Every other Sunday, The Simple Dollar reviews a personal finance book.
Bach writes in a very approachable tone, but many of his earlier books seemed to be repetitions of the same material – The Automatic Millionaire, Smart Couples Finish Rich, Start Late, Finish Rich, and Smart Women Finish Rich might as well have been the same book with an extra chapter for each specific demographic. Thankfully, though, he seems to be addressing a new topic with his more recent writing – Go Green, Live Rich looks at the overlap of personal finance and environmentalism, for example.
This leads us to another attempt at a new direction by Bach. Fight for Your Money focuses specifically on cutting your spending by dealing head-on with companies that slip extra fees into your bills. Much of the book centers on advice for negotiating away those fees, getting better rates on your bills, and so on.
This is a very action-oriented book, not a philosophical one. Specific action points take the lead here – ones that have the potential to directly save you money. Let’s dig in.
A Walk Through Fight for Your Money
Fight for Your Money is split up into a ton of short chapters that focus tightly on specific areas of spending – for example, the first ten are Buying a New Car, Buying a Used Car, Car Leasing, Car Rentals, Car Repairs, Bank Accounts, Debit Cards, Credit Cards, Credit Scores, and Payday Loans – and there are thirty one more short chapters on similar, very specific topics.
Instead of doing a chapter-by-chapter review of such a dense book, I pulled out eight specific tactics that were of specific interest to me.
Don’t (?) Trade In Your Old Car
On page 12, Bach says
To put it bluntly, they will lowball your trade-in to make up for the great price they gave you on your purchase.
This is not always the case. Some dealerships have actually adopted the direct opposite of this tactic – they’ll offer a great trade-in to soften you up for later negotiations. I agree with Bach that dealers use the trade-in to play tricky games with buyers, but it’s not always that straightforward.
Take our recent car purchase. The blue book value on our trade-in was $400, and we had two different direct estimates from people we trusted that we should not expect to get more than $500 out of the car, whether selling it directly or trading it. The car had 175,000 miles on it, shocks and struts that needed immediate replacement, some ominous engine noises, wear on the interior, and a transmission that would sometimes fail to shift gears – in other words, it needed major work to stay on the road.
Instead of giving us a great deal up front on the car, the dealership played a much different game. They gave us $1,500 in trade on the car, but we were only able to negotiate the price down to about $21,100 (not including the trade-in) – roughly factory invoice, when we were intending to negotiate further.
In other words, the dealership used the trade-in as a bargaining chip, not using it to “make up” losses on the “great deal” they gave us.
Still, Bach’s point is well taken. Dealerships are there to make a profit, and you need to look at the total package you’re being offered including the trade-in.
Be Careful with Debit Cards
On page 80, Bach says:
According to calculations by Consumer Reports, a typical overdraft fee on a debit card purchase translates to an annual interest rate in excess of 1000%!
Bach’s point is simple: if you don’t keep a very careful bead on your balance, it can be easy to overdraft using a debit card – and the fees from such a use can eat you alive.
Another point: there is usually very little fraud protection on a debit card if it’s used with a PIN instead of used as a credit card with a swipe and a signature. Even if your bank seems to have a “zero-liability” policy, that policy usually only applies to uses of the card as a credit card, not as a PIN-based debit card.
Thus, his advice for debit card use is to use it only for small purchases that you’re sure you can easily afford, and use other methods for paying for larger purchases. This keeps you safe from liability concerns and also keeps you safe from overdrafts.
Ask to Have Your Credit Card Account Closed
Bach advocates a pretty hardball strategy for negotiating with your credit card company. On page 93, he advocates requesting to have the account closed if the issuer won’t lower your interest rates upon request:
If they won’t work with you, tell them you want to close your account. Often this will lead the person who took your call to transfer you to a new department – one whose job is to talk customers like you out of canceling their cards.
I believe playing hardball like this is usually good advice, but in a very shaky economy, it might not be the best advice, because they may simply say, “All right, cancelled.” Keep that in mind as a potential risk when you use this tactic.
Clean Out Your Mailbox
Identity theft is a pretty big concern, and one big route to identity theft is unsolicited mailings from creditors. Bach has a solution to such insecure junk mail on page 121:
Equifax, Experian, and TransUnion (which provide your credit history to the card issuers) have created a service called OptOutPrescreen that allows you to opt out of receiving offers of credit or insurance that you didn’t ask for. […] For details, call them toll free at 888-5-OPTOUT (888-567-8688) or visit them online at www.optoutprescreen.com.
