Finance and Fat » Books

Debt is Slavery Book Review

Eden — Sat, 15 Aug 2009 12:42:46 +0000

Debt is Slavery: and 9 Other Things I Wish My Dad Had Taught Me About Money, by Michael Mihalik. This book is short, to the point, and packed with lots of great advice. I’ve read it three times and I would put this in my top five personal finance books, possibly at number one. I think for someone just getting started with figuring out their debt and finances this is probably the first book to read. It’s short enough to get through very quickly and find some immediate advice and inspiration to get your finances under control.

The book offers this definition of slavery: “The state of being bound in servitude as an instrument of labor” [pg. 23]. Do you ever wake up in the morning and not want to go to work that day? Do you go anyway? Do you go because you really love your job that much or do you go because you owe money to someone (probably many people) and even though you may have a choice of how you’ll earn your money, ultimately you have no choice but to go to work and get that money. Lately, I’ve been dreading Monday mornings as early as Saturday night. I feel trapped and bound to this service by my debts.

“Too many people hate their jobs but are afraid to leave, because they wouldn’t be able to pay their mortgage, credit card bills, car loans, or boat loans. Debt can turn a free, happy person into a bitter human being. Debt can turn you into a slave.” [pg 25].

It’s possible for debt to be good, but debt is still slavery. A mortgage can usually be thought of as good debt, but you still must make sure you can afford the mortgage you are signing up for.

“The word ‘mortgage’ is derived from the Latin word ‘mort,’ which means ‘death’, and the Germanic word ‘gage’, which means ‘pledge’. So ‘mortgage’ means ‘death pledge’. What does that tell you?” [pg 30]

When we spend money, we are really trading our time for the things we buy. We make this even worse when we go into debt to buy things. We are now committing our time in the future to work to earn money to pay for the things we bought in the past. This becomes even more painful if you don’t like your job.

‘Stuff’ ads busywork and stress to our lives. So much stuff we buy we don’t even need. Eliminating unwanted stuff from our lives is an important part of getting control of our finances and getting out of debt.

Experiences are more valuable than stuff. Don’t find happiness only in buying things. You won’t look back on your life when you’re older and fondly remember the stuff you accumulated.

It will be easier to stop buying stuff if we avoid advertising and understand that we are constantly being marketed to and a lot of money is being spent to convince us to buy things.

Make a goal of saving 50% of your income. If you do this, you would have the ability to take a month off from work for every month you work (assuming you’re earning an income from a job and not passive sources). Don’t spend more money when you get a raise. If you keep your expenses the same as before, you can increase your savings exponentially, even as your income may not be increasing at such a high rate.

Money doesn’t buy happiness, it buys freedom. This is my greatest motivator for making more money and getting out of debt right now. I want to be free again.

This book is packed with solid advice, expertly fit into a short, easy to read format. If you’re just getting started with fixing a financial mess in your life, I would buy this book immediately. If you need a little extra motivation and a better understanding of the mistakes of the ‘normal’ American way when it comes to money and work, read this book. I had planned to give away my copy after reading it, but I decided this is one I want to keep on my bookshelf so I have it available to read again when I see bad habits creeping back into my life.

Debt is Slavery Book Review

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Predictably Irrational, The Hidden Forces That Shape Our Decisions

Eden — Fri, 17 Jul 2009 18:11:34 +0000

I recently read Predictably Irrational, Revised and Expanded Edition: The Hidden Forces That Shape Our Decisions, by Dan Ariely. This book is well written, and easy to read. The many experiments described in the book are presented in a lively way which elicits interest, and Ariely goes into just enough detail without boring the reader by getting into esoteric points which are more appropriate for journal papers.

If you think you’re a rational person, read this book as soon as possible. It will help you understand how we are wired and/or conditioned to be irrational, and we typically aren’t even aware of it. This concept can be a bit disheartening, but the good news is that we can fix at least some of this irrationality by being aware of how it can occur and by making a steady effort to compensate for it. The key, it seems, is increasing our awareness and planning to be irrational (this concept is explored in-depth in The Black Swan
as well).

This may not be a ‘personal finance’ book, but it offers a lot of insight into how and why we make decisions and it presents a lot of examples tied directly to money. Not only is this book very interesting and enlightening, but I found it to be quite entertaining as well. I would put this one near the top of your reading list.

