The overall point of The 9 Steps to Financial Freedom is laid out clearly on the very first page of the book. The premise of the entire book is that conquering fears is the key to financial freedom. In other words, most of the limiting factors to financial success exist in the walls we’ve built up in our own minds, and achieving success lies in knocking down those walls.
Suze Orman takes this idea and subdivides it into nine steps that you can walk yourself through in order to find the source of those fears, root them out, and remove them from your life. In other words, this book isn’t strong on the actual mechanics of personal finance, but it is strong on setting the psychological stage for strong personal finance habits.
Another distinct feature of The 9 Steps to Financial Freedom is the heavily anecdotal nature of the book. Suze likes to use lots of anecdotes to illustrate her points – and she’s pretty good at choosing strong ones. If overly anecdotal works frustrate you, there will likely be portions of this book that you find difficult. For me, I find anecdotes appropriate in books like this that focus on the psychological underpinings of a thought process; they become less useful when you deal with the actual mechanics of personal finance.
What’s Inside The 9 Steps To Financial Freedom?
The book is divided into nine sections (after the compulsory introduction) that focus on each of the titular nine steps. These steps are:
1. Seeing how your past holds the key to your financial future
2. Facing your fears and creating new truths
3. Being honest with yourself
4. Being responsible to those you love
5. Being respectful of yourself and your money
6. Trusting yourself more than you trust others
7. Being open to receive all that you are meant to have
8. Understanding the ebb and flow of the money cycle
9. Recognizing true wealth
Step 1: Seeing how your past holds the key to your financial future
The focus of this section of the book is straightforward – for almost everyone, there is some key memory related to money in their past that is particularly vibrant. The chapter gives several very strong anecdotes and gives ideas for teasing out that key memory.
Why would you want to tease out that memory? Childhood memories, particularly strong ones, are layered in feelings of all kinds. Those memories are of the moments that defined who you are as a person, and true understanding of those memories can bring about significant insight into your adult life, which is what the second step deals with.
For me, I remembered the time when I worked on a project to raise money for a year, only to have the proceeds stolen from me. It is truly a painful memory to recall.
Step 2: Facing your fears and creating new truths
This second step is really just an extension of the first one. Once you’ve teased out that memory in detail, you can dig through it to see what exactly it says about your current views on personal finance.
The mechanism that the book uses for teasing out these meanings is to make a list of your current fears. What are you afraid of? Once you’re able to actually be honest with yourself and list them, comparing these insights to your memory can be very insightful. Quite often, the memory explains the root cause of your fear. Once you understand what exactly the fear is, you can begin to tackle it in various ways; Suze suggests the “traditional” idea of a mantra that you repeat for comfort and confidence.
To me, the first two steps felt very much like typical “self help” concepts, but they did work; I was able to find a key money memory and it did reflect clearly on my behavior with money today. I don’t particularly find a mantra to be useful for me, but I do agree with the need to conquer fear. The Simple Dollar itself is part of my method of conquering my fear of personal finance.
Step 3: Being honest with yourself
This is definitely the meatiest step of the first part of the book, and it provides the first non-psychological steps you can take to get your financial house in order, though this one is also a psychological trick at its core.
The basic idea is that most people don’t have a real grasp on what they’re spending or what they’re bringing in, and quite often people are spending more than they’re bringing in without really realizing it, thus creating severe financial problems over time. This is pretty typical given the consumerist lifestyle that so many of us live.
Suze’s solution is to take two years worth of records and make a list of everything you spent by category, then make a monthly average for each category. Then, do the same thing for your income and compare the two. Basically, this provides the background for a truly realistic budget; you can see from this data whether you’re overspending or not and you have actual feasible numbers to work with when determining where to cut fat to improve your finances.
Suze provides a lot of ideas on how to use this information in order to subtly trim fat away from your budget, but the real key here is psychological; this step can really make you see where that money is going.
Step 4: Being responsible to those you love
This section is a detailed overview of what I would describe as “disaster planning;” in other words, insurance, wills, and trusts. The general point is that you should focus first on the people that are truly important to you and make sure that insurance and wills and such are set up so that if something happens to you, everything is taken care of in the way you truly want. The argument is that this allows you to feel much more confident about your place in the world.
The chapter is a pretty solid overview of the world of insurance and estate planning. Suze repeatedly encourages people to contact an expert for handling these things and not to trust her book, which is something I really appreciate. You should never trust a book to give you all of the answers when it comes to areas of the law that you don’t fully understand.
