Updated on 04.28.08

Review: The Big Payoff

Trent Hamm

The Simple Dollar book reviews are back again! Each Friday for the foreseeable future, The Simple Dollar reviews a personal finance book.

the big payoffAfter a long stretch of focusing in on Born to Buy, I’m looking forward to writing a whole lot of book reviews over the next several months. And I’ll start off with a book that both my wife and I enjoyed, Sharon Epperson’s The Big Payoff.

The Big Payoff is subtitled 8 Steps Couples Can Take to Make the Most of Their Money – And Live Richly Ever After – and that’s quite a good description of it. It’s pretty obviously intended to be in the same vein as David Bach’s Smart Couples Finish Rich, but rather than focusing on the relationship aspects of things (which Epperson really only devotes a chapter to), the book quickly moves on to nuts and bolts personal finance issues like how to invest your money and so forth.

Does this make for a worthwhile personal finance book? Let’s dig in and find out!

A Deeper Look at The Big Payoff

Right off the bat, Sharon Epperson notes something that I’ve felt very strongly about personal finance – in fact, this idea was the reason I started The Simple Dollar:

Good financial planning isn’t just about numbers on a computer screen. Good financial planning helps you get control of your money matters so you can stop fretting about cash and start focusing on your life.

Personal fiance is about more than figuring out which option will pay out the most pennies. It’s about relationships. It’s about psychology. It’s about being able to wade successfully through the challenges that modern life presents to us in countless forms. For some people, it’s easy – for others, it’s a real challenge. For some, cranking numbers is an obsession – for others, it’s a quick route to falling asleep.

The goal of any good financial plan should be that everyone involved with it understands it completely and is committed to it. For some people, that might mean a spreadsheet full of numbers. But for others, it might just mean imagining a real world goal and knowing the steps it takes to get there. In either case, the part that really matters is the goal and the commitment to get there, because without that central commitment, those pages of spreadsheet data don’t really matter one little bit.

1 – Energizer Bunny Money
After that introduction, the book quickly turns to the nuts and bolts of personal finance, starting off with a detailed discussion on how to build your first budget, construct a debt repayment plan, get your credit report, and practice basic frugality. In other words, the real basic stuff that people need to do to get themselves heading in the right financial direction. For most people, if they simply read this chapter alone and acted on it, they’d find themselves in significantly better financial shape.

2 – Prescription for Financial 911
Epperson devotes the second chapter to emergency funds, arguing that everyone needs to have a significant emergency fund in order to handle the “just in case” situations in life. She encourages readers to stash the cash in something fairly liquid and not very risky but offer at least some return – online savings account or CDs work quite well for this.

She recommends that everyone have three months’ worth of living expenses in the ol’ emergency fund and encourages calculating up your real living expenses so you know what they are. Personally, I believe in even more – I think two months’ worth of living expenses for each dependent you have is the right amount. So, for our family’s emergency fund, we have eight months’ worth of living expenses. Regardless of this quibble, Epperson’s right on the money – an emergency fund is a great thing for everyone to have.

3 – On Golden Pond
Here the focus is on retirement and, again, Epperson offers solid basic advice – start saving young, max out a Roth IRA if you can, and contribute up to at least the matching amount in your employer’s 401(k). What I found most refreshing, however, was the very offhand mention that Epperson and her husband have a couple percent of their retirement savings tied up in an insurance policy that has a cash value to it, though she doesn’t seem to recommend this anywhere in the text.

That little tidbit reveals a big truth about personal finance writing and makes me like this book even more. The reality of each person’s life is different and no plan is perfect for more than one person. Sure, in the average situation, it’s best to sock your money right into that Roth IRA or that 401(k), but if your parents started you a whole life insurance plan when you were a newborn, it might make more sense to keep funding that versus putting money in the Roth IRA. Decisions like that are the ones that a good financial advisor can help you with. If you’re not sure, ask a professional, one who recognizes that all financial situations are a little bit different and one who is not trying to sell you a product (yes, that means hire one that you pay a one-time fee to rather than one who gets a commission).

4 – Feathering Your Nest
What about buying a house? From the perspective of a first-time homebuyer, this chapter is loaded down with good information – it covers basically everything I yearned to know about the home buying process when we were going through it for the first time. I also thought the input on the rent versus buy debate was particularly levelheaded – neither answer is the absolute best one for every situation.

One key piece of advice: shop around for your mortgage and don’t forget your local credit union. We wound up getting our mortgage through a credit union because their rates were stellar, it was easy to stop by and ask questions because they were local, and the person handling the mortgage did manual underwriting, which is generally more forgiving than the automated processes that big banks use.

5 – College Savings
This chapter is mostly filled with planning for your child’s college education, one of the standard things that many parents with children worry about. I’m lucky – living in Iowa not only means that the stellar Iowa 529 (managed by Vanguard) is available to me, but it also means that any contributions I make to that 529 is deductible in terms of state taxes, saving us $90 on our tax bill for every $1,000 invested for our kids. Those features add up to a no brainer.

In other areas, though, there are a lot of options to consider, and Epperson walks through all of them. The key thing to remember about college funding, though, is that it’s more important to start early than anything else – even if you don’t make the best investment choices immediately, you’re better off having started on your savings now rather than later.

6 – Healthy, Wealthy, and Wise
Here, Epperson tackles health insurance and spends most of the chapter walking through the nuances of it. Health insurance is frankly an unclear and boring mess for most people, but it’s something that pays off if you figure out the best solution each time you go through a significant life change. For example, my wife and I originally found it cheaper to have separate health insurance plans. When our first child was born, we again recalculated and we again found it was better to keep us separate and just add our son to her insurance. When our second child was born, we recalculated a third time and found that our best option now was a family plan.

