Review: The Wall Street Journal Complete Personal Finance Guidebook

WSJGThere’s a large number of roughly equivalent “personal finance guidebooks” out there that provide foundational explanations of personal finance use, from explaining how a bank works to the very foundations of investing to how a 401(k) works and so on. I chose to review this one out of the set because, well, it was given to me as a gift.

The Wall Street Journal Complete Personal Finance Guidebook is written by Jeff Opdyke, one of the regular writers at the Wall Street Journal (particularly in the “Personal Journal” section focused on personal finance). In other words, he’s an individual who writes about personal finance on a daily basis in a professional environment, one held to a pretty high standard.

The biggest benefit to this experience is that Opdyke writes very clearly and concisely. There’s a lot of information packed in here, sometimes in just a sentence or two, but it’s always clear and easy to understand. That’s something truly vital for a book like this, which seeks to explain the basics of the tools of personal finance to people who may not know, for example, what a mutual fund is or any of the various terms that describe it.

So what’s inside? What sort of material actually is covered in The Wall Street Journal Complete Personal Finance Guidebook? Let’s dive in and find out.

Walking Through The Wall Street Journal Complete Personal Finance Guidebook

The book is divided into seven rough sections that tend to build on the ones before it. Each section focuses heavily on a particular area of personal finance.

Banking
The first section covers in detail all of the services that are typically offered by a bank, including checking and savings accounts, certificates of deposit, and so on. There’s also a nice guide to changing checking accounts, as well as a checklist of features to look for when getting a new account. This is pretty straightforward stuff, information that many people will pick up over time if they use a bank regularly and are willing to ask questions when there, but it provides a great foundation to build upon for more complex topics later in the book.

Borrowing
This section starts with a differentiation between “good debt” (student loan debt, a home mortgage, an auto loan) and “bad debt” (pretty much everything else, especially credit cards). What’s the point? “Good debt” is highly regimented and allows you to buy things that are highly important for your life, while “bad debt” is simply convenient and enables splurging. There’s also a brief discussion of credit reports, including how to get them and how to evaluate them.

Most of the remaining part of the section covers the foundations of home buying, home selling, and borrowing against home equity. If you’re moving in the direction of making a home purchase, this section does a great job of explaining the basic tools that are involved here: how a mortgage works, what lenders look at (your credit and your employment, mostly), and so on.

Budgeting
The chapter on budgeting is quite brief, mostly because, as the book puts it, “budgeting is the four letter word of personal finance.” A budget is a useful tool, but it’s a tool that often frustrates many people because they feel it is highly regimented. I largely find that simply learning and enforcing good spending habits works better than a budget, but it is useful to learn the basics of how one works, which is what this chapter teaches.

Investing
The Investing section, though, is the longest in the book, as it outlines all of the many investment opportunities available to the person who really understands and uses the tools of the first three chapters (wise budgeting, avoiding bad credit, establishing savings). It covers the gamut from individual stock investing to mutual funds to bonds. If you’ve never really understood how these things work, this is a brilliant chapter, but if you’re already familiar with the basics, you won’t learn a whole lot here.

Planning
Now that you have those tools, how can you use them in concert to plan for the future? That’s the focus here, looking at retirement and education planning. Again, it’s an overview of the multitude of options available: 401(k)s and IRAs, 529s and financial aid. Opdyke has a very nice touch here, taking the tools of the previous sections and showing how they apply for planning for major expenses later in life.

Insurance
The chapter on insurance is probably the most boring one in the book for most people, but it’s because of the “boring” aspect that many people overlook it or make really poor choices (like double-insuring things or getting really bad life insurance). As with previous chapters, this one lays out all of the options available to you, including some very nice checklists of things to do to reduce your home and auto insurance costs. It’s a pretty boring section, but a valuable one.

Taxes
The final chapter is also rather boring for many people; my parents, for example, just take their “papers” to a tax preparer each year and don’t worry about it. It’s quite useful to understand how taxes actually work, though, as it provides insight on moves you can make so you’re not taken by surprise by the tax man each April. The chapter mostly describes how income taxes work, what you need to know about them, and most importantly (for many people), how to avoid an audit and how to handle it if you do get audited.

Buy or Don’t Buy?
If you know of someone who could really use a book that lays out foundational information like this, The Wall Street Journal Complete Personal Finance Guidebook is a very good one to choose. It’s written in a warm and friendly tone, is quite information packed, and isn’t overly long so that people are intimidated. While it’s not a great guide for how to get started managing your own money, it is a wonderful guide for understanding the tools available to you.

However, most of the information in The Wall Street Journal Complete Personal Finance Guidebook will be a little on the simple side for many readers of The Simple Dollar.

Here’s a great litmus test: if you read the occasional “Personal Finance 101″ columns here and roll your eyes at the simplicity, this book is definitely not for you. If you read them and think to yourself, “Wow, so that’s how that works!” then The Wall Street Journal Complete Personal Finance Guidebook would probably be a very worthwhile choice for you to read.

The Wall Street Journal Complete Personal Finance Guidebook is the thirty-ninth of fifty-two books in The Simple Dollar’s series 52 Personal Finance Books in 52 Weeks.

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  1. Wendy says:

    So, Trent, how would you describe “really bad life insurance”? I have threatened my life insurance agent that I’ll leave the next time whole life is mentioned. What is your take on this business?

  2. vh says:

    Ditto Wendy! Trent, I’d love to read what you think about whole life insurance.

    I inherited a whole life policy from my defunct 25-year marriage. At first thot I should cash it in, as it costs almost 30 bucks a month, and right out of the gates of freedom I was in full Bag Lady Mode (that’s when a new divorcee thinks she’ll soon be living under a freeway overpass). But I was persuaded to keep it because by the time it came to me it was earning more than than the premiums cost. It’s now worth over $25,000; I believe it’s supposed to be worth 30 grand at maturity. So it’s something I can cash in when I retire in a couple of years, adding to the other investments. . .and if I croak over before then, my son will get 25 or 30 grand, tax-free.

    But….I don’t understand well enough how the things work to know what it really costs and whether it was a wise investment. Today, would you make a better choice by putting 30 bucks a month into an index fund?

  3. Sometimes it’s really that simple, isn’t it? I feel a little stupid for not thinking of this myself/earlier, though.

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