sent his entire life off of the rails, resulting in him having a breakdown in his home. In his pursuit of money, he failed to pursue a well-rounded life. It took the replacement of his money with the child for him to rediscover the beauty of life.

Never let the single-minded pursuit of wealth stand in the way of your life. The pursuit of wealth for wealth’s sake is an empty pursuit, one that will leave you without the things you most need when the time comes.

Instead, seek wealth with a purpose. Why are you making the choice to succeed financially? Are you seeking to provide a stable home for your family? Perhaps you have a passion that you’d like to chase that doesn’t earn a large income. Perhaps you’ve got a philanthropic bent.

Whatever that purpose is in your life, that purpose should be in the lead, not the money. Money is merely a tool to help you do the things you want to do.

What do you want to do today?

One of the biggest underlying themes of The Simple Dollar is that personal finance is merely a tool to improve the quality of your life. Of course, it’s an unwieldy and dangerous tool, one that, if used without care and forethought, can add quite a lot of difficulty and pain to your life. Take credit cards, for example.

In connection with that theme, I often read intriguing books about personal happiness – take my reviews of Stumbling on Happiness and Happier, for example, both of which were excellent reads.

Perhaps the most enjoyable book on happiness I’ve yet read, though, is The Happiness Project by Gretchen Rubin. A quick note: I know Gretchen professionally, have exchanged several messages with her over the years, and enjoy reading her excellent blog on happiness topics. Of course, if I didn’t like her writing already, I might never have read the book – which I suppose means I already knew I would like the book before I opened the cover. But enough with that…

The Happiness Project largely focuses on Gretchen’s own experience applying mountains of classic advice on happiness (from Thoreau to Epicurus to the Dalai Lama to Oprah) to see what actually worked – and what didn’t. It’s mostly written in a memoir form covering a single year in which she applied these ideas, which works really well for the material covered (and makes it engaging to read).

Although I’ve had this book for a while, I decided to save this review until the start of the new year because it relates so well to the resolutions that people make for themselves.

January – Boost Energy
It’s often hard to tackle all the things we want to do in life if we don’t have a high level of energy. If your energy is sapped, it becomes all that much easier to simply take the path of least resistance and simply not work on the important things in life, which of course contributes greatly to a sense of unhappiness. Thus, there’s a great deal of sense in beginning a happiness journey by lifting one’s energy.

The two techniques that really stood out in this chapter – and in my own life – were to get more sleep and to simply move around more and get a bit of exercise. I’ll speak for myself in saying that when I don’t get adequate sleep for a few nights in a row, I feel tired and lethargic and unable to do much of anything productive. Similarly, when I fall off the “exercise wagon,” my energy level drops like a rock after about a week.

February – Remember Love
Marriages aren’t easy. Add kids and they become even more difficult. At times, marriages can seem like an emotional negative on the whole. What works? First, don’t expect appreciation for the things you do – and don’t feel a need to point them out and lord them over your partner. It does nothing more than instigate fighting and resentment over something you chose to do. If you want something done, do it and don’t use it as a psychological weapon.

Second, don’t just use your partner as someone to dump your problems on. Don’t blame them for problems. Don’t nag them over things left undone – if it’s undone, it must not occupy a high level of importance for them. Instead, focus on ways to accentuate your partner’s positives. What do they do well? Encourage that in a positive way instead of browbeating over the things they don’t do well. You’ll both wind up happier.

March – Aim Higher
There are few things that feel better than success, particularly when that success occurs at something you never expected to be successful at. When you think to yourself, “I could never do that,” then after investing work you find that you can do that, you’ll find yourself at a big emotional peak.

The best way to aim higher and go beyond what you think you’re capable of is to simply give it a shot. You should expect to fail at first. The first ten times. The first fifty times. That’s fine – you’re learning what it takes to succeed each time you fail. The key is to not give up, to not beat yourself up over the failure, and to get up and try again. Eventually, you will succeed – and that success will lift you high.

April – Lighten Up
People are often happiest when they’re doing something. Gretchen refers to this as “fog happiness” – a sense of happiness, or at least contentment, that comes from working towards a goal. Often, that happiness is borne of a sense that what you’re doing will make others happy.

Another big piece of the puzzle is to simply act happy. Act lighthearted. One effective way to do that is to simply sing on a regular basis – Gretchen suggests doing it in the morning. Play some simple pranks on other people. Do things that make you laugh. It’ll lift everything else.

May – Be Serious About Play
Happiness is often found when you seek out sources of happiness – things you do that bring you joy, no matter what they are. Those things are different for each of us, but when you find those things, devote some serious time to them. Block out time for fishing or for playing the piano. Those times will become powerful personal refreshers for you.

If you don’t have a hobby or activity that brings you such joy, find one. Set aside time to explore potential new interests – and block that time off. Make time for it. When you find something that brings joy into your life, it often works like a “happiness battery,” charging your entire day.

June – Make Time for Friends
Friendship is an easy thing to neglect in our busy lives. We often think to ourselves that our friends will always be around, but when we look again, we find that the friendship has drifted away. Even more importantly, we get joy from time spent with friends, but because we define such interactions as “important but not urgent,” we often replace them with the “urgent but not important” things in our lives.

One powerful way to maintain friendships is to schedule regular events with them. Start a weekly potluck dinner at your house and invite several friends (something we’re in the process of setting up). Another effective tool is to avoid gossip – don’t talk negatively about people behind their backs.

July – Buy Some Happiness
This chapter more or less focuses on one of the major themes of The Simple Dollar – the connection between money and happiness. Without directly touching on it, Gretchen touches on the idea of the fulfillment curve – that everyone has some point that maximizes the enjoyment they get from their spending. Spend too much and you’re not happy. Spend too little and you’re not happy, either.

How do you find that balance? Focus on just buying things you know will bring value into your life, but don’t chide yourself constantly for doing so. Look at your true passions and focus on things that complement those passions and don’t spend as much on the rest.

August – Contemplate the Heavens
Spirituality is another interesting beast in the stable of happiness. For many, there is a lot of solace in contemplating the mysteries of life. If you find peace in seeking these answers, seek them. Gretchen suggests reading about the lives – and beliefs – of spiritual leaders of all stripes (like the Dalai Lama or the Pope or any of a huge number of historical figures).

I find a lot of power in keeping a gratitude notebook. Simply by writing down five things I’m grateful for each day, I keep in mind how many gifts and blessings have found their way into my life. It also often opens a window into religious exploration for me as well.

September – Pursue a Passion
In a way, pursuing a passion builds upon many of the themes already in this book. If you discover you’re passionate about something, chase it. Dig in deep.

For me (and for many others), one great way to build upon a passion is to embark on a big, ambitious project that requires us to dig deep. Write a novel. Build a new deck. Master a particular technology. Start an ambitious blog. To do these things, you have to set aside time – but the projects themselves provide a lot of spiritual happiness and personal reward.

October – Pay Attention
Quite often in life, it’s easy to feel as though we’re swept along by currents largely out of our control. Yet, just as often, if we study our lives, those currents make sense. We have a surprising amount of control over them as well. Most importantly, that awareness can be a real source of happiness.

One effective way to do this is to meditate a bit each day. Spend some time doing nothing more than emptying your mind of all of the mental junk you’ve picked up and clear out that space. Looking at the world with fresher eyes makes all the difference.

November – Keep a Contented Heart
If you’re finding more happiness in your life, how do you maintain it? To put it simply, just pass it on.

