Review: Grow Your Money

Each Friday, The Simple Dollar reviews a personal finance book.

grow101 Easy Tips to Plan, Save, and Invest. That’s the subtitle of Grow Your Money, and the concept intrigued me. It basically takes the concept of blogging – short, bite-sized narrowly focused articles about the length of, say, this book review – and turns it into a personal finance book, collecting, well, 101 articles on personal finance.

The author, Jonathan Pond, was a regular host of specials on public television looking at various aspects of personal finance. Given that we basically only had four channels growing up (ABC, NBC, CBS, and PBS), and given the drought of quality programming on the networks in the 1980s and early 1990s, I would often tune into PBS in the evenings on the old black and white television in my bedroom – Robert MacNeil, Jim Lehrer, and Alistair Cooke were familiar voices of my childhood, as was Jonathan Pond.

As I noted before, the book consists of 101 articles on specific personal finance topics. The introduction, interestingly enough, sorts these into categories, identifying the articles that would be most of interest to Generation X, Generation Y, baby boomers, and various other demographic categories. Again, in my mind, this continues the blog analogy that I mention before – basically, these are print versions of blog category pages.

The value of the book, though, is in the quality of the writing. Is there enough meat in all of these little short tips to make this book compelling, or should you just move along to something else? Let’s dig in and take a look.

A Deeper Look at Grow Your Money

Being one of those people who rides the fine line between Generation X and Generation Y, I thought a good way to review this book would be to use Pond’s list of the articles that focus on Generation Y and see if they provide interesting and compelling advice. Pond identifies 29 articles for a Generation Y audience – I picked fifteen of them to discuss here.

2. Time Is Your Ally
The younger you are when you start to invest, the better off you’ll be because of the power of compound interest. Of course, this same logic applies to debt repayment – the earlier you start making big payments on a debt, the less interest you’ll pay overall and the more money you’ll keep in your own pocket. Unfortunately, many people in their twenties aren’t thinking at all about investing or saving money – and it’s unfortunate. I wish I had figured out financial responsibility five years ago, but I’m very glad I figured it out before I turned thirty.

6. The Ingredients For Career Success
“It’s not that difficult to be a success in your career because most of your competition probably isn’t as highly motivated as you are.” I like this statement – it’s painfully true. Most people out there are not highly motivated to advance their career, especially family-oriented people in their thirties and forties. If you’re committed to your career, there are a handful of things you can always do to kick it up to the next level: keep learning, find and use a mentor, and go that extra mile when the opportunity presents itself. Doing a good job and growing as a person will always benefit you.

7. Advice for Those Who Have Taken a Career Sabbatical
This is a serious issue for those of us who are considering a period of stay-at-home parenting while our children are young or leave to care for an aging parent. How can one get back to the workplace? The best thing you can do is to try to keep your skills up and, when you return to work, focus on your energy – what did you do that can demonstrate that you have what it takes to work but still help out small children that will still need a lot of focused attention? When you do go back, the best place to start is by touching base with all of your old contacts and see if they have anything that will fit you.

13. Devise a Plan to Reconcile Your Gross Habits with Your Net Income
Beware of little expenses – a small leak will sink a great ship. So said Benjamin Franklin, and the principle is still true. This chapter mostly focuses on the so-called “latte factor,” making the well-worn point that the little expenses, added up over time, equal a lot of cash. Pond’s solution? Figure out what your unnecessary expenses are, then commit to reducing them by some dollar amount. Trim the five lattes a week down to two and buy one book less a week and suddenly you’ve got $30 a week to save or invest.

17. Borrow for Things that Will Appreciate in Value
The idea of borrowing to buy things that will appreciate seems risky, until you realize that most people in fact do just that. A student loan for an education is one, as is a home loan. What gets riskier is borrowing money to invest, even in real estate (something many people advise) and, although Pond mentions them, he doesn’t seem to recommend it unless you’ve already got significant capital (so that you can deal with the debt if things go awry).

20. Pay Off Your Credit Cards Later Rather Than Sooner
This was perhaps my favorite one in the book because of how directly Pond takes on a seeming “fact” of personal finance (“pay off your credit card debts now“). Pond does agree that it’s a good idea, but he points out something I’ve noticed recently – it’s often hard to continue to feel motivated if you’re constantly tossing money to pay off your past. Instead, Pond suggests taking half of your debt repayment money and put it away for your future instead, either in a retirement plan or by directly investing it. If I took this philosophy to heart and reduced my extra debt repayment money each month ($1,500) to $750, and then invested $750, I could build towards my future. The idea here isn’t that it’s financially the best move, but that it’s psychologically good – you’re not constantly focused on fixing the mistakes of the past, but also building somewhat for the future.

