Book Review: All Your Worth -E. Warren

I’ve decided to share some books from my own personal library as well as those that I may read each week during library and bookstore visits.  My hope is that readers will be intrigued by a book (even one that I may not have enjoyed) and will go purchase or borrow the book and read it for themselves.  Some of these books are old favorites.  Others are books I would never read again.  But I believe every book has something to offer the reader and I hope to provide some good learning experiences I had from each book I review as well as my own opinions, criticism or action taken as a result of reading the book.

Onward…

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On a recommendation, I browsed a copy of “All Your Worth” by Elizabeth Warren last week (clicking on the picture will take you to Amazon to see their review of the book but I have no affiliation with them and I’m not receiving any compensation for this review from anyone).

1 minute Synopsis:

Figure out how you will live by building a budget based on the following numbers: 50% expenses, 30% towards things you want, and 20% to savings.  While it’s important to cover the necessities without overextending yourself, life is for living and should also include spending on things you enjoy along the way.  You don’t have to deprive yourself of everything you love, living on Ramen indefinitely, just because you got into debt.

What I learned:
I really enjoyed the introductory part where she talks about how the rules have changed. She said that it used to be good advice to just get a degree and a good job, and that everything in life would fall into place if you dutifully bought a house and didn’t spend too much.  Today, banks and credit cards have helped many people dig very deep debt holes and now they feel trapped and can’t get out.  Today, jobs are unreliable and may not last until you’re 65 and ready to retire.  Today, the average family can’t afford a new car and a typical house without overextending themselves by several times their annual salary.

DH and I have spoken about this quite a bit during our first years of marriage as we’ve tried to figure out how we may or may not ever achieve the “typical” newlywed goals of homeownership, 2.5 kids, and a dog.  However we’re both shocked at how much we’ve paid (and continue to pay) to fund our own degrees. We’re also shocked at how much more our younger family members (who are only 5-10 years younger than us) are planning on taking in loans to attend college for the first time. Tuition costs have risen 20% since I graduated college.  Don’t even get me started on the rising costs of housing and food and how those may be impacting room and board charges at the local university.  So, these days, we leave college with a boatload of loans, a small amount of consumer debt, and possibly no job- unless you choose your major well.  It’s very frustrating.  Is this why so many people our age can’t get ahead and just take a leap buying things they can’t afford (houses, cars, designer duds)?

I think it’s extremely important today to be clear about career goals before pursuing expensive academic degrees.  There are lots of free educational programs, cheap community college educations, and cheap vocational programs out there for those who are ambitious and interested in other fields.  I don’t believe a formal education is a necessity for every 17 year old graduating high school these days and I do believe that 4 years is plenty of time to complete a degree.  If your kid is binge drinking and taking fluff classes on the “5 year plan” (spending 5 years to get a 4 year degree due to repeated changes of major, failure of classes, etc) you’re really doing them a disservice to the tune of $30-40,000/year or more.  It would be wiser to allow kids to explore volunteer or work opportunities for a few years and then pursue education that has meaning and value to them.

My Issues:
From there the wisdom of the book takes a sharp turn. Perhaps it’s because DH and I are so gung-ho about saving that I couldn’t stomach her advice.  But honestly, putting only 20% towards savings just doesn’t sit well with me unless you’ve paid off your debts and have an emergency fund (3-6 months living expenses at least) on hand.

Also, one of the rules my husband and I set for our marriage was that we would always base expenses around the smaller income of the two.  If we were to lose our jobs, or become disabled, or get pregnant…we would not face uncertainty as to how we will survive.  She makes no distinction about how many incomes the family has (despite apparently being the author of another book encouraging women to stay home?) or how much house or car is too much.  Why doesn’t this book address any of that?

What she promises is really over simplified financial planning. It’s less painful to tell someone that they can spend 30% willy nilly on whatever they please than it is to tell them to cut it out and stop spending on junk that they don’t need.  Why would you encourage someone to pay the debt off (while not saving a dime since their 20% savings might be entirely used in debt reduction) and to continue throwing 30% away every month on more junk???!

Sorry if I’m too harsh about this book. I may have honestly missed the point if it was sandwiched in between buying ding dongs and shoes while continuing to carry credit card debt… I just felt she really ignored the importance of having savings and not having debt before giving people permission to continue spending like drunken sailors.

