Review: The Real Cost of Living

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.

The Real Cost of LivingMost of us, at some point or another in our lives, end up having to make a fundamental choice between more money or doing something that’s deeply personally important to us.

The choice to be a stay-at-home parent.

The decision to continue to live in an area where you’re unhappy living just to chase good pay.

The impact of an expensive hobby or habit that we don’t want to give up.

Does money win? Or does life win? These types of decisions are the focus of Carmen Wong Ulrich’s The Real Cost of Living. The book is broken into sections focusing on specific areas of decisions that we have to make in our lives.

The Real Cost of Home
The opening section establishes the format of the book. Each of the larger sections is broken down into smaller sections that address one major decision that people have to make between financial costs and personal costs. For example, Ulrich takes a serious look at walking away from a home mortgage. It might be a good personal choice, but is it a good financial choice? If you don’t care about borrowing a dime for the next several years, it might be. Otherwise, you’re probably better off finding another route than just walking away from a painful mortgage.

The Real Cost of Marriage and Divorce
If a marriage is in a rough situation, is it better for all involved to just get a divorce and start over? Depending on the marriage, it might be, but many contested divorces wind up with only one real winner: the lawyers. The best way to avoid this is to have a strongly-written prenupital agreement so that if the marriage goes on the rocks, you have a plan to follow that doesn’t destroy either one of you financially.

The Real Cost of Family
While there were many sections on the cost of having children, the section that really resonated with me was the challenge of dealing with parents as they age. How much financial burden should the children take on in this situation? How much is fair and right? So much of this hinges on the personal side of the equation: your values, your relationship with your parents, and so on. It is an intensely personal choice, one that Ulrich offers some good advice on if you’re thinking through it.

The Real Cost of College
Ulrich’s suggestion here is that if you don’t clearly have a career plan that doesn’t involve higher education, you should dive into some form of higher education in an area that interests you. She evaluates the ins and outs of going to college immediately versus waiting and seems to come down on the side of education.

The Real Cost of Bad Habits
Simply put, few “bad habits” are worth the net cost they introduce to your lives. We’re not just talking about the initial costs of the purchases. We’re talking about the long-term health costs and personal costs that come from a bad habit. Many people think that this all falls under substance abuse, but anything you’re involved with that eats up too much attention and money is a danger to the balance of your life.

The Real Cost of Being Your Own Boss
I can speak from experience here. It’s stressful in a completely different way than an ordinary job. I once believed that it really wouldn’t be stressful at all – after all, I’m picking my own hours and own tasks, right? However, I’m also responsible for my entire method of income, which means hard work and dedication in areas I never anticipated. Being your own boss means creating your own revenue stream, too.

The Real Cost of Credit Cards
Unless you’re paying off the balance in full each month, the costs of credit cards almost always exceeds the rewards. The interest rate on most credit cards is simply financially punishing. For the slight benefit of getting something now rather than later, you’re accepting a bill with a frighteningly high interest rate that will just siphon more and more money out of your pocket the longer it goes unpaid.

The Real Cost of Saving
The cost of saving money is that you don’t have the ability to spend it now. Instead, you have to have the willpower and the desire to hold onto it for a later date. Of course, you’ll often find that when that later date comes, you’re incredibly glad you have that money.

The Real Cost of Investing
The costs of investing are similar, except that you’re often also taking on investment risk. What’s the benefit? It’s probably the only way many young people will have adequate savings for retirement. Without a healthy set of retirement investments, you’re going to be banking on Social Security, and that’s something I’d never bank on.

Is The Real Cost of Living Worth Reading?
The Real Cost of Living does a great job of reviewing some of the challenging balances people have to make between personal needs and financial needs.

It’s not a book that provides a “system” for you to follow or an overarching method for getting yourself into great financial shape. Instead, it’s more of a problem solving book, one that can help you think through a specific dilemma you might have in your life and your finances.

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Trent Hamm
Trent Hamm
Founder of The Simple Dollar

Trent Hamm founded The Simple Dollar in 2006 after developing innovative financial strategies to get out of debt. Since then, he’s written three books (published by Simon & Schuster and Financial Times Press), contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.

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