25. Preparing for a Financial Emergency Can Cost You Thousands
I expected this to be an argument against emergency funds, but it wasn’t – instead, it was really an argument about not keeping your emergency fund in a low-interest savings account. Pond instead points towards putting the money in a higher-yield account, which is great advice. I personally use ING Direct, which currently offers a rate over 4% in savings and 3.5% in checking, for my primary checking and savings. Pond also mentions putting money in CDs, but with other high-interest options available, the rate should be very, very nice to make the lack of liquidity of a CD worthwhile.

26. The Best Ways to Invest for Retirement
Pond basically follows the normal advice here. The best place you can put your retirement cash is in an employer plan that offers a match – nothing beats that free cash. If you’ve invested up to the match and want to keep going, look at a Roth IRA, then look at other options if you still have money left. Pond ranks a big list of options, but once you’re putting away 15-20% and you’re young, you’re probably better off keeping your remaining cash in something taxable that you can use for other things, like an auto purchase or a down payment.

32. Free at Last: Deciding What to Do with Your Retirement Plan When You Change Jobs
Never, ever cash out. The tax implications can be devastating. Instead, either leave it where it is (if you can, and if you like your old plan better than your new one) or roll it over (if you can, and if you like your new plan better). If neither one works, you can roll it into your own IRA, but make sure you can get a direct rollover, which basically means that you’re not touching the cash directly yourself, keeping you away from any tax implications. If you can’t directly roll things over, leave the cash where it’s at.

37. Investing When You’re Just Starting Out
If you’re just starting out, the best places to invest are in your retirement plan, in a high-yield savings account like at ING, or in low-minimum low-cost mutual funds. I agree with this, and it’s what I’m doing, with one caveat: I tend to think it’s worthwhile to find the best mutual fund, then use the savings account to save up for it until you can pay the minimum to get started. I used this exact strategy to save up for my house down payment – I put money into Vanguard, where the minimum is usually $3,000.

51. Save for a House or Save for Retirement?
Pond says that in many situations, this doesn’t have to be a quandary. Many retirement plans allow you to borrow against the balance for a home down payment, so if your plan allows for this and doesn’t have any caveats (talk to your plan representative), this is probably the best route to take. If you can’t take advantage of that, then Pond suggests trimming down your retirement savings (down to perhaps just enough to get an employer match) and using the rest to save for a home loan. I used this strategy to a degree to save for my own home loan, at least down the home stretch – but when I bought the house, I kicked the retirement savings back into gear.

52. Should You Pay Off Your Mortgage Early?
In a nutshell, Pond says “YES!” He tackles the two biggest arguments against it quite deftly. On the idea that you can get a better return in the market, he points out that the steady return of paying ahead on your mortgage (in other words, whatever your interest rate is) is more likely to benefit you over the period of overpayment (usually just a few years) than investing in stocks. What about the tax deductions? Pond runs the math and shows that unless you’re in a tax bracket of 35% or above, it’s not a net benefit. This doesn’t even include the psychological benefit of being debt-free, so it’s pretty much just a big win to pay ahead.

75. The Straight Scoop on Life Insurance
Pond moves pretty quickly through the life insurance options here, but he basically seems to say that for younger people in reasonable or good health, the best option is term life insurance. This matches up well with everything that I’ve read. Pond does point towards a few other specific options that are appropriate for people in specific situations, but for the most part, a term policy with a payoff equal to five to eight times your salary should do the trick.

81. Helping Older Family Members Cope with Their Finances
Pond again gets right to the skinny: the best thing you can do is sit down with your parents and talk to them frankly about your money. Of course, this piece is short and only goes over the basics – if you have an older relative that you need to talk about, you should dig into some deeper advice on the subject. I recommend Charles Schwab and Carrie Schwab-Pomerantz’s excellent book It Pays to Talk if this piece grabs your attention.

90. Achieving Early Retirement
Here are the keys: intense focus, frugal living, aggressive investing, and willingness to not just sit on your behind in retirement. Rather than early retirement, look at it as reaching the crossover point: you want enough money so that you can simply walk away from whatever you’re doing if you want to.

Buy or Don’t Buy?

Grow Your Money has a lot going for it. It’s highly readable and engaging, but still has plenty of meat on the bones to think about and apply. The individual pieces of the book are very short, wonderful for a busy person like myself to digest in bites when I have time. Pond also doesn’t stick strictly to purely mathematical dogma – he has a lot of respect for the fact that personal finance has a pretty big component.

Add these all together and you have a top-notch personal finance book for a busy person. I was able to read this thing in tiny bits and pieces while traveling, pulling it out for a piece or two whenever I had five or ten minutes in the airport or in the hotel. In several places, it left me with food for thought that stuck with me for hours, leaving me with something to muse on as I looked out of a taxi cab window. I finished up the book with a few nights of reading just before bed and it worked quite well there, too – bite-sized pieces let me choose just how much I wanted to read.

Pond’s a solid writer with some good advice and some very intriguing ideas. This adds up to making Grow Your Money a very, very good and accessible personal finance book. It’s well worth picking up.

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