Every Sunday, The Simple Dollar reviews a personal finance or other book of interest. Also available is a complete list of the hundreds of book reviews that have appeared on The Simple Dollar over the years.
Karen McCall has a fairly interesting premise with this book. From her perspective, anyone who is in a challenging money situation is more or less in the same boat. If you’re struggling with debt, struggling with inheritance issues, or struggling with simply being able to save money, you’re more or less in the same boat.
It’s an interesting take, since the financial tools that you would use to solve these situations are often quite different from one another. McCall’s perspective is that the real challenge all of these situations throw at you come from instability and dissatisfaction with one’s situation and that there are constant principles that turn instability into stability and dissatisfaction into satisfaction.
Understanding Your Relationship with Money
McCall’s argument is that most of the financial problems that people face don’t come down to not having enough money. Instead, they come down to a poor relationship with money. Our expectations are often unrealistic, for one, and we often don’t have a strong grasp on where our money goes and what our best financial steps are. The key to solving all of this is self-evaluation. You’ve got to sit down and spend some time looking deeply at the financial choices you’re making, from top to bottom. Every dollar you spend. Every dollar you make. Why are you making these choices?
Deja Vu All Over Again
If you do this kind of self-analysis with sincerity and with regularity, you’ll begin to see that you often repeat the same mistakes over and over and over again. When you find these, you will have discovered the key things that you need to clamp down on. These will often be spending leaks, but they might be other things, too, such as a bad habit of forgetting to pay bills on time. It is these leaks that cause people to feel as though they’ll never get ahead financially.
Healing the Wounds of Shame and Deprivation
Such mistakes can make people feel ashamed of themselves, but the truth is that almost everyone has a mistake or two that they make behind closed doors. The key, as with any serious life mistake, is to look forward and commit to making the situation better. Nothing heals the mistakes of the past like positive moves in the present and future.
Getting on Track
That revelation, of course, brings us to the next chapter, which focuses on the very process of getting on track. The advice at this point begins to move more into the traditional personal finance areas. The first step that McCall advocates is simply tracking all of your spending. Whenever you spend a dime, write it down. This alone will help you get a better grasp on where your money goes.
Creating Your Personal Spending and Income Plan
Once you have the data on where your money goes, start grouping it together so you get an idea of how much you spend in a particular area per month or per paycheck. Some areas will stick out at you as a bit excessive. Those are the areas you should focus on reducing. McCall largely suggests putting a cap on spending in those areas. What I find works well for me is grouping all of your nonessential spending and putting a cap on all of it.
Saving Your Way Out of Debt
Ideally, you’ll quickly reach a point where you’re spending less than you earn. That money should, of course, be applied to the debts you’re in. McCall advocates actually saving this money in a savings account in order to build a large emergency fund first, then making extra debt payments from there later on when you have a healthy emergency fund.
Your Relationship with Work and Earning
Many people have conflicted feelings about their work. Many people hate their jobs. The key thing to remember that you’re often exchanging spending time and energy on things you don’t want to do for money that you can use to survive. Look at your job as that type of equation. During those moments when you’re unhappy, keep in mind that you’re doing this so you can enjoy the other aspects of your life. Similarly, there’s no reason to not look for work that pays you more for the time spent doing unpleasant things or reduces the amount of unpleasantness in the work.
Imagining Sterling Money Behaviors
The book closes with what I would describe as goal setting. What do you want most out of life? What in your life really is unimportant compared to that? Focus on the things you really want and don’t be afraid to really cut back and eliminate the other areas. You can mold your life to whatever you want it to be. The choice is up to you.
Is Financial Recovery Worth Reading?
Rather than addressing direct financial topics, McCall’s book focuses heavily on getting your mind in the right place. This book comes off like a psychology book more than anything, as the focus is on making the mental shifts needed to be ready to get ahead with your money.
For many people, particularly people who are earning a reasonable income but just can’t seem to get in a good financial place, this book is just what they need.
It’s not a great solution for someone who is making a very low income and is truly scraping by, nor is it going to give specific retirement advice for investors. It focuses on the people struggling to stay afloat when it seems like they shouldn’t be – and it does a very good job of addressing their struggles.