Excellent advice, and an excellent service. We signed up for this and our preapproved credit card offers basically disappeared overnight. Not only does this mean we have less junk to deal with in the mail, it also reduces our risk of identity theft.
Get Term Life Insurance
On page 141, Bach takes a swing at the life insurance industry:
According to the most recent statistics, about 60% of the [life insurance] policies sold in the United States are permanent policies, while about 40% are term. The greater popularity of permanent policies is not surprising, even though consumer advocates agree that term policies make more sense for most people. Permanent policies generally cost five to 10 times more than term policies – meaning insurance agents make a lot more commissions selling them, which is why your “friend in the insurance business” will gladly come to your home at night to discuss it.
In other words, consumer advocates generally point towards term life insurance policies as a better deal, yet there is still a lot of belief out there that permanent policies (like universal or whole life) are better.
Why? The salesmen make more money on the permanent policies. Any good salesman will try to sell the item that will make them the most return, so they’ll attempt to make the case for universal policies or whole life policies, while pooh-poohing the term policies (because those won’t put as much money in their pocket).
If you’re insuring yourself for your family’s benefit, focus on a term policy.
Avoid Most Work-At-Home Opportunities
On page 235, Bach encourages people to avoid most work-at-home opportunities:
Typically, work-at-home rip-offs involve phony opportunities to make big bucks doing simple tasks like stuffing envelopes, assembling small products or crafts, or processing medical insurance claims. What the ads don’t tell you is that before you can start “raking in the dough,” you’ve first go to take a training course (which costs you money) and order software or supplies (which costs you even more money). And then all a lot of them do is merely send you a list of potential clients – most of whom have absolutely no interest in hiring home workers to do anything.
There are ways to earn income from home, but these kinds of prepackaged deals (the type you often see advertised on late night television) aren’t the way to go unless you’d rather spend money than make it.
If you want to make money from home, find your own path. Figure out what you enjoy doing, then find ways to earn an income from it. Don’t shell out money for some prepackaged “solution.”
Save An Hour a Day of Your Income for Retirement
I thought this was a brilliant way to look at retirement contributions. From page 245:
The trick is not to think about percentages. Instead, when it comes to funding your retirement plan, think in terms of how many hours you work each week. If you work a 40 hour wee, I believe you DESERVE to at least keep one hour a day of your income. That’s five hours of income a week – or 12.5% of your gross income.
That’s an interesting perspective on retirement savings, one that focuses on the time you invest instead of the money you earn.
One could take that same philosophy and apply it to any savings goal. Are you saving for a house? Isn’t that worth twenty minutes of your workday? Start saving 4% of your gross income, then, and then use that as motivation to find the ways you’re wasting money elsewhere.
Don’t Get Extended Warranties
On page 297, Bach says:
As a rule, if a product is so unreliable that you need to supplement the manufacturer’s warranty with additional protection, you probably shouldn’t be buying it in the first place.
I took this as a major call to research your purchase. If you go into a store to make a major purchase and don’t know exactly what you want, you’re probably not going to walk out of the store with the best option for you.
If you do the research, not just into specific models but into how reliable the brands and product lines are, you’re much more likely to find the reliable item that’s perfect for your needs. Doing that allows you to shop for that specific item, do price comparisons, and then when you’re ready to buy, the extended warranty is just an extra expense you don’t really need.
Is Fight for Your Money Worth Reading?
Fight for Your Money is a great compendium of consumer information that offers real, tangible ways to make yourself more secure, reduce the amount you pay on lots of different things, and learn some useful negotiating tactics. If you’re willing to spend some time reading through this book and taking action along the way, you will save some money.
This is the perfect book to pick up if you’re going to have a “money saving weekend.” Many of the tasks suggested in the book can be done over the weekend, with only a big handful that would have to wait until the workweek to execute.
Does it have long-term usefulness? Fight for Your Money is incredibly worthwhile right now, but in two or three years, some of the information in the book will be dated. Specific information will change and large companies will change their tactics. Fight for Your Money works great in the here and now.
My suggestion? Pick up Fight for Your Money in 2009 if you’re interested (and there’s plenty of worthwhile material in here if you are). After that, wait for a revision or a later edition on this one. In other words, I highly recommend the book – in 2009.