It’s very easy to do this. Laugh when others are around. Help others out. Use good manners and be polite. Be positive when you talk about things. Surround yourself with people who do the same thing. This will all add up to a lot of reflected happiness in your life.

December – Boot Camp Perfect
If all of these changes seem overwhelming or impossible, remember one thing: the perfect is the enemy of the good. Take small steps and do them when you think of them or when you can do them. Put these ideas into your calendar and mark off some boundaries for your happiness – but don’t despair if something happens to take one of them out.

The key is to put little positive steps into your life and let the aggregate of those steps help you reach a higher level of personal joy.

Is The Happiness Project Worth Reading?
Regardless of any value you might get out of the advice, I think The Happiness Project is worth reading for the pure entertainment factor. I was sucked into the narrative and wound up reading it much more like a novel than like the nonfiction books I typically read for The Simple Dollar. In fact, this book has found its way into my “to-be-read” pile for purely personal re-reading, a rarity for the books I review for The Simple Dollar.

The advice itself throughout the book overlaps well with many of the books I’ve read on happiness. I think the real key comes through here: listen to yourself carefully and act on what you hear. Your mind is often telling you what you need to be happy, but we often overrule it because of what we’ve consciously decided makes us happy. We buy stuff when we don’t need it and get ourselves into financial pinches. We hang onto relationships too long. We stick with old tired patterns. Quite often, we know these are choices that will make us unhappy, but we don’t listen.

The Happiness Project is a very enjoyable read. It takes a topic – personal happiness – and runs with it, making it personally engaging and entertaining. Drier books fail to entertain at times and fictional narratives often fail to inform – this balances the two quite well. If you’re seeking your own happiness, read this one. You’ll enjoy it.

The Little Book of Safe Money by Jason Zweig is the ninth book in the “Little Books…” series, which each tackle a particular investing topic or strategy. To date, I’ve reviewed all of the previous books in the series, so here are links to my reviews of the previous eight entries.

The Little Book That Makes You Rich
The Little Book That Beats The Market
The Little Book of Common Sense Investing
The Little Book That Builds Wealth
The Little Book That Saves Your Assets
The Little Book of Bull Moves in Bear Markets
The Little Book Of Value Investing
The Little Book of Main Street Money

So what’s the focus this time around? To sum it up in one word: risk. Zweig focuses on risk through the overarching idea of keeping your money safe and avoiding unnecessary risk, recalling that risk is often a reasonable portion of a successful investment.

The book goes beyond investment risk, however, and focuses on risk in many aspects of financial life. Let’s dig in and see more of what Zweig has to say.

One – The Three Commandments
Zweig’s “commandments” are simple and straightforward. Don’t take risk you don’t need to take. Don’t put money at risk that you can’t afford to lose. Don’t take risks if they don’t have a clear reward for that risk. These rules are pretty straightforward to apply in most situations – basically, stay away from truly murky things and only invest money that you can afford to invest in risky things.

Two – Solid, Liquid, or Gas?
A liquid asset is something you can convert into cash quickly and easily without losing much value in doing so. Many people think of some of their very illiquid assets as being liquid assets – like their home, for example, or their art collection. To be liquid, you have to have a seller, a buyer, a secure way of completing the trade at a low cost, and a price that’s reasonable to both parties. Stocks? You’ll probably be able to do that. Real estate? A bit less likely. An art collection? Not very likely.

Three – You Are an Egg
There are many risks that aren’t often discussed in financial writings, at least not all together. Inflation risk, your health, your location, your professional future – those are all risks that are often overlooked as people invest. There are investments that will let you hedge against all of these risks, from treasury inflation-protected securities to long-term disability insurance, that should be part of an overall plan.

Four – Keeping Your Cash from Turning into Trash
Cash is a key part of any portfolio. It can be held onto to ensure no loss in the money you’ve saved and can often be put places to earn a small, virtually guaranteed return (in an FDIC-insured savings account, for example). However, virtually everything beyond cash introduces some sort of risk – even treasury notes and money market accounts. Keeping some money in cash (or at least in TIPS) helps hedge all of the risks across your portfolio.

Five – Guarantees Are not All They’re Cracked Up to Be
Most guarantees have loopholes in them that often allow companies to slip right through them if they’re ever called on their guarantees. Things like SIPC insurance, for example, often don’t hold up when you most need them. The most trustworthy guarantees usually come from the federal government in the form of things like FDIC insurance, which are backed by the full faith and credit of the government. If the government fails, all bets are off on many, many, many things.

Six – Fixing Your Fixed Income
Don’t reach for yield. In other words, don’t go chasing bonds based on their yield because such bonds often have really high costs and fees associated with them that eat away quickly at your returns. Instead, focus on bonds and bond funds that have very low costs, like bond index funds. I myself use a bond index fund through Vanguard for part of my investments.

Seven – Stocks for the Wrong Run
Stocks are not guaranteed to beat every other investment over the long run. If you start investing in stocks near the peak of a bull run, you’ll have a hard time ever catching up to returns on other possible investments, even over a very long period. Instead, treat stocks as though they’re likely to earn better long-term returns, but not guaranteed, meaning they need to be mixed with other investments with lower risk (like cash).

Eight – Rules for Stock Investors to Live By
Don’t worry about stock prices. Instead, invest in the stocks of businesses you know well and you know are well-run. You should also do all you can to minimize costs. Diversification often isn’t the big deal it’s made out to be – you’re far better off investing in the things you actually know and understand than diversification for the sake of diversification.

Nine – Little Things Mean a Lot
Frugality. Yes, stare at that word. Here, Zweig makes the very good point that by cutting your personal spending in areas that work for you, you can easily come up with more money to invest and prepare for your future. Use a programmable thermostat and you’ll have $100 a year more to invest – no different than an extra 1% return on a $10,000 investment. Eat at home more often and you’ll have hundreds more to invest per year.

Ten – How to Get Your Kids Through College without Going Broke
Zweig’s real message here is to not overlook prepaid 529 plans – ones offered in some states that effectively allow you to pay tuition in advance for an education at a state school. While they’re not as flexible as investment-based 529 plans, they’re also nowhere near as risky as long as you know what school you’re attending, as you’re passing off the investment risk to the school. If you’d still prefer a normal 529, you’re better off investing as conservatively as possible within it and focus on contributing more (by living frugally).

Eleven – What Makes Ultra ETFs Mega Dangerous?
“Ultra” ETFs – those that are leveraged in other investments – are incredibly risky investments that many investing advisors promote as a good solution in a down market. In fact, such investments are incredibly volatile, swinging wildly on a daily basis. To put it simply, don’t invest in such things – avoid them like the plague.

Twelve – Hedge Fund Hooey
Another common misconception spread around is that hedge funds are a ticket to financial success. Much like “ultra” ETFs, hedge funds also carry a substantial amount of risk, because hedge funds often operate in secret. The name Bernie Madoff comes to mind. Why do hedge funds have such a reputation? Survivorship bias (the ones that survive get to tell the story, ignoring the mountain of failures) and backfill bias (the losing funds are never reported at all) are two big reasons.

Thirteen – Commodity Claptrap
Are commodities (like gold) a sure way to riches? Actually, commodities are incredibly volatile, showing huge gains and losses almost every year. In order to profit from commodities, you have to deeply understand and know them – and be able to eliminate as many variables as possible. For most investors at home, that’s not a realistic picture. If you simply must invest in commodities, balance those investments with some very stable investments (like TIPS).

Fourteen – Spicy Food Does Not Equal Hot Returns
Another investment often promising huge returns is emerging markets. If you invest in countries that are rapidly developing their industries, you reasonably have a chance to invest in companies that get huge very quickly – and make you a mint, right? Several problems. First, such markets are often really poorly regulated. Second, there are a lot of failures in such emerging markets. Third, it’s often hard to get reliable information about what’s actually happening there. In other words, avoid such markets.

Fifteen – WACronyms: Why Initials Are So Often the Beginning of the End
Acronyms are often tossed onto complex investments to make them sound much more palatable. Of course, that means that such investments are being marketed to someone, which then means that the person who developed the investment is selling a product instead of investing in this discovery. Who gets rich when you buy a carefully marketed product? Usually, it’s not the end buyer.

Sixteen – Sex
Men and women work together far better than they work individually, because their various strengths (on the aggregate) balance well. When you enter into a long-term relationship with someone of the opposite gender, you’re far better off opening up your investing and other financial choices to that partner and discuss them in detail. It’s not just because honesty is the best policy, but because your partner often has a different perspective that can counterbalance yours and lead you toward a better solution.

Seventeen – Mind Control
We all have lots of psychological biases. In day-to-day life, those biases help us manage the complexities of everything going on around us. Quite often, though, in investments, the biases work against us, causing us to make mistakes. The best solution is always to do your homework – and lots of it. Move slowly. Make careful choices. Bounce your ideas off of others and see if they see things you don’t.

Eighteen – Financial Planning Fakery
Similarly, it’s usually worthwhile to wait a bit to act on “tips” and advice that you hear. Quite often, such tips are based on rumor and innuendo and are proven to be wrong – or, when they’re proven right, the insiders have already run away with all of the profits and you’re left holding the bag. If you have some good information, sit on it for a day. Watch what happens. Do some follow-up.

Nineteen – Advice on Advice
If you don’t want to manage your investments yourself and want a financial advisor to handle it for you, take your time in making that choice. Take it slowly. Meet lots of people and ask lots of questions. Look at their hard numbers and figure up how much they’ll cost you over a long period. Don’t sign up for an advisor unless you’ve done lots of legwork and are very confident about your choice.

Twenty – Fraudian Psychology
A simple rule of thumb: if someone sends you an email or calls you about a particular investment, ignore it. You’re far better off doing the seeking and discovery themselves. People don’t waste the time and effort to spam you or to call you if they don’t have something that they’re trying to sell – and something that they’ll make a profit from when you jump on board with it.

Twenty-One – The Terrible Tale of the Missing $10 Trillion
People rarely do as well (on average) as one would expect given the annual returns on investments. Why? People often get out at the bottom of a market and get in at the top of a market, meaning their actual returns are worse than the long-term annual returns of a long-term investment. How can you beat that? Be patient. Ride the crests and the valleys. Only sell when you have a personal reason to sell, not because you think you can “time” the market.

Twenty-Two – How to Talk Back to Market Baloney
When people talk about something that “beats the market” or claims large returns, it’s going to be bogus, period. If someone actually had such knowledge, would they be selling it at all? Would they be giving it away? Even more important, if such returns did exist, then everyone would quickly invest that way and such returns would become the norm. They’re not. Stay away from such nonsense – and use some common sense.

Is The Little Book of Safe Money Worth Reading?
The Little Book of Safe Money is a great book for beginning investors to read because it counterbalances the aggressive salesmanship of most of the investment press. The book is logical, accurate, and points toward some great choices to make to keep you safe from the multitudes of risk out there.

Having said that, the book doesn’t really cover a lot of new ground if you’ve read a lot of books and articles on investing over the years. It’s mostly just a thorough coverage of the risks that an investor is exposed to – and investors that are well-studied and have seen risk hammer people (from Bernie Madoff to housing bubbles) are familiar with many of the points.

Zweig’s writing style is really accessible, solid, and dare I say it, enjoyable. If you’re a beginning investor, pick this one up. You won’t regret it.

I’m a big believer in following your passions, wherever they might take you. Part of doing that is preparation – saving money, making choices that pave the way – but another part is simply stepping up to the plate and hitting that fat fasball down the middle of the plate when it comes your way.

Gary Vaynerchuk is passionate about wine. He’s one of the best known wine evangelists in the world because he wears it and shares it. He built a $60 million business in the wine industry mostly on the back of sharing his enthusiasm about wine online. Crush It! tells the story about Gary’s experience in translating his passion into a real business.

Gary’s story and advice rings really true to me because, in many places, it’s a journey I took myself. I did wind up in an area without the mainstream appeal of Gary’s area (sorry, folks, but there aren’t as many frugal people as there are wine fanatics) but most of the elements are strikingly similar.

His conclusions are spot-on, too – but we’ll get to that later.

1 – Passion Is Everything
It’s incredibly hard to be successful at something without being passionate at it. Why? Success takes time – a lot of it – and that early time is often filled with a ton of failure. If you don’t have that true seed of passion that will help you get through those early trials and tribulations, you’ll never make it through. Passion keeps you going even in the face of repeated failure, and it’s only through repeated failure that you build the skillset necessary for success. I agree from experience – I failed as a writer for at least ten years before finding any sort of success with the written word. Without passion for writing, I would have given up and started playing World of Warcraft.

2 – Success Is in Your DNA
Every single person is unique and brings a unique perspective and set of talents to the table. That unique mix is something that is valued by others if you go through the process of mining it and isolating exactly what you have that’s valuable. It’s a long process, one that’s going to include a lot of failure along the way.

3 – Build Your Personal Brand
What do people think of when they think of you? The stronger you can make that theme, the better off you are. Why? Because if you’re able to conjure up something when people think of you, they’ll already have a strong preconceived notion when they see your name pop up in other places. You’ll be familiar – and if you’ve built a positive (or at least an interesting) brand, you’ll turn something ho-hum into something people want to engage with. This might mean books, products you make, speaking engagements, and countless other things.

4 – A Whole New World
As the costs for starting your own business get lower and lower, it becomes less and less of a sensible proposition for talented and intelligent people to work for other people when they could be using that talent and intelligence to build a business for themselves and collect the rewards from their efforts. The Simple Dollar was started on a shoestring with little more than my spare time invested in it, for example. I could have just signed on to write or produce content for another site – but if I had done that, I would have made much less and had much less control over what happened with my stuff. If you’re passionate, don’t sell that passion to others – ride it yourself.

5 – Create Great Content
If you’re not making things that other people want to read or listen to or watch or interact with, no one will pay any attention to you. The keys are straightforward: know what you’re talking about, be excited and passionate about it, and tell a story as you go. Those things work in any medium about any topic that you might be covering.

6 – Choose Your Platform
“If you build it, they will come” isn’t true. You have to make sure people know you’re there and are aware of what you’re talking about. Thus, to get started, you have to go where the people are – places like Twitter and Facebook. Go there before you even have a product and join in the conversation. Follow others who are interested in the things you are and converse with them. Ask questions. Say astute things. Get involved in topics of conversation. Eventually, you’ll start accruing followers yourself – and you can start building from there in whatever direction you want. The key thing is that your followers – the people interested in what you have to say – are your platform.

7 – Keep It Real … Very Real
Don’t put on an act or else that act will inevitably fall apart. Be as real as you can. Be who you are. If you have boundaries, decide what they are right off the bat and make them as clear and concrete as possible – and never cross them. Aside from that, be completely yourself, because your authenticity will defeat any sort of faux image you attempt to develop.

8 – Create Community: Digging Your Internet Trench
Community building largely revolves around interacting with people, engaging in discussions, answering questions, asking questions, and being involved. You create community when you listen to what people say, focus on topics that people want to hear about, involve yourself in conversations, and so on. Each time you connect with a person, that person becomes part of your internet community. The larger that community is, the more powerful of a support platform it becomes for whatever you choose to do.

9 – The Best Marketing Strategy Ever
I will quote this entire chapter: “Care.”

10 – Make the World Listen
Many people start a site and focus immediately on how to turn a buck on it. Don’t worry about it at all. Instead, focus 100% on coming up with interesting content. Content brings eyeballs and eyeballs begats regular readers. It’s much harder to get that ball rolling if you’re focusing some of your energy on monetizing what you’re doing, so don’t. Wait on it.

11 – Start Monetizing
Once you do decide to start making money (after you have a nice audience, of course), there’s a lot of potential avenues for income – advertisements, affiliate programs, speaking engagements, consulting, freelance work, writing a book, and on and on and on. All of that (except for perhaps the direct ads) builds on top of establishing a community of followers who are interested in what you have to say.

12 – Roll with It
Things will change over time. You might find yourself going in a different direction than you initially expected. If that happens, roll with it. Live with the changes and find ways to capitalize on them instead of letting them wear on you. For example, The Simple Dollar has changed drastically since I started in terms of how I split my time and, if it continues, I may actually hire an assistant to help me take care of tasks.

13 – Legacy Is Greater than Currency
In the end, remember that a lasting legacy is much more valuable than money in hand right now. Don’t sell yourself out for something that you don’t believe in. If you do that and maintain honesty with the people who follow you, they’ll respect and value you far more than if you’re into every money-making opportunity that comes along.

Is Crush It! Worth Reading?
If you’ve ever thought you could do what I do, Crush It! is pretty much an essential read. It outlines quite a lot of the process involved in translating a personal passion into an online-led endeavor that can be your primary source of income. It matches up very well with my own experience in doing much the same thing.

The real key behind it, though, is passion. You need to have a passion before you even start or else the book won’t ever take off for you. If you have a passion and want to share it with others and grow it into something that can financially sustain you, that’s where this book takes over.

One of the most profound lessons I’ve learned about money management since I’ve started The Simple Dollar is that a deeper understanding of your desires and motivations is vital for making good money decisions. Today’s marketing is incredibly clever – and I’m not talking about advertisements, though that’s just part of the equation. I’m talking about the multitude of messages that are sent to me in order to convince me to choose to buy a particular product: product placements, peer pressure, appeals to one’s self esteem, and so on.

As a result, I find that I learn a lot about how to better understand and manage my own spending desires and instincts by reading the key books about marketing. Few books are considered as essential in that field as this one, Roberd Cialdini’s Influence: The Psychology of Persuasion.

The book’s central premise is that there are six universal principles that work to persuade people to your way of thinking, discovered through thirty five years of Dr. Cialdini’s research. The book focuses on these six principles, offering tactics on how to use each of the six principles as well as suggestions on how to resist their use.

Reciprocation
It’s simple: if someone gives you something for free, you’re more likely to think positively of them. You’re also more likely to listen to what they have to say, simply because of human nature. Quite often, that’s all a good salesman needs to make the sale.

I’ll use a great example from my own life. We shop at Sam’s Club, and on Saturdays they often have a large number of free food samples that they give out. We’ll often go grocery shopping on Saturdays and due to the samples, we’re much more likely to make Sam’s Club a stop on our trip. Once we’re actually in the store – and then softened up a bit by the free samples – we’re more likely to spend our money there.

The most effective way to avoid this type of persuasion is to simply decline free things that you don’t actually need. Many people will argue that they’ll just take the freebies and not actually buy anything, but to get that freebie, they often have to surround themselves by marketing and temptation. It’s simply not an equation worth entering.

Commitment and Consistency
It’s easy to say no the first time. It’s easy to say no the second time. By the fifteenth time, though, the message has been pounded into your head and, not only that, on some level you respect the tenacity. You’re much more open to buying the product.

This is why major brands often run advertisements that do nothing more than attract your attention to that brand – then run them over and over. Geico. Nike. Verizon. We see their ads so often that their message is pounded in our heads. Whether consciously or not, they become standards that we use for comparison simply because we know them and we know what they offer, thanks to the commitment and consistency of their message.

How can you avoid this type of persuasion? Minimize your channels of persuasion. Avoid commerical-sponsored television programming. Also, when you make purchases, do research in advance so that you know what the actual features of the product – and reviews of the product – are before you buy them. Read Consumer Reports and let that be your guide instead of pitchmen. It doesn’t matter how many times you hear the pitch if you just stick to the data for your purchases.

Social Proof
Ever notice how ads often show a multitude of people using a product, usually successfully? That’s because the persuasive tactic at work here is social proof – look, many others do it this way and they’re seeing success, so you will, too!

The Simple Dollar, in its own way, runs on this tactic. I’m the social proof. I write about the things that work in my life, and because they work in my life, you’re more willing to try it. Thankfully, I’m not selling a product – I’m just encouraging people to get control of their financial life.

That’s also why marketers will often use testimonials in ads because you can see that the product works for other people.

The best way to break through this is to remember that when you see someone in an advertisement for a product, they’re paid to be there. They’re not speaking the truth (or the full truth).

Liking
Sex sells. So does humor. Why? Because we like them.

When someone makes you laugh, you feel better and you’re more receptive to what they’re saying. When someone arouses you, you’re much more susceptible to the suggestions that they make. Both of these things make us feel better and open us up.

What can you do to resist these things? Enjoy the emotional ride, but step back from the actual purchase. Learn to walk away, because walking away is the most powerful tool in your arsenal.

Authority
As I mentioned above, it’s often useful to consult others when making purchasing choices. The problem here is that marketers are aware of the fact that we often consult experts – and they try to co-opt this as well. They hire experts to do their marketing. Having a doctor in your ad for medicine is helpful. Having a well-known doctor in your ad is even more helpful.

Another technique often used is the reference to recommendations and awards – “this car won the J.D. Power blah blah blah award,” for example. This call to authority makes the claims of the ads seem more real – “see, this respected third party agrees with us.”

The antidote is simple. Follow up on those claims. If a car won an award, check out that award. Check out the reputation of that award, Use more than one source – and find your own sources.

Scarcity
“Get them before they’re gone” is often a simple spur to convince people to take action quickly. Think of Black Friday and the hordes of people chasing sales that will disappear if you don’t jump on board.

Scarcity is powerful. It calls to our fear of doing without. We might miss something of great value. We might miss a great opportunity. And we might wind up being one of the ones without.

Two antidotes really work here. First, surround yourself with people who don’t care if they’re doing without. Use peer pressure to your advantage to counteract the power of scarcity (and the “haves” and “have nots”). Second, find out for yourself if the opportunity really is scarce. Quite often, the “big sale” isn’t really much of a sale at all – just ordinary prices with some very clever window dressing to push your “scarcity” button.

Is Influence: The Psychology of Persuasion Worth Reading?
If you have an interest (as I do) on how marketers (and others – including writers, I suppose) persuade you to certain ideas and also how to resist those tactics of persuasion, Influence: The Psychology of Persuasion is an utterly fascinating read. For me, it was one of the most enjoyable and thought-provoking books I’ve read this year.

To get real value out of this book, however, you have to invest in some introspection. Unlike many books that I review, it doesn’t simply provide you with a checklist of things to do. Instead, it points you in directions for you to think about the decisions you make and lead you in better directions. Similarly, if you have a career in which you persuade people (like writing, for example), the ideas in this book can help sharpen your persuasive skills quite a bit.

If this sounds intriging to you, pick Influence: The Psychology of Persuasion, without question. It’s an excellent read and one of my favorite books I’ve read this year.

A couple years ago, I reviewed Stephen Pollan and Mark Levine’s earlier book Die Broke. I found it really interesting for the first half – which focuses on investing in yourself – and completely faulty in the second half, which talks about specific investment choices. The first half, though, was thought-provoking enough that I actually returned to some of the early chapters of it again in the future.

Recently, I had the opportunity to read Pollan and Levine’s latest book, Lifelines for Money Misfortunes and I found it quite enjoyable. It’s composed of a lot of short chapters that focus on how to deal with various money problems, from losing a job to not having enough money for college.

Because there are so many of these short chapters, I won’t review them in detail. Instead, I’m going to focus on the five central principles of the book, ones which Levine and Pollan apply to each of the problems.

Accept the Problem and Own the Solution
When something goes wrong in our lives, it’s easy to try to blame others. Here’s the thing, though: when something is wrong in your life, thinking about blame doesn’t help – at all. Instead, you need to accept that this problem exists in your life and focus your energies not on figuring out who to blame and getting “revenge,” but on actually fixing the problem.

At the same time, you also can’t just sit around and wait for someone to solve the problem for you. You need to step up to the plate yourself and solve the problem. If you don’t, you’re not only vastly increasing the odds of locking yourself in a downward spiral, you’re also denying yourself the chance of building a lot of personal fortitude and skills.

Unburden Yourself
Bottling things up inside – your frustrations, your pain, your anger – is never a good thing. It will either explode at an inopportune time or it’ll fester inside of you.

When you have a money misfortune, talk about it with the people important to you. Tell them about your frustrations, as well as what your plans are for overcoming them.

Not only will this provide a psychic release for you, it will also give your friends an opportunity to give you advice and help as well. You’ll often be surprised at how helpful and insightful the core people in your life can be.

Diagnose the Impact
How bad is it, really? Quite often, when a misfortune hits us, we either radically overestimate or radically underestimate the impact the event has upon us. Step back for a moment and figure out exactly what the impact of the event is in your life.

Does it change your ability to earn revenue in the future? Does it alter the income or revenue of people you care about? Are you losing something of value in your life – or in danger of losing it?

Work through the ramifications of what just happened to you and figure out how it affects the important areas of your life. Know the impact before you start flinging around “solutions.”

Take Your Financial Pulse
What’s your actual financial state right now? What resources do you have available to you to solve the crisis?

Quite often, people look at their situation from too narrow of a viewpoint. They don’t look at nearly all the assets available to them to solve the crisis. Many life misfortunes allow you to use retirement accounts and other assets without penalty, for example.

Look at what you have, then investigate whether those things can be used to fix your problem.

Start Pallative Measures
Pallative measures are things that reduce the immediate pain of your misfortune. What can you do in the ultra short term to minimize the pain?

Maybe you need to take some job – any job – to get some revenue moving in. Maybe you can sell some things. Maybe you can ask for a little bit of help from the people central in your life.

Figure out what can take the edge off the pain in the short term, but don’t make that your long-term solution. Pallative measures just help you to the point where long term plans can be put into place.

Launch Revenue Rehabilitation
Most financial misfortunes result in a serious revenue shortfall. To put it simply, there’s not enough money coming in to cover the money going out – and that can result in a serious downward spiral.

Don’t allow this to happen or the problem will be exacerbated. Do what you need to do to rehabilitate your income quickly. Start applying for jobs now – and while you’re job-hunting, get a night job. File for unemployment. Tap any funds you have to make up for the shortfall. Start living cheaper immediately.

No matter what, try to avoid going into debt because of the loss of revenue.

Cultivate Antibodies
What can you do to ensure you’re not smacked by such money disasters again? Launch antibodies, of course. “Antibodies” are things you can do to ensure that such disasters don’t blindside your life in the future.

Emergency funds are one type of antibody – they provide the funds you need in any kind of pinch. A greater array of personal skills are another type. Knowing how to live cheap – and practicing it – is yet aother type.

The more antibodies you have in your life, the less likely a money misfortune will strike you and take you down.

Is Lifelines for Money Misfortunes Worth Reading?
The advice in Lifelines for Money Misfortunes is accurate and straightforward. The book does a very good job of outlining a plan of attack for a lot of different personal finance situations.

However, most of these plans of attack are very similar. They all more or less follow the structure outlined above with just a few tweaks for each situation. If you’re flexible in your thinking, you really only need to read a few chapters in the book to get the idea.

If you have a specific money misfortune, the advice in this book can be a great guide to you. Once you’ve recovered, though, and reflected on the situation, using this advice in future situations might seem a bit repetitive. It can be a lifesaver once – after that, it might feel like the same old, same old.

This is a book I wish I had my hands on about two years ago.

I was working at a job I liked, but I also felt that there were several directions in which I was unable to spread my wings. The work I was doing was slowly moving in a less creative direction over time. Plus, I wanted to spend a lot more time with my children and limit my work-related travel to perhaps one trip a year at most.

For me, “the leap” was into a freelance writing career and it seems to have worked out. The Leap, by Rick Smith, is a guide to this very kind of move. You’re in a job that’s stifling you in some way and you want to move in a different direction with your career and/or your life. What can you do without sacrificing the income you need?

Before we get started, I found the advice in this book often paralleled my own experience, but in more than a few places, it dropped some insights that I didn’t think of or didn’t expect. In other words, I would have loved to have this book in my hand about two years ago.

1. “Great Work, You’re Fired”
Sometimes, when you think you’re in an incredibly secure position in a successful job with a great company, it’s all swept out from under you. You’re walloped with a new passion (like writing, for example). Your life context changes – you fall in love or you have children. The economy changes and your job is “downsized.” Your company’s CEO makes some really stupid moves and you’re “downsized.”

These types of changes happen more and more often and yet people are still often gobsmacked by them. Yet we all have the opportunity to turn lemons into lemonade. We just have to start now.

2. The Now Trap: Stuck in the Status Quo
One of the biggest traps we fall into in the workplace is the urgency of now. Most of the time, we’re chasing the things that need to be done immediately, but all of these little “putting out the fire” actions do nothing to actually establish a great career. We’re trapped by the moment in our jobs. Instead, it’s the less urgent things that tend to establish us: completing projects, improving ourselves, and so forth.

Sometimes we need to set aside the “now” and work on the truly important things that are a little less urgent. Commit to some projects or some educational opportunities. Don’t just worry about the “now” – devote some of your time to building your value for the future.

3. Breaking Away: The Three Rules
Smith proposes three “rules” for getting you from where you are to a position where your job doesn’t control your life or your career future. For the most part, these rules revolve around figuring out where your skills and passions overlap and maximizing that area, which he calls your “primary color.”

Of course, these three rules are discussed in detail over the following three chapters.

4. Primary Colors: Tapping the Energy Within
We each have a distinct set of strengths and weaknesses. We also each have areas we’re passionate about and areas we’re less passionate about. Quite often in life, we spend time trying to patch up our weaknesses and trying to improve ourselves in areas we’re not really passionate about. Smith argues that this is a giant mistake.

Instead, we should focus on the areas where our strengths and our passions overlap. So, for example, if we’re awful at public speaking but good at writing, and we’re passionate about fiction but don’t like science, we should avoid public speaking on science topics and instead focus on writing fiction.

5. What Is My Primary Color?
The trick, of course, is figuring out where our skills and passions lie. Smith refers to this as our “primary color.” In essence, this “primary color” is essentially a description of our core personality – what we’re naturally geared toward and skilled at.

Smith offers such an assessment for free at www.primarycolorassessment.com. I took the test myself and came up with 85% curiosity, 35% execution, and 33% leadership, which sounds about right. I prefer to come up with ideas, but will lead or be involved in execution if need be.

Is it useful? I think it is if you spend some time really contemplating the results and asking yourself how they match – or don’t match – what you’re doing.

6. Big, Selfless, and Simple: How Ideas Become Contagious
The most valuable thing in the modern workplace is the idea. People who come up with ideas, share those ideas, and are involved in implementing those ideas are the people who get ahead. Of course, without other people buying into those ideas, it’s very difficult to get your ideas heard and implemented – which means that you need to work on the “stickiness” of your ideas.

Most of this chapter lines up perfectly with the excellent book Made to Stick by Chip and Dan Heath (which I reviewed and loved a while back). In fact, I’d consider it reasonable to simply read the full book than read this chapter, since the ideas are similar and the general concepts are covered (in my opinion) in the book by the Heaths.

7. The Spark Sequence: Stacking the Deck
How can you know if this idea you think would match your passions and skills would actually work out? The best way to find out is by doing it – devoting as much of your time as possible to exploring that junction between your passions and your skills. Practice. Dive into opportunities. Back away from the optional things in your life that are less fulfilling and instead fill your hours with finding that crux between your passions and your skills.

One strong exercise that Smith suggests is simply writing down your idea, then making a list of five or ten questions that, if you knew the answer to them, would make your decisions about that idea much easier. Those questions then become your checklist – strive to answer as many as you can without giving up your current way of life.

8. Aristotle on a Lily Pad: A Perspective on Life-Work Design
Smith closes out the book by calling upon the philosophy of Aristotle to make a simple, yet central, point: the journey is what really matters. As you go along and figure out what you’re passionate about, you might have your eye on the destination, but the journey is where your true lessons will be learned. Your destination will likely change over and over again, but the lessons learned along your journey will stay with you.

Is The Leap Worth Reading?
The Leap is a very solid book for people who are struggling with finding the career they’re meant to have – a position I found myself in not too long ago. It’s incredibly straightforward, yet it provides plenty of food for thought and reflection.

I’ve been reading a lot of career books lately and many of them overlap on a lot of themes: finding your passionas and strengths, focusing on things that build value for you over the long term, building you and not your organization (remembering that a better you will help your organization more). The Leap presents all of these ideas very cohesively and clearly.

It’s a book I wish I had in my hands two years ago.

I quite enjoy reading personal finance books that offer different advice and ideas than the rest, even if I don’t agree with what they have to say. Killing Sacred Cows, by Garrett B. Gunderson, falls into this category.

Killing Sacred Cows (ussurprisingly) takes on some financial “myths” that the author argues is destroying your prosperity. As with all such books, it’s an entertaining read and it makes quite a few good points – and quite a few questionable ones. That’s why it’s worth reading – it, at the very least, provokes you into thinking about things.

Let’s dig in and see what Gunderson has to say.

Myth 1: The Finite Pie
Quite often, people convince themselves that the good things in life are scarce. There’s only so much success and money and opportunities to go around, they argue, and they’re jealous of the people that have the things they do not. In truth, there’s a bounty of wealth and opportunities in the world, and someone else’s success almost never precludes your own. Instead of worrying and stressing about the great things others have, focus on improving yourself and claiming opportunities for you.

Myth 2: You’re in It for the Long Haul
I’m not sure I agree with this “myth.” Here, Gunderson argues that 401(k)s are simply there for people to sock their money away for some ultra-expensive unspecified retirement, and that a better option is to use it now in ways that multiply your money. In other words, instead of saving for retirement, channel that money into improving your earning potential – an education, starting a business, and so on. I think this philosophy makes a big assumption about 401(k) savings – that they’re just for some sort of “golden years” image of retirement that’s starting to not reflect reality. In truth, 401(k)s are often simply a tax-advantaged way to save for the long-term future. I actually think for most people that Roth IRAs are the best option of all, since earnings aren’t taxed at all if you withdraw them when you’re over 59 1/2 years old.

Myth 3: It’s All About the Numbers
It’s not all about the numbers. It’s all about the psychology. Do you have the mental strength to overcome temptations, buckle down, and save? Or are you prone to keeping up with the Joneses and constantly giving into simple temptations? It doesn’t matter how good your investments are if you constantly buy yourself splurges and are in debt up to your ears.

Myth 4: Financial Security
Financial security used to mean a steady paycheck and a pension, but the world doesn’t work that way any more. Instead, the true source of financial security is you: the unique skills you have, the experience you have, and the connections you have to others. If you can provide genuine value to others, you’ll always find work – if you can’t, you won’t be finding work any time soon.

Myth 5: Money and Power
Money is not power. Money is just an expression of the value created by people for people. People who create more value tend to accumulate more money. You do not need to have money to make money – you just need to be able to produce value on your own with your skills, connections, experience, hard work, and creativity.

Myth 6: High Risks = High Returns
The big problem that Gunderson points to (in so many words) is that people often confuse volatility and risk. Volatility means that over a certain period of time, an investment might go up and down rapidly. The stock market is volatile and you know it’s going to be. Risk centers around the as-of-yet-unknown outcome of a future event – you take on risk when you assume the outcome. A well-researched investment lowers the risk (because you increase your actual knowledge and reduce the unknowns about it) but doesn’t change the volatility (it’ll still be somewhat volatile, no matter how much you know). If you assume a lot of risk, it just means you’re investing in something you know little about – and that’s more or less akin to gambling.

Myth 7: Self-Insurance
Insurance is there to decrease the risk in your life, nothing more, nothing less. The less insurance you have of various kinds, the more risk you expose yourself to. Gunderson highly recommends buying a wide variety of insurance, arguing that the financial cost of the insurance is low compared to what it protects you against. I think it tends to come down to your personal situation – if you don’t have many assets or resources to protect, there’s not much need for insurance. If you’re driving a junk car, for exmaple, full insurance is pretty much overkill.

Myth 8: Avoid Debt Like the Plague
In so many words, Gunderson distinguishes between good debt and bad debt. In general, bad debt has high interest rates and is used to buy stuff that doesn’t help you generate additional income. Good debt has low interest rates and is used to generate additional revenue in your life. Student loans, for example, would be “good debt,” while credit cards are almost always “bad debt.” The problem with this dichotomy is that the line in the middle is blurry – there’s a giant grey area in this dichotomy. What about a car loan? Some car loans might be “good debt” – like a used car loan to help you get back and forth to work – but a car loan to buy a Mercedes is likely “bad debt.” But where’s the line?

Myth 9: A Penny Saved Is a Penny Earned
I agree strongly with the argument here. Gunderson argues that price really doesn’t matter compared to value when making a purchase. Does the item actually provide deep personal value to you? If the answer is yes, don’t be afraid to spend money on it. The challenge here is doing enough personal reflection and self-analysis so that you clearly understand what things provide value in your life and which things do not.

Is Killing Sacred Cows Worth Reading?
Killing Sacred Cows is thought-provoking. It will make you think about your money. For me, that’s strong praise – that’s what I look for more than anything in a personal finance book.

Having said that, I don’t wholly agree with all of the conclusions in the book. I think the “good debt”/”bad debt” dichotomy is a pretty bad one – all debt is bad and to say any of it is good is to try to put a nice label on something that’s a bit less onerous than something else. I also felt like the insurance chapter was practically written by an insurance salesman and was obviously targeted toward people with a lot of assets to protect.

It’s definitely an enjoyable read that will make you think (Gunderson has an engaging writing style), but I wouldn’t follow all of the advice as gospel. Of course, I wouldn’t follow the advice of any one personal finance book as gospel.

If you’ve been reading my weekly roundups for long, you know I’m a big fan of the Unclutterer blog and its chief writer and editor, Erin Doland.

I link to Unclutterer frequently because I believe there is a strong connection between clutter and financial problems, since clutter represents having more physical possessions than you can manage and all of those possessions cost money. Plus, dealing with clutter requires a time investment and in our busy lives, time has a very high value.

Unclutter Your Life in One Week essentially offers a “detox” plan for getting clutter out of your home, office, and life, ostensibly in one week. I should say right off the bat that I found actually accomplishing all of the ideas in this book in one week to be impossible. That doesn’t mean the book has value, but you should not expect that all clutter in your life will be gone in one week if you follow this plan. Although, I will say that there is some function of how cluttered your life is when you start and how thoroughly you’re going through your life with the plan.

That being said, the advice in this book is stellar, in my opinion. Let’s dig in and look at some of the specifics.

The Foundations
Most of us have lives that are overbooked, overworked, and overstuffed. We have more things that we want than we possibly have time for. I’m certainly in this boat myself – I’d trade all the material items I have for another four hours in my day.

In our rush to jam even more into our lives, our lives become inherently complicated. We accumulate more things than we can deal with and some things begin to slip simply because there aren’t enough hours in the day. Those “things that slip” often take the form of clutter – items in our lives that we simply don’t have the time to process. These tend to build up throughout our lives, filling up our homes and our day planners with a backlog of things that need to be taken care of and things we don’t have the time to actually enjoy or use.

Dealing with clutter is an intense process, because it not only requires dealing with this backlog of stuff, but it also requires dealing with the elements in your life that are causing clutter.

Monday
Monday is the best day of the week to begin establishing new routines. It’s also a good day to tackle the “firsts” – the elements of clutter you face first throughout your day.

For example, many of us face a cluttered closet in the morning when we wake up, so a good first step is to get your clothes in order. If you have more clothes than you can adequately fit in your dresser and closet, you need to eliminate some.

At work, the first thing we often see is our desk or workspace. Figure out a place for all of the stuff that you see – and don’t be surprised if the space for many of those things is the trash can.

Tuesday
Tuesday is the most stressful day of the week, so it’s the best time to tackle the areas of your life that cause you the most stress and require the most work to keep up.

At home, Erin encourages decluttering the bathroom (with the goal of being able to easily find all of the things you need but tossing the things you don’t actually use that tend to fill up your bathroom closet) and also streamlining your household chores. I find in my own life that when I have a household chore routine, things are more likely to work well.

At work, one should take a look at filing all of their papers so that the documents one needs can easily be found and the less-important things are out of the way. At my previous job, I found that having a filing cabinet split into two pieces worked for me – a single drawer for stuff I actually used sometimes and the rest for stuff I needed to retain but would rarely look at. 99% of the time, I’d just look in that one drawer and find what I needed.

Wednesday
Wednesday is “hump day” and a perfect day to focus on communications and processes in our day.

At home, take a look at your kitchen and your bedroom. For us, at least, the kitchen alone can be a major project for de-cluttering. One big tactic that works is simply reducing your kitchen implements, replacing fifteen low-quality single use items with one high quality item that simply does the job. You don’t need a butcher’s block, you just need one really good chef’s knife, a bread knife, and a paring knife. You don’t need tons of casseroles and Pyrex, you just need a few high-quality French ovens. A more streamlined shopping plan helps, too.

At work, re-evaluate your commute and your communication processes. How do you get to work? Does your trip fill you with unnecessary distractions and angst? Look for the least stressful way to get to work. When you’re there, look at how you communicate with others. Does it happen in an orderly fashion with appropriate emotions? I find that “communication sessions” work well for me, where I spend a period of time each day just handling communiques, then I turn off those communication channels to allow myself to focus on other areas.

Thursday
On Thursday, the focus should be on organizing your living spaces at home and focusing on your workflow and processes at work.

At home, look at the places you spend your time during the day. For us, that means our family room, and the obvious place to look there is our entertainment center, which is often a mess thanks to kids pulling out DVDs and playing with various items. Another spot to look is our book collection in the laundry room, which could sorely use some time.

At work, examine how you work on projects. Do you have difficulty completing them? Do you have too many projects? Start using the “five whys” and dig into the reasons for this. Quite often, there are some simple things blocking you from a much better workflow.

Friday
Friday’s focus is solely on uncluttering your schedule. Most of us have schedules that are so full to the brim with activities that we scarcely have time for important things in our lives. How many of you read the previous activities and thought, “That sounds awesome, but I don’t have time for it!”

The best way to do this is to simply prioritize the things you’re doing. Figure out what elements are truly of low priority and either treat them as such or find ways to completely eliminate them. Then, look at the higher priority things and look for ways to compress them – perhaps, instead of watching a show live on Tuesdays, you can record it and watch it commercial-free on Wednesdays. Perhaps instead of unwinding after work, you can spend a brief bit of time truly relaxing and then get on with the things you need to do.

The Weekend
The biggest benefit of unclutterinig is that it truly frees your weekend. If you have established routines for handling everything throughout the week – and you’ve uncluttered your time enough to allow for it – your weekends go from being “catch up” time to being big blocks of free time with which you can do whatever you want.

That’s really the reward, isn’t it?

Is Unclutter Your Life in One Week Worth Reading?
Absolutely. This is the single best book I’ve ever read on organizing your life. Much like my favorite book on time management, Getting Things Done (and, incidentally, Unclutter Your Life in One Week has a foreword by the author of GTD, David Allen), Unclutter Your Life in One Week shines because of the small implementable details, like the few pages devoted to how to organize your clothes and fold your shirts (seriously – I started using that method and it works really well).

If you were to do everything in this book, it would take much longer than a week, without a doubt. However, the modularity of it allows you to pull out pieces to tackle the most egregious parts of your life and then gradually move to other details as the “de-cluttering” advantages become clear.

This book has found a semi-permanent home on my bookshelf as I move towards decluttering some of my own life (like that nightmarish junk drawer and the train wreck that is my closet and, frankly, my time schedule).

Over the years, I’ve professed a ton of admiration for Thomas Stanley and William Danko’s excellent personal finance book The Millionaire Next Door. It was the first book I reviewed on The Simple Dollar and it’s still one I turn to regularly for ideas and inspiration.

One of the most interesting themes in The Millionaire Next Door is the idea that you really can’t judge a book by its cover when it comes to personal wealth. In fact, quite often, public displays of affluence disguise a debt-ridden underaccumulator of wealth, while many exceptional accumulators of wealth possess ordinary, often seemingly outdated things. The underaccumulators of wealth focused on appearance, while the exceptional accumulators of wealth focused on how things functioned.

Thomas Stanley expands upon that single idea here in Stop Acting Rich. The entire premise of the book is simple: lasting wealth and happiness is rarely found through buying expensive things. Throughout the book, Stanley relies on extensive research of people who have acquired financial security – much the same group as in The Millionaire Next Door – to illustrate and reinforce his points, painting a pretty convincing case of the actual buying habits one should adopt if one is seeking lasting personal wealth.

1 – The Difference Between Being Rich and Acting Rich
Stanley opens Stop Acting Rich by defining a group of people he calls “aspirationals” – people who choose to act like the super-rich, but don’t have the financial resources to truly back it up.

The “aspirationals” and the truly rich (people with truly exorbitant wealth) tend to spend a lot of money. Stanley reviews these spending habits in detail here – think yachts, country clubs, cases of vintage wines, private jets, BMWs and the like. To put it simply, “aspirationals” often have to sacrifice every dime they have to appear rich, leaving them incredibly vulnerable to losing everything.

What’s interesting is that this “aspirational” and “truly rich” phenomenon continues all the way down the money scale. In many neighborhood, there are “aspirationals” – people who are pushing themselves into financial ruin to keep up appearances – and people who can actually afford to live there.

The solution to financial success is pretty simple – stop being an “aspirational.”

2 – Everything You Think about Rich Is Wrong
When you step back and look at “aspirationals” from an outsider’s perspective, an interesting phenomenon occurs. Aspirationals are more common than the truly rich by far, so our “pop” idea of what it means to be rich actually comes from people who are financially poor and are making reckless decisions for their future.

Those aspirationals are seeking respect from the wrong group of people. In truth, it doesn’t matter at all what the random person on the street thinks of you, yet it’s the respect of the random person on the street that aspirationals desperately seek.

“But what about dressing for success and the like?” The only people who you should focus on impressing and winning the support of is your professional peer group and community. Their respect is what will actually impact your life. In many – if not most – professional communities, the watch you wear or the car you drive doesn’t matter one little iota.

3 – Do the Shoes Make the Man?
Many people argue that by doing things like dressing for success, they’re creating the groundwork for success. People will trust and respect them and money will flow their way. So they focus on the material elements – they focus on the perfect shoes, the perfect suit, the perfect handbag, the perfect car, and so on. After all, gotta look good, right?

Yet, while that person is focusing their energies and resources on appearing rich, others are focusing their energy on building the skills that will pay the bills. While one person is buying expensive shoes and keeping up appearances at the country club, the other person is practicing their speeches and coming up with a better business plan.

In the end, one of these two people will find lasting wealth. Will it be the glossy suit with nothing underneath, or the person who put in the time to prepare?

Don’t put the appearance of success before success, or else someone who is actually putting in the footwork will grab that brass ring away from you, leaving you with nothing but a mountain of debt. Focus on the skills that pay the bills, not on the bills that bring more bills.

4 – Brother, Do You Have the Time?
Want to know why you’ll often read articles or hear about people who wear expensive things getting extra attention? It’s because having high-end items makes you a target for people who want to drain even more of your money.

Think about it. If two people walk into a jewelry store, with one person dressed in normal clothes and another person dressed to the nines and wearing a $10,000 watch, which one do you think will get more attention from the salespeople – and thus more encouragement to buy a more expensive item than he or she intended to buy? Such “attention” is the type of attention that causes you to walk out of a store with an overpriced item.

If you value your money, you’re better off not appearing affluent in public.

5 – Keeping Up with Your Spirits
Here, Stanley focuses in specifically on one type of product – sspirits – to make a greater point about purchasing habits. People who buy high-end wines and spirits do so because they believe that having a particular brand – a brand that’s been built up with a lot of careful marketing – of liquor will somehow enhance their satisfaction with their lives.

In truth, an expensive brand is often of debatable quality as compared to the “bang for the buck” choice. The premium paid for a luxury brand may offer a bit more quality, but the minute increase in quality is rarely worth the extra price. What people pay for is the “cachet” – the idea that this particular brand will contribute more to the quality of their life than the other brand.

And that’s called marketing, my friends. Nothing more, nothing less.

6 – The Grapes of Wrath
Stanley discovered an interesting correlation between the net worth and the amount people spent on wines. Ignoring the outliers, the more a person spent on a bottle of wine, the lower their net worth was.

Why the focus on wine? More than almost anything else, wine is a prestige-oriented product. There are many, many wines with strong tasting scores well under the $10 threshold, yet many people who are “aspirationals” tend to seek out the prestige wines – vintages with exorbitant costs that are only marginally better than the $10 versions and, even worse, actively turn their noses up at the lower cost vintages.

Such snobbery has a dual effect. Not only does it sap you of your financial strength, it also can cause unwanted negative consequences. Stanley relates a tale in which a person thought they were showing off high class and sophistication by turning up their nose at the $12 wine offered to them and brandishing their own expensive vintage, but in the eyes of the wine offerer, the person was being downright rude and his actions cut off a potentially useful relationship. To put it simply, trying too hard to appear affluent can cut off relationships.

7 – The Road to Happiness
Among millionaires, what automobile manufacturer has the highest loyalty rate? The highest percentage of ownership? The most recent buys?

One might expect to hear names like Mercedes-Benz and BMW here, but in truth, the answers are Chevrolet, Ford, and Toyota, respectively. In other words, millionaires aren’t the ones buying the expensive cars. Who is? The “aspirationals” – the broke people pretending to be their idea of what a millionaire is.

You can actually judge people by their cars. If you see a shiny new Mercedes rolling your way, it’s likely that the person inside isn’t rich, they’re just pretending to be rich.

8 – Geeting Out of the Poorhouse
The size of a home is a better predictor of the size of one’s mortgage than the size of one’s net worth.

Stanley actually draws this correlation statistically in this chapter, as well as relating that ratio of financial assets to home value to one’s state of happiness. Guess what? The lower that ratio is – meaning that you’ve got a mortgage so large that your net worth is significantly lower than the value of your home – the less happy you are with your life.

Instead of buying what you think you need, focus on buying what you actually need. We did this very thing at our home, where our two children share a bedroom (and soon the three of them will). They don’t need a bedroom to play in – that’s what the family room is for. Why have that unnecessary extra space? Just so we can store more stuff we don’t need?

9 – All that Glitters Is Not the Millionaire’s Goal
Accumulating wealth is an unhealthy goal in life. A person is much better off with other goals in their life.

Of course, the ability to enjoy all that life has to offer without the need to spend exorbitantly on stuff is a key part of being able to accumulate wealth. Wealth isn’t accumulated on an elaborate European vacation – it’s accumulated by spending a summer vacation camping and visiting museums. Wealth isn’t accumulated with a country club membership – it’s accumulated with a walk in the park with people that you want to be around. Wealth isn’t accumulated from rich mahogany and many leather-bound books – it’s accumulated from a home you feel comfortable in and books you actually read, probably checked out from the library.

Is Stop Acting Rich Worth Reading?
Stop Acting Rich is basically just a somewhat more action-oriented but perhaps slightly less rigorous and thought-provoking book than The Millionaire Next Door. They’re very comparable, as they cover many of the same topics.

From my perspective, it felt like The Millionaire Next Door was broader in scope, while Stop Acting Rich focused in on more specific behavioral issues. For some, that may make Stop Acting Rich more worthwhile; for others, perhaps not.

For me, I didn’t feel like Stop Acting Rich surpassed the original at all. Perhaps it was because the first book introduced the ideas, but this often felt like a re-hash in places, albeit of some excellent ideas. If you’ve never read The Millionaire Next Door, Stop Acting Rich would be an excellent read – if you have, it’s probably redundant.

The Simple Dollar has reviewed hundreds of personal finance, personal growth, and career books. Please check out the full list of Simple Dollar book reviews, alphabetized for your convenience.