Each Friday, The Simple Dollar reviews a personal finance book of interest.
As I watch my nieces and nephews grow up and approach college age, I constantly see potential in them. Potential to live a great life where they’re in control of their own destiny. Potential to follow their dreams, no matter what those dreams might be.
A big part of that is having a good understanding of personal finances right off the bat, and that’s basically the idea behind Please Send Money. Written by Dara Duguay, the director of Citi’s Office of Financial Education, it focuses on the financial reality of young adults just starting out, particularly those who are currently in college.
Does Please Send Money pack a strong punch for younger people? Is it a better choice than other books targeting young adults, particularly Suze Orman’s The Money Book for the Young, Fabulous, and Broke? Let’s dig in and find out.
A Deeper Look at Please Send Money
1. The Ostrich Syndrome
Right off the bat, Duguay hits upon what I consider to be the biggest danger that many people face when financial problems begin to strike: they stick their head in the sand. I did the same thing: I spent money like it was going out of style and pretty much ignored the consequences. The truth is you can’t do that – if you do, you’ll end up paying for it throughout your adult life. Duguay gets the point across by using many stories from people who ignored things – and the pain of those stories rang very true for me. Her advice? Pay attention. If you’re getting worried about your money, don’t just ignore it. Address it head on and find a solution now, not in five years when it’s disastrous.
2. Do You Run Out of Money Before You Run Out of Mouth?
Here, Duguay makes a very compelling case for spending less and addresses head-on most of the arguments that people throw up against living on the cheap. Why shouldn’t I spend everything I make? Because it puts you at the mercy of your boss and removes control from your life. Why should I even think about spending less than I do? Because if you’re spending more than you earn right now, a big bill will come home to roost, and the only way to keep yourself away from a financial disaster later on in life is to spend less now. But won’t I feel miserable if I downgrade my lifestyle? Maybe, but you’ll be a lot more miserable if your income drops or your bills come due – it’s much easier to downgrade a bit right now than to face complete disaster in a year or two.
3. Credit: It’s Not Your Money
When many people first become comfortable with using a credit card, they lose that connection between the credit card and the reality of money. If you can just give them the card and get the stuff, why not just keep doing it? When that disconnect happens, you’re on very dangerous ground. What’s the solution? Keep very careful tabs on your cards: know what the balance is, how much you actually can afford to charge, and also know how you’re going to be repaying anything you charge. If you don’t know, you shouldn’t be using the plastic.
4. I Need Wheels
Duguay mostly lays out useful basic information for buying a car. She focuses quite a bit on what I consider to be the most important piece in the car purchasing puzzle: the extra costs. Gas, oil changes, other maintenance, insurance, repair costs: they all add up, and many people don’t even consider it when they make a purchase. Even more compelling (for me) is the section in which Duguay really digs into the idea that many people buy cars based on image, not necessarily on reliability or value. In other words, they’ll pay a stunning premium just to appear “cool.” My neighbor down the road a bit has a Lexus and, frankly, I’m a bit jealous of it when I see it out in the driveway, but when I step back and think about his $500 car payments, I suddenly feel quite a bit better about my decision not to have one.
5. The Semester of Living Dangerously
The college experience is often filled with risky behavior, and financially risky behavior is no different. Not only is there a big credit card risk (as covered in the third chapter), but there’s also student loans, party expenses, and a huge variety of ways in which to gamble your money (day trading and card playing were two that I saw frequently in the dorms). Most risky behavior in college has no ill effects once you’ve moved on, but financially risky behavior often has huge consequences that dog you for years. If you feel like pushing the limits in college, that’s fine, but when you push the limits with your money (like one person I knew who took out a huge student loan and used the excess to day trade), you’re setting up a scenario where you’ll be literally paying for these moves for many years to come. So, go out and have fun, but don’t do stupid things with thousands of dollars unless you want huge debt bills to repay later on in life.
6. What Do You Want to Be When You Grow Up?
Determining what you want to do with your life is a challenge that almost everyone faces at some point in their life, and some people never really figure it out. Duguay offers some very strong encouragement (both financial and otherwise) for figuring this out as early as possible, and also offers some very basic tactics for figuring this out. Her ideas are enough to generally point a person in the right direction with their educational and career choices, but it’s not quite enough to push a person to the right answer. My suggestion? Read Richard Nelson Bolles’ excellent What Color Is Your Parachute? It’s the single best guide I’ve ever read on figuring out what you want to do with your life.
7. Returning to the Nest
Here, Duguay focuses on the challenges of a person who moves back in with their parents. For this chapter alone, Please Send Money is a book worth reading for kids who have returned to the nest. The basic idea? Create a plan. Plan right now for a move-out date, because without a target and a plan for working for that target, that move-out will keep slowly being pushed back. How can you plan for it? The best method is to come up with a very clear budget for what it will cost – and the parents should start charging rent. My own thought is that if parents are uncomfortable with taking that money, then still charge rent and put that paid rent into an account to give them back once they’re on their own two feet (for a car down payment or something). Excellent advice here.