Abundant Living- $400

 In keeping with my Abundant Living series, I am happy to say that I am still finding the project to be quite easy each week.  DH and I have already decided to implement some of these money making ideas over the next year as we simplify our lives and dig down to what really matters to us.  This week’s amount is $400.  It’s funny how this project has already started to affect me.  If I’d thought about $100 a few weeks ago I would have really struggled to figure out how to make an additional $100 without working any overtime at my current job.  Now I find it quite easy to look around our home and see piles of cash in the form of “stuff” just lying about.  I see our money just lying around in piles of material goods here at home and I hope to continue to expand this way of thinking to “find” larger and larger amounts of money in our lives.  I feel the money is probably already there but we just haven’t been seeing it.

How I’d spend $400 today:

I’d purchase the complete Financial Peace University package  (a package product by Dave Ramsey but please know upfront that I’m not an affiliate or compensated by the company in any way for this mention) and bless two family members who desperately need help with debt reduction, savings, and personal finance basics.  They are truly headed for a train wreck and could benefit from the system.  My only request would be that they pass the materials on to someone else in need should they choose not to use them. 

Normally this would cost the entire $400 but as they’re having a 50% off sale on the main site through Labor Day I would still have $100 to invest in my own continuing education.  I’d likely purchase new copies of Jim Cramer’s “Stay Mad For Life” and Thomas Stanley’s “The Millionaire Next Door” as they’re favorites I don’t own yet.  And I’d check out “Thou Shall Prosper” by Daniel Lapin and “Ben Bernanke’s Fed” by Ethan Harris as I’ve been meaning to get a hold of those but haven’t found them yet.  I still believe that financial education is far more powerful long-term than cash in one’s pocket now!

How I’d raise $400 quickly:

I would sell the skis, poles and boots I’ve been keeping in the closet for 3 years and only used half a dozen times.  I really intended to ski more but due to work and school demands and a general disdain for cold weather I found it’s not really enjoyable to do and I’d much prefer to use the cash to improve our financial education and those around us.  The purchase was made when I had not skied in 5 years and decided “Hey, I should do that again!” on an impulse one day and made the purchase after a big check came through at work.  It was a foolish decision although based in the hope that I would use it to improve my physical shape and to be more social with friends on weekends.  In the future I hope to be more careful about impulse buys and purchase nicer versions of items that we currently use daily.

3 things I’m particularly grateful for this week:

1) A steady job and solid income.  I’ve had some hours cut this summer like many others but I have a good income and if I continue to work hard I will have a job to see me through this recession the US is facing.

2) Healthy retirement savings- my husband and I are starting early and hope to complete our retirement savings within 10 years!

3) A strong financial background in formal and personal education and an abundant amount of resources available at local libraries and book stores to continue my education.

Retirement- Is 35 too young?

                                                                        

This has crossed my mind a number of times.  Now, I’m not saying I’m going to make retirement by age 35.  But at this rate, I’m pretty sure DH will as he is a few years younger than me.  He hasn’t even finished his first degree yet.  If we were to retire at his 35th birthday would he have time to really pick and start a career before his early retirement party??

And honestly, what would retirement mean?  Would we stop working completely?  Would we start volunteering our time or travel internationally and help worthy causes for stipends?  Would we cut back to part-time work and refocus our efforts at home on volunteer work and social projects?

Could we celebrate at age 35?  Would ANYONE in real life support us or be happy for us?  Or would we quietly have to do a dinner followed by a lengthy world cruise uncomfortably laughing at work when coworkers suggest we’ll be “paying that trip off for a few years, huh?”?  Could we even admit to our families, who, if still alive despite many years of smoking and alcohol abuse, will likely still be working and not contributing a dime to their own retirements at that age?

These are the questions we regularly ask ourselves.  These are the concerns we frequently wonder about and sometimes I wonder if it somehow keeps us “trapped” and will make us unable to ever cutback or retire should we continue to carry these concerns forward.  If a couple retires young enough to really enjoy their lives, but they aren’t shouting it from the rooftops and quietly continue upon their path, did it really happen?