However, the real decision to be looked at is disability and long-term care insurance. As Epperson puts it on page 144: “You probably think your biggest asset is your house or your 401(k), but it is really your ability to earn money.” In other words, if you have house insurance but don’t have long term care or disability insurance, you’re not insuring your most valuable asset. This is one portion of the book I really read and thought about – I need to look into these kinds of insurance simply to protect my family.

7 – Get a Life (Jacket)
The following chapter is also about insurance, but this time the focus is on life insurance and property insurance. For me, life insurance is pretty simple – if you don’t already have a whole life policy that someone set up for you as a child, your best option is term life insurance, and this is a stance that Epperson largely agrees with. How much? She suggests 6 to 10 times your annual salary, but I think it varies a lot depending on your situation. If you’re single, you certainly don’t need that much, if any at all. If you’re married with young children, it should be huge – you don’t want their options while growing up to flounder.

8 – Good Will Hunting
The Big Payoff closes with some discussion on estate planning. Basically, if you’ve got a net worth of less than $2 million, Epperson advises drafting a will, a revocable power of attorney, and a living will; if you’re worth more than $2 million, add a living trust to the mix.

For most people, these documents are simple – think about where you want your things to go, have it prepared, sign off on it, and rest in peace. The biggest trick is actually doing it – it requires thinking about matters most of us don’t want to think about it. Just set aside the time to get it done, right now – you’ll be glad you did it.

Should You Read It?

The Big Payoff is basically Personal Finance 101 for couples who have just woken up to the fact that they need to get their finances in order. It summarizes the key facts and has sensible stances on what exactly a couple should be doing with their money, and Epperson explains them in a personable fashion, often using herself and her husband as examples.

I actually found this to be a good complement to Smart Couples Finish Rich. Smart Couples focuses more on issues of actually talking about money, making sure you’re on the same page with decisions, and focusing on reducing spending. The Big Payoff is more of a couple-oriented education on how things work – what can you do with your money and how can you protect it? Different focuses, but they complement each other well.

If you’re in a couple and you’re just beginning to realize that you need to focus on your finances, this is a good book to read alongside David Bach’s Smart Couples Finish Rich. Snag them both from the library or from PaperBackSwap.

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  1. Jon says:

    I’ve heard in the last few years that whole life insurance is never a good idea. Continuing to fund it just because your parents started it seems like throwing good money after bad if you believe that. Can you elaborate on why you like whole life insurance and when it is a good deal?

  2. Dave says:

    Love the review style!

    – Dave

  3. weiszguy says:

    I like the idea of paperbackswap, but it doesn’t work so well in practice. They never seem to have the books I want. I’m in the queue for The Big Payoff, but I’m number 8 of 8. For other books, there are more than 100 ahead of me.

    I’ve given away a lot of books, and paid the postage for them. I have a large number of credits in my account but nothing I can spend them on.

    What kind of books are easily available on paperbackswap?

  4. michael says:

    “don’t forget your local credit union.”
    Best. Advice. Ever.

    My car loan in 3.9%, and my mortgage is 5.75%. Friends who bought such things at nearly the same time as me through their bank are paying WAY more.

  5. K says:

    Trent, if you had to recommend just one book to a young couple who has just realized that they need to start paying off debt and get their financial life in order, which would it be?
    Dave Ramsey Total Money Makeover?
    Smart Couples Finish Rich?
    The Big Payoff?
    Another one?

  6. Dave says:


    Would you say this book applies to young singles as well? It doesn’t look to me like that advice is couple-specific…maybe just a marketing gimmick?


    – Dave W

  7. Milehimama says:

    You are so right about the disability insurance!

    Last year my dh got pneumonia. He coughed a lot and cracked a rib. Doc said no lifting for 6 weeks. His job said, must be able to lift 50 lbs., don’t come to work until you have a doctor’s release.

    It turned out we had disability insurance tacked onto the employer’s health plan. We didn’t plan on it, but we certainly needed it! I was 9 months pregnant at the time and I don’t know what we’d have done without it.

    And we didn’t have it to begin with because I didn’t think we needed it – dh is relatively young, no health problems, with an active lifestyle.

    I’d love to see you do a series on life insurance. Particularly insurance for children – no, you don’t need to replace their income, but for a couple starting out, a small policy would pay for the funeral and leave of absence from work/getting relatives out to the funeral, etc. It seems like a good idea to me (5k or 10k).

  8. Sharon Campbell says:

    If your parents bought you a whole life policy, the commission is paid. The whole life policy big expense is the commission, not the rest of the cost. So, refusing to pay on the whole life policy is throwing the original expense down the drain.

    Also, if something happens and you become uninsurable, such as a childhood cancer diagnosis, that is the ONLY way the person will ever be able to get life insurance. Life insurance is for the people you love, and being unable to get it can have serious financial ramifications for survivors.

    Besides disability insurance through the job, everyone should also have an independent policy that they pay for themselves. Get one with the first job you get after school, before you become uninsurable. Pay that premium even if you go hungry at the end of the month. It will be dirt cheap if you get it in your teens or twenties, and you can’t count on being employed when you get hit by that bus. Also, the income should you collect from it is tax-free, unlike the income from an employer-provided disability insurance policy. Upgrade your coverage as your expenses mount, too.

    And above all else, do NOT buy disability insurance from Unum-Provident. They are documented crooks who routinely deny coverage, or decide to cancel coverage on the flimsiest pretexts. Check out the insurer BEFORE you buy, and research the matter on how to get a good policy. It needs to be for your work, not ANY work.

  9. Byron Udell says:

    Your take on life insurance is great. Most people do need term life insurance and the amount you need depends on a number of factors. To get the best idea of how much you need, it’s recommended to speak with a licensed life insurance agent or financial advisor.

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