I am new to book reviews. I’ve done plenty of Album reviews in my day, particularly hip hop albums because we all know great personal finance leaders listen to great underground hip hop*. But I figure if I want to get a little more serious, and be taken a little more serious, regarding personal finance I need to be better read in the arena.
So I have started using Mr Money Mustache’s recommended book reading as a good starting place, while utilizing our awesome public library system to actually read the books.
To get a little off track for a second, I want to state how awesome the Phoenix Public Library System is. I’ll admit the last time I stepped foot in a library was in college to do mundane research that I don’t even recall. The last time I went to a library to pick out books for enjoyment was probably in junior high school. The fascination of our culture has with the book stores and owning the books had me blinded to the greatness of the public library system. I was caught up in this saga, purchasing dozens of books over the years, but what I never realized is that there is this wonderful place that pools small amounts of money from millions of people to allow you to read and learn about any subject you want! When I was a kid researching books and finding them was a pain with a manual card catalogue systems. Anyone remember that? Now it is so easy online. Plus the city of Phoenix has spent lots of money on refurbishing libraries to make them enjoyable and pleasant experiences. That is to say, as long as you don’t mind associating with different cultures and wealth classes of people. If you are the type to drive your BMW into a gated community and shut the garage door after alarming your car and house to make sure you don’t associate with anyone in the outside world then you might want to continue buying your books at Barnes and Nobles, at least until it goes out of business
Well back to the book review. So I haven’t decided the best way to review the book so I am going to categorize it into three areas: Reading Level/Audience, The Overall Good, and The Overall Bad.
Reading level: This book is written in a way that I believe someone in late elementary school would understand. The book is short, simple and laid out fairly straight forward. Does this make it for a very exciting read? No, not really, as I was getting bored during certain parts, but this could just be because I have already incorporated many of the solid financial principles the author discusses. This book is intended for a financial beginner / novice. Most of the financial principles were very basic to a more advanced financial aficionado, but with that said, it took no more than a couple hours to read and did not take a large amount of time in my life.
I think the intended audience would be those from 10 to 30 that have not had good financial principles or education instilled. This book can help form the beginnings of good habits and light the flame to learn more about how money should be utilized rather than consumed.
Overall Bad: I’ll start with the bad to get it out of the way and to end on a positive note.
Too many of the examples and some of the principles in this book were based on the economy at the time of writing this book and I would argue are not true long term financial principles or principles I might disagree with.
First the author states that if you do not own your own home that you will never be rich. Well if you are a financial beginner this is very deceptive. Yes in many places in America and across the world it makes sense to own rather than rent, but this is not a universal financial principle. In many cities purchasing a property is out of reach or does not make financial sense; i.e New York City, San Francisco. This is a very independent rule and it is very fair for many to be rich without ever owning a home.
Second the author makes a strong case that your home is your largest investment. My back gets chills at this advice. The author made this claim at the boom of the real estate market when prices were inflating 100% to 200% in 10 years. Of course we all learned that the market went *BOOM* and many people that thought their houses were investments lost their shirt. Yes a home can be an investment but this financial principle comes with many asterisks.
Another principle the author discusses that I do not completely agree with, although not driven by the timing of the book, is the safety cash pillow for those “disastrous, you didn’t plan for, catastrophes”. This generic idea discharged by the financial world tends to get under my skin. I think savings is great and we should save more, but to use fear as a method for savings I think is a bit of a sad move and negative reinforcement. Of course there are times when you might need some rainy day money, but I think this should not be the driving force of our savings; it should just be an unspoken law that your savings could be used for that purpose if needed but is not there for that purpose.
Finally the author is very safe in most of his financial advice due to his background in being a financial advisor. Financial Advisors are salesman disguised as financial helpers (at least in most cases). They benefit by you working long years by making consulting or management fees off your money and their advice generally is to keep you working long past when you need to, ensuring their financial future. The author asserts you can retire early but maybe only 5 to 10 years if you do everything right. Of course his audience is the financial beginner, which can spark the idea of early retirement but if you are more than a financial novice like myself; you may be disappointed that there is not much to learn from this book.
The Overall Good: The main point the author is trying to make is to automate your finances. I think for someone who doesn’t know much about finance this can be a good principle coupled with other foundational things, But automating alone can have dire consequences. I still put this in the good category because you can simplify your life by automating many of things he suggests. This is a good principle and one that younger readers should employ.
There are some other good financial bits about paying off your mortgage early which I tend to agree with, although some financial experts disagree because of the low rate of interest on mortgages these days. He mentions setting up automatic options to pay your mortgage off early. But the part that perplexes me is that he advocates the 30 year mortgage without a word about early, quicker amortizations years like 10 or 15years that will save you thousands, even hundreds of thousands in interest depending on the purchase price of the home.
Also the author is very much against debt and living debt free which is a great beginner foundational principle.
The last great thing about this book is the author’s approval for giving! He talks about it as a tithe, while I would lean not to use this “religious” jargon as it could potentially turn off many readers to this principle. As you know if you read my blog, I am very much a proponent of giving whether it is your time or another resource: giving particularly to those that really need it. Although, I will disagree with his statement: “if you give you will receive”. This is a very debilitating principle if taken the wrong way. Yes you will receive back in the form or learning the value of money and its true purpose (not consumption) but it doesn’t necessarily mean you will get back any additional financial means.
Summary: This is a good beginner Finance Book as long as it is not the only financial education one gets. The title is deceptive because I don’t think you have to aspire to be a millionaire to benefit from the good this book has to offer, though I realize most people are driven by the desire to be a millionaire, so it probably appeals to his target audience. You could give this book to a high school age, college age or someone beginning their career to set some nice finance foundations. Anyone above this demographic can still benefit from the book, but will have missed out on the some of the advantages of compound interest and thus will need a more radical solution to become financially independent. This book isn’t a financial salmon book, but more in the arena of laying solid salmon eggs for a future upstream swimmer.
Overall Recommendation: I am not sure I would recommend this book….Due to some of the misnomers regarding the economy at the time of the book publishing and the incorrect philosophies toward renting vs buying and seeing your house as an investment that can appreciate 600%. If I did recommend it, I would give it to a younger financial novice due to some sound financial principles, such as giving, living debt free and the idea of automating tasks to ensure they are accomplished as long as it is coupled with a caveat that these principles are only a start to strong financial education.