Predictably Irrational, The Hidden Forces That Shape Our Decisions

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48 Days to the Work You Love

Eden — Thu, 16 Jul 2009 23:43:08 +0000

I just finished reading 48 Days to the Work You Love by Dan Miller. I found this book to be generally helpful and easy to read, but it doesn’t offer anything groundbreaking or terribly enlightening either. I thought it had a lot in common with What Color is Your Parachute, though I found 48 Days to be much more readable and less boring (maybe it’s just me, but I didn’t care for What Color is Your Parachute at all).

48 Days to the Work You Love will likely help you find inspiration, motivation, and just may spark a few ideas. However, there isn’t much ‘meat’ to the book. It only glosses over these topics at a high level and leaves you still to do the work of figuring out the details and coming up with a plan for finding new work or making money on the side. It offers nothing that you can’t find on hundreds of websites for free, but if you want to spend some money on this book you’ll have it packaged into an easy-to-read, paper format.

If you think that earning an hourly wage, working for someone else is the only way to make a living, you can certainly benefit from reading this book. If you already know that isn’t your only option, and/or you are already earning money on the side, you probably won’t find anything new here. I’d say it’s worth reading if you think you need some help finding a new direction with your work and income. If you already have that part figured out, there isn’t anything else for you here.

48 Days to the Work You Love

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The Top 10 Distinctions Between Millionaires and the Middle Class

Eden — Tue, 16 Jun 2009 20:40:52 +0000

To follow-up yesterday’s post, here is another excellent book that I came across while cleaning out my book collection yesterday. The Top 10 Distinctions Between Millionaires and the Middle Class by Keith Cameron Smith.

This is another short, excellent book that covers the basics that need to be understood to become wealthy. Don’t read too much into the title though, the focus isn’t about becoming a ‘rich millionaire’ rather solid advice that anyone can follow to become wealthy an successful.

Much like The Richest Man in Babylon, this book is packed with great information and keeps the advice short and sweet. It’s only 112 pages long (small pages at that), so you should probably set aside a couple of hours to read it all at once. However, the key with this book isn’t to just take in the information and move along. I highly recommend looking at each of the 10 sections and taking the time to review and work on the areas that need improvement in your life.

Read this book if you want some great motivation and an outline for financial success.

The Top 10 Distinctions Between Millionaires and the Middle Class

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The Richest Man in Babylon

Eden — Sun, 14 Jun 2009 22:54:23 +0000

I spent some time cleaning out my book collection today and came across a few favorites that are worth mentioning again. One of which is the The Richest Man in Babylon by George S. Clason.

This is one of my favorite personal finance books and it’s a definite must-read if you are working on improving your finances. Not only is the information excellent, but it’s a short book too (my version is only 144 small pages).

The beauty of this book is that it’s not selling a gimmick or an easy way out. It simply gives you good fundamentals and a simple plan that anyone can understand and implement in their lives.

If you already know to pay yourself first and avoid debt, then you probably don’t need this book. Everyone else should read it as soon as possible. I found it to be one of the best books I read as I was getting started with figuring out my financial mess. This book and Your Money or Your Life are the two that come to mind first when someone asks me where to get started with personal finance.

The Richest Man in Babylon

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Common Sense Economics Book Review

Eden — Mon, 29 Dec 2008 22:27:04 +0000

I just finished reading Common Sense Economics: What Everyone Should Know About Wealth and Prosperity. This book is an introduction to the key fundamentals of Economics, as well as a bit of Personal Finance. It’s a relatively small book too, one you can easily read in a day.

Common Sense Economics is a great book to read if you are new to Economics, haven’t studied Economics for a long time, or if you are currently clueless about your money and/or the Economy.

This book is divided into three parts. The first two deal with Economics and Government. The last part deals with Personal Finance. The inclusion of the Personal Finance part can either make this book the perfect fit for you or it may leave you wanting more. If your personal financial life is already under control, you won’t gain anything from this third part. If you have yet to take control of that part of your life, this chapter provides you an excellent outline for how to get started.

Some highlights from the book:

The reality of life on our planet is that productive resources are limited, while the human desire for goods and services is virtually unlimited. Because there is “no free lunch,” we must sacrifice something we value in order to get something else.

Politicians often speak of “free education,” “free medical care,” or “free housing.” This terminology is deceptive. These things are not free. Scarce resources are required to produce each of them. Governments may be able to shift