The Money Book For The Young, Fabulous, and Broke is an attempt by Suze Orman to take personal finance ideas that traditionally appeal to older generations and make them palatable to Generation Y. The back states clearly that this isn’t your parents’ personal finance book, but is there anything really interesting or different about the book that makes it stand out from the crowd? This week, let’s find out!
Chapter 7: Investing Made Easy
The first six chapters of the book felt as if they laid a good foundation for financial stability; the last four chapters focus on more detailed topics. This chapter basically compresses the basics of investing in stocks down to about fifteen pages. I’ll compress it even more for you: buy some stock-based mutual funds and focus at first on ones that cover the whole market, like index funds. Given that this book is intended for twentysomethings, this advice is spot-on.
Most interesting problem: I get sick when my 401(k) goes down; I don’t want to invest any more. This is a question of perspective, and the person here is taking a very short term perspective on something that should have a very long term perspective. In fact, if you’re investing regularly, you’re better off for the long haul if the market goes down early on, because you’ll be buying at the market’s bottom and can ride the elevator all the way to the top floor.
Chapter 8: Big-Ticket Purchase: Car
This chapter is full of great advice about buying a car that will disappoint people who want a Lexus straight out of college: leases are a rip-off, the best deal is a late model used car that isn’t ultra-showy, and the more cash you can pay the better off you’ll be. All of these points are true – and yet I just saw a person who graduated just a few months ago and is employed as a secretary driving a leased Lexus. Sheesh.
Most interesting problem: I use my car 50 percent of the time for business. Even with the drawbacks of leasing, I figure the tax break makes it a good deal for me. Whenever you use a tax break to justify a purchase, you’re getting ripped off. Plain and simple, leases are a giant rip-off that leave you with nothing in the end except an empty wallet.
Chapter 9: Big-Ticket Purchase: Home
This chapter starts off with a great twenty page walkthrough of the home-buying process, along with a lot of encouragement about how good of an investment a home purchase is. I tend to think of one’s primary home not as an investment, but it is something with value that does appreciate over time. This chapter is great if you know nothing at all about the home-buying process, but even as someone who is still months away from my first home purchase, it was a gloss-over for me.
Most interesting problem: A starter home where I live costs at least $330K. The only way I can afford it is if I take out an interest-only loan. Then you can’t afford it. This is very similar to leasing a car, except at least you have some chance of the property value increasing over the long haul (and that’s a big if, depending on how big the housing bubble is in your area and how hard it’s popping). Live as cheap as you can until you can afford to buy something with a loan that can actually be paid off in some reasonable amount of time.
Chapter 10: Love & Money
Yes, a “love and marriage” chapter finishes out the book. Again, this is good, solid, simple advice: make sure you and your significant other are on the same page financially, because there will be big problems if you’re not. This chapter is great if you’re in a relationship that’s not incredibly serious yet, but you want some guidance on how the finances will work if you do take the plunge.
Most interesting problem: I am dating someone I really like personally but hate financially. The way a person handles their finances is a character trait that will eventually show up in other dimensions of life. If you have problems with the way they handle their finances already, it will only get worse – and other problems might crop up, too. Think about it carefully before you take any sort of plunge.
The Money Book For The Young, Fabulous, And Broke is the sixteenth of fifty-two books in The Simple Dollar’s series 52 Personal Finance Books in 52 Weeks.