8. Loaning Money? Call It a Gift
Duguay offers some general advice on loans here. First, if you’re lending money to anyone, Duguay recommends making it a gift or not lending at all, a stance I strongly agree with. Second, if you’re borrowing money, try to avoid borrowing it from friends or family, as you’ll often alter the relationship in a bad way just by asking. When you do borrow money, make sure you truly understand the entire agreement, because there can often be nasty consequences for not knowing the rules and thus not following them. Borrowing money is never a fun thing, no matter what.
9. Mind Over Money
Much of personal finance is rooted in psychology. Learning how our minds trick us into making poor buying decisions, understanding the influence marketing has on us, and knowing the techniques used by marketers to gain access to our wallets are all useful things to know, and they’re all rooted deeply in psychology. Duguay’s advice is to think deeply before you spend, no matter what you’re spending your money on. If you don’t really understand why you’re spending the money, don’t spend it! If you do know but the reason seems flimsy, don’t spend!
10. ‘Til Debt Do Us Part
Relationships aren’t easy, and finances make them even more difficult. Duguay offers the basics of what you need to know, but there really is only one key to making money and relationships mix well together: communication. Talk about everything you’re uncertain about. Every bill should be entirely open with your partner. You should be fully honest about what you’re thinking – and about what you’re spending. If you don’t do these things, you add mistrust to your relationship, and that mistrust can fester and eventually grow into something that can destroy the relationship. Excellent advice, in my opinion. If you’re really into the topic of relationship-based personal finance advice, The Big Payoff by Sharon Epperson is an excellent read.
11. “I’m Too Young to Start Saving” and Other Excuses
Duguay spends most of this chapter countering arguments people may want to make against financial responsibility, including that old chestnut in the chapter title. In a nutshell, if you’re old enough to start facing paying any kind of bill, you’re old enough to be financially responsible and start saving. I particularly like that she took on the tired old argument that “saving a little bit here and a little bit there is a waste of my time,” something I hear almost every time I write about frugality. If you can shave off $3 a day, that’s $1,100 a year – three or four car payments for most people. The little things add up – and they add up quick.
12. Easy Come, Easy Go
Duguay seems to address a lot of little things in this chapter, like keeping your spending down, hiring a financial advisor, and determining what your priorities are, but the real message boils down to just one word: goals. Set goals for yourself, ones that you can reach if you stretch yourself, and keep setting new ones as you reach old ones. You always need a carrot to strive for – without them, you’ll keep spending for the now and never have a great tomorrow to look forward to.
13. Wall Street Panic
This chapter covers the basics of investing, and for the most part it’s completely in line with my investing philosophy: buy diverse holdings and sit on them. For me, that means buying index funds. More importantly, Duguay encourages not “gambling” with the stock market – don’t buy the “hot” stock of the moment, because you’ll very likely just get burned by it. I generally agree with her: turn off CNBC if you’re tempted to put your cash into one of their talking heads’ hot pick of the moment.
14. Bankruptcy – Is There an Easy Way Out?
Dubuay closes by giving some serious consideration to the question of bankruptcy, something that many people bring up to me in questions. For the most part, she encourages people not to just hit the bankruptcy button as a way out, because it creates ten years of very difficult experiences as you find out what life with no credit at all is like. Think very high insurance rates, poor loan opportunities, and so on.
Some Thoughts About Please Send Money
After reading the book, I was left with several thoughts floating around in my head that were worth discussing. Here are a few.
The cost of “image” A big undertone of this book is the constant reveal of how much spending a person makes in order to maintain image. Clothing. Automobiles. Housing. Gadgets and electronics. Image is a big part of all of these purchases, and these purchases really add up. The thing that always bites me is that most of this “image” is the result of marketing, but even if you realize it, that doesn’t mean that others do. Thus, it becomes a difficult challenge for image-conscious people: how do you display the kind of personal image you want without spending too much? Image is a ridiculously costly thing – so costly, I’ve ceased to really care that much about it.
I think loaning money to a family member or a friend is a very bad idea. If you have someone close to you who has asked you for a loan, don’t do it. If you feel truly compelled to help, make it a gift, not a loan. If you loan money, you create a lender-borrower relationship – and can you name anyone who has warm and fuzzy feelings towards their banker? Imagine what might happen if that person doesn’t repay the money. I think this is a fine general philosophy to live by.
Why do we all make financial mistakes when we’re young? From the age of about eighteen to about twenty six, I made a ton of financial mistakes. There are times when I wish I could go back, grab myself by the ears, shake myself wildly, and say “Stop being STUPID!” But is that a necessary thing? I really believe that in the end, even though recovery was painful, it was the best thing that could happen to me.
Is Please Send Money Worth Reading?
This is the single best personal finance book I’ve read for people under 25. If you’re in that category, whether you’re 16 and just thinking about college or 24 and just getting started on a career, there’s a ton of meat in this book for you to think about.
Duguay hits a perfect balance between stories of how real college-age people are dealing with these issues and the concrete advice that’s needed. She also doesn’t speak down, either, something that many books targeting college-age people fall into. I often get the impression that she’s talking to her younger self, trying to sit down with her at a coffee shop and telling her the things she dearly wishes she knew back then, but doing it in a way so that her younger self might actually listen instead of tuning her out.
I thoroughly enjoyed Please Send Money and highly recommend it to others. If it seems applicable to you at all, go to the library immediately and check this one out. This book has now become my default high school graduation gift for friends and children of friends – it’s really that good. Bravo, Dara Duguay.