Each Friday, The Simple Dollar reviews a personal finance book of interest.
I’d seen this book on bookshelves dozens of times, but I always skipped past it because of my general aversion to “apocalyptic” personal finance books. You know what I’m speaking about – the ones that foretell doom and advise that you put all of your money into some specific investment vehicle so that you can survive some sort of Beyond Thunderdome scenario.
It turns out, though, that Crashproof Your Life is much more about protecting yourself against things that might actually happen. There are no apocalyptic nightmare scenarios here, just things that happen in life – job losses, unexpected health expenses, sudden investment losses (like those people who had their retirement savings in Enron stocks), business failure, and so on. Real disasters that actually happen, not speculative armageddon.
This resulted in a rather significant shift in my perspective on the book and I quickly checked it out from the library. It turns out that Crashproof Your Life has quite a lot of sensible advice in it and Thomas Schweich has a deft writing hand as well. Let’s take a deeper look.
Part One – Professional Crashproofing
The first third of the book focuses on protecting your career and also protecting your personal assets from career obstacles and adversaries.
1. Protecting Yourself from Your Own Actions on the Job
The overriding theme of Crashproof Your Life is evident right off the bat: be mindful of your actions. Schweich is a strong advocate of the “loose lips sink ships” ideal and makes it very clear here, as he pounds home time and time again the idea that it’s better to be conservative and less revealing with what you say than to openly state what’s on your mind without regards to the consequences. In short, run as much communication as you can by others before you make it and if in doubt don’t reveal information about your organization.
2. Managing Your Relationships with Others on the Job
Here, Schweich focuses on office politics. He largely advises documenting everything that goes on, particularly if it leads to a personnel decision. For example, if you’re considering terminating an employee, you need to carefully document the exact dates, times, and actions that led you to that decision, lest you open yourself up to lawsuits. He also advocates strongly for setting up realistic boundaries at your job, allowing people
3. Dealing with Major Corporate Events
Schweich’s advice for dealing with major corporate events (like massive downsizing) is to maintain a lot of connections both inside and outside the company. Build relationships with your peers and also the next level up in the hierarchy. Also, he advises making sure you have an employment contract and know what it actually says, because without such a contract, you’re likely an at-will employee, which means you’re easy to terminate.
Part Two – Financial Crashproofing
The middle section applies best to readers of The Simple Dollar, as Schweich covers what you can do to financially prepare yourself for anything that might come your way.
4. Bringing Wasteful Spending Habits Under Control
Guess what? Schweich basically advocates for frugal living here, arguing that it’s financially risky to simply spend money because you have it at the moment. Instead, he strongly encourages people to trim as much fat as possible from their spending no matter their situation. His argument is that a high spending level is a financial risk because if your income level falls, you’ll quickly be spending far beyond your means. This also leads into his next major point…
5. Building Wealth to Achieve Security
A big reason to become a master of spending at a lower level than your income is to build wealth, and wealth itself is a powerful hedge against whatever might happen in your life. If you consistently spend less than you earn, then over time you will accumulate a fair financial reserve, which can provide protection against almost everything that life throws at you. In other words, the long-term consequence of frugality is wealth building and wealth building is a powerful protection against the vagaries of life.
6. Protecting Your Money from the Evil Around You
So how do you protect this wealth once you accumulate it? Schweich encourages people to be extremely careful with their investments and also to only hire financial advisors that they deeply trust. In other words, you’re far better off with more conservative investments than chasing the big returns, and you’re also far better off doing the investing yourself than you are hiring a financial “advisor” that you barely know. I wholeheartedly agree.
Part Three – Avoiding Personal Liability
The final portion of the book deals with protecting yourself against inevitable personal disasters, such as loss of health and loss of life, most of which is dealt with in the seventh chapter.
7. Demystifying Insurance
This chapter is a well-rounded coverage of insurance types – health, life, homeowners, and auto insurance are all given thorough coverage. Schweich advises not treating insurance as anything more than protection against the unforeseen, meaning you shouldn’t look at it as an investment or anything like that. He also advocates for high deductibles, especially if you’re accumulating wealth and can afford fairly high deductibles.
8. Working with Your Spouse to Implement Your Crashproofing Plan
Schweich makes the astute point here that no financial plan is destined to be a success if you don’t have your spouse on board, so he advocates including your spouse as a fundamental part of all planning. I agree – the most important part of getting your money straight with a partner is communication about everything so you’re sure you’re both on the same page, and that starts well before marriage.
9. Limiting the Financial Threat Posed by Children, Parents, Relatives, and Neighbors
As for the other people in your life? For the children, Schweich advocates saving for college early and often so that you’re sure that college will be adequately handled, but he leans hard towards the “tough love” attitude for children once they’ve gone away to school or are beginning their careers – don’t bring them back to the nest. As for other friends and family members, his big advice is to never lend them money. If you want to give someone something, great, but adding a lender-borrower relationship to a friendship is never a good move.
Some Thoughts on Crashproof Your Life
Here are a few things I think I think about the book.
Crashproof Your Life isn’t as negative as it might seem. Looking at the chapter titles, it came off as being a rather gloomy book, but it’s really not. It’s more of a “your life is good, here are a hundred bad things that might happen, here’s how to avoid them to maintain the good life” attitude, which is fine by me.
On the other hand, some of the options Schweich suggests, especially for careers, are awfully restrictive. I think those options work best for a person who has found their spot and just wants to hold onto it without advancing. From my experience, the people that succeed are those that are pretty candid but tactful. They might occasionally push what they should say, but that often makes them seem more reliable, not less.
Schweich and I share paranoia about sharing our financial information. The encouragement in chapter six to manage all of your money yourself (or with the aid of a single very well trusted and evaluated financial advisor) is spot-on with me. I’m very hesitant to share account information and other specifics about my personal finances – that’s why I avoid services like Mint.com. They just feel like a risk to me.
Is Crashproof Your Life Worth Reading?
Crashproof Your Life is one of those books that’s well worth reading and thinking about, but implementing it as your de facto guideline for life would be rather dangerous. Following all of Schweich’s suggestions would lead you to a state of financial and personal lockdown without a lot of flexibility or personal freedom.
In other words, Crashproof Your Life is a great book to read if you don’t expect it to have all the answers for you. This is a book where you’ll find a lot of useful pieces that can easily fit your life, but no one’s life matches all of the pieces (unless their life is filled with paranoia and they have a high income).
Using some of Schweich’s ideas is a good move, as he has many useful ideas for making your life more secure. Crashproof Your Life serves as a strong complement to a well-rounded personal finance situation, but often swings into a more conservative territory than is comfortable for most people. Pick and choose from his ideas and you’ll find success.