She makes very strong cases for revocable living trusts, long term care and disability insurance, and a large dollop of life insurance, all of which would only be triggered in the event of a major crisis. Some people would likely shrug their shoulders at this, but I think the point for her is that it is psychologically healthy to be able to look at the people you care for and know that if something disastrous were to happen to you, they would not be destitute. This is a great attitude if you can afford it.
Step 5: Being respectful of yourself and your money
The focus of this chapter is getting your own basic financial house in order: putting plenty into retirement, getting out from under any high-interest debt, and so forth. In essence, this chapter tries to ensure that you are on a level playing field with your long term future covered. She argues that this will, again, make you feel better about yourself and your money.
This chapter is pretty basic in terms of such rearrangement of personal finances, hitting upon the usual bromides: pay off your credit cards as soon as you can, take advantage of every dime of employee matching in your optional retirement plans (401(k), 403(b), and so on), and max out what you can put in a Roth IRA. In the last year, I’ve done two of the three of these and she’s right: it has been invaluable in improving my personal psyche. The only one I’m not doing yet is the Roth IRA, as my highest priority for the moment is a house down payment so I don’t have PMI or high interest rates.
Step 6: Trusting yourself more than you trust others
After two chapters of pretty solid individual financial advice, the sixth step focuses on building wealth for yourself. Basically, this chapter focuses on trusting yourself in terms of where to go next once your financial house is in order.
Suze is a big proponent of complete trust in your gut feelings, and most of this chapter focuses on that, particularly in terms of how you can use that gut feeling to guide your investing. The whole point of this chapter, in fact, is that you should become as comfortable as you can with your money so that you can follow your pure gut instinct about what’s right for you, which makes a lot of sense. She even provides a seven page questionnaire that can guide you along this path of comfort.
One portion of this section that made me somewhat uncomfortable is her repeated hinting that one should really get a financial planner, which seems to contradict most of what she says. For example, she continually points out that most index-based mutual funds beat managed mutual funds, but in the next breath she encourages readers to seek out a financial planner for advice. If you’re investing the time to read this book, wouldn’t it make sense to also invest the time to do the planning yourself?
Step 7: Being open to receive all that you are meant to have.
This step focuses on the fact that money in and of itself doesn’t really bring happiness, but that happiness can bring money. Thus, money is merely a tool to bring about happiness.
Suze gives some solid advice here on the therapeutic effects of giving to charities, as well as the strong bromide that you should never let cash gifts interfere with family and friends. Yet much of this comes off as a contradiction, since most of the book up to this point focuses on how to balance your financial life and accumulate wealth.
Step 8: Understanding the ebb and flow of the money cycle.
This step is merely the realization of the fact that much good can come from the bad times in our lives, whether it be new opportunities or merely personal growth. Quite often, the mistakes one makes in life end up being the foundation for much greater things.
Step 9: Recognizing true wealth
The final step is the simple recognition that the truly valuable things in life are not monetary. It seems simple, but so many people overlook this fact. The most valuable thing in my life, for instance, is the smile of my son when I’m playing with him. It has no real financial value, but no amount of money can ever replicate that feeling.
The final three steps are quite short, but they are important in one fundamental way: the true path to wealth comes not from having enough money, but from having inner peace.
Buy or Don’t Buy?
Now we come around to the big question about The 9 Steps to Financial Freedom: should I buy it or should I skip it?
The most important factor to realize about this book is that it focuses much more on the psychology of personal finance than on the mechanics of personal finance. If you’re looking for nuts and bolts ideas, this book won’t hold very much meat for you. On the other hand, if you’re lost and wondering where all of the money went, this book is right up your alley, as those issues are typically psychological in nature.
This book also features the Suze Orman “personality.” If you find her persona on television to be highly grating, then there are many aspects of this book you will also find grating. Admittedly, the Suze Orman factor isn’t quite as thick in print as it is on screen, but if this is a major turn-off for you, then avoid the book. If you’re already a fan of hers, on the other hand, this book will fit right in.
In short, buy this book if you’re really unsure how to get started in setting your financial ship right. If you feel very lost with your money, her approach is a solid one, because your biggest problem is getting your mind in the right framework so that you can improve your financial situation.
On the other hand, don’t buy this book if you’re already on a solid financial path. There isn’t much to this book in terms of the actual mechanics of personal finance; you’ll be much better off reading books that provide information on specific topics rather than this one.
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The 9 Steps To Financial Freedom is the second of fifty-two books in The Simple Dollar’s series 52 Personal Finance Books in 52 Weeks.