Every other Sunday, The Simple Dollar reviews a personal finance book.
Liz Pulliam Weston is described on MSN as “the web’s number one personal finance columnist” – and in terms of readers, that’s probably pretty accurate (MSN has an enormous audience, and she’s the best of the writers over there, in my opinion). She’s got a lengthy archive of all kinds of articles on personal finance topics if you’d like to get a taste of her writing.
I picked up her most recent book, Easy Money, because several readers claimed it was quite good – one reader favorably compared it to a book I quite liked, Jane Bryant Quinn’s Smart and Simple Financial Strategies for Busy People. Both books target the same general topic – simple tactics for busy people to get their financial life in order.
Is Easy Money a winner, or is it just a rehash of information you can find elsewhere? Let’s dig in and see what it’s about.
A Walk Through Easy Money
1. Setting Up Your Financial Life
This is a fantastic opening chapter for any modern personal finance book – the only problem with it is that it runs the risk of being outdated fairly quickly. The basic premise is simple – using online tools and a bit of advance planning, you can essentially build up an “overview” of your accounts, similar to what Mint can provide without the security concerns. Even better, by linking these accounts together – savings to checking, investment account to checking – and using online bill pay, you can have many of your payments handled automatically, including automated savings and automated investing, drastically reducing the time you have to devote to worrying about it. This chapter basically walks you through how to do this – but I’m pretty sure that technology will make some of the steps redundant in a few years. For now, though, this material is fantastic.
2. Take Charge of Your Spending
Weston is a big advocate of the so-called “60% solution” that I wrote about a while back. The idea is simple – you make yourself live on only 60% of your take home pay, putting the other 40% away for retirement, big purchases, your children’s education, a big emergency fund, and other such items. It seems extreme on the surface, but once you start digging into the specifics and working out how it would work for you, it’s actually surprisingly doable for many people.
3. Get the Most Out of Your Credit Cards
The key piece of advice here is to simply not carry a balance on your credit cards. For many people, that’s easier said than done, so Weston advises starting by simply putting your credit cards away and not using them for a while, then spend that time focusing on eliminating that debt. If you do have them all paid off, Weston encourages finding cards with great bonus programs that match how you spend – much like how I use the Citi Driver’s Edge card. I agree wholeheartedly with Weston’s philosophy here – keep a zero balance and enjoy the perks of a good card.
4. The No-Sweat Guide to Retirement and Other Investing
Again, Weston sticks to pretty simple advice in the investing section of her book. She basically encourages readers to always invest in low-cost index funds (this is a major theme of investment books, for good reason – it works) – but not just stock-based ones. You should also have some of your retirement money in bonds and cash and even a bit of real estate. She seems to be largely in favor of “target retirement” funds for the most part (as long as they contain some stocks, some bonds, and some cash) if used for retirement.
5. The Easy Way to Save for College
Get a 529 plan and set up an automatic savings plan to fund it. That’s Weston’s advice for college savings – and that’s what I do as well. She’s not a big fan of prepaid plans since they tend to lock you into a particular school (or set of schools). She also strongly encourages people to avoid taking out excessive student loans (ones for more than the amount you actually need for college – to consolidate other debts, for example) because student loan debt can’t be forgiven during a bankruptcy.
6. Insurance: Protecting What You Have – And Will Have
Here, Weston offers a bunch of very specific advice about different types of insurance, from life and auto insurance to homeowners’ insurance and umbrella policies. I was mostly interested in her life insurance advice, as my wife and I have been discussing an additional policy: Weston encourages us to get a term policy that covers a long period, don’t buy it from her employer, and get a convertible policy that could be transformed into a cash-value policy if needed. Solid advice, all around.
7. Buying Homes and Cars
The big advice that Weston gives here is don’t overbuy. People have a tendency to “push” what they can really afford with these major purchases. Weston argues that such a move is a mistake – you’ll end up with property that you can’t easily pay the bills on that’s worth less than what you paid for it, and that’s a situation that’s a real loser for anyone in it. What can you do to avoid it? Take serious stock of your finances before any major purchase and set a strong spending cap before you even look.
8. When You Need Help
Liz’s biggest piece of advice if you find yourself needing additional help is to find a certified financial planner (CPF), preferably one that works only for fees and not for commissions. Also, no matter who you hire to help you with anything, do some background checking on that person to make sure they’re legitimate (they are who they say they are and have the accreditations they claim) and have a positive reputation (ask around in the community and among your friends, and also check out the Better Business Bureau).
9. Be a Savvy Shopper
This chapter is basically just a lengthy “tips” collection for general shopping needs. One tip I found interesting was Weston’s suggestion to focus your travel with just one airline, one hotel chain, and one car rental company – join their frequent “flyer” programs and scoop up the benefits. This would, of course, apply best to people who travel regularly. She’s also a huge advocate of using lots of online price comparison tools, but she’s also pretty wary about using the internet – virus scanning and pop-up blockers for all!
10. Changing Your Uneasy Mind
Here, Liz tackles several of the most common psychological hang-ups people have with money – things like “the one with the most toys wins” and “I’ll never get ahead financially, so why bother?” Liz’s choices here are quite good – they reflect almost all of the common emails and comments I get from readers who are doubting the benefit or usefulness of trying frugality or adopting good money habits.
11. Setting Goals, or What Are You Doing the Rest of Your Life?
The final chapter focuses on setting goals – short term, medium term, and long term goals with tangible definitions of success. I find goal setting to be a key part of personal finance, one that’s sometimes overlooked in other books, and this is a solid discussion of how to develop goals. I would have put this chapter much earlier in the book, however.
Is Easy Money Worth Reading?
I generally put personal finance books into two distinct groups. There are the “mechanical” ones – the ones that are mostly there to provide instruction on how to handle different situations – most of the books people think of as personal finance books fall into this category. Then there are the “other” books – ones that take a completely different approach. I personally tend to enjoy reading the books from the “other” category, as the “mechanical” ones tend to be quite repetitive – once you’ve read two or three, there’s not much new out there worth reading.
Liz’s book falls clearly into the first category. I had already read most of the advice in the book – very little was strictly new to me. Yet, of all of the “mechanical” personal finance books I’ve read, I think Easy Money might very well be the best of the lot, at least in terms of presenting information that I agree with.
If you’re looking for a general reference-style personal finance book with a lot of solid information in it, written in an approachable and easy-to-read tone, Easy Money is probably the best one I’ve yet come across. Do note, however, that if you’ve already read multiple books along those lines – or already have a few in your own home for reference – this one won’t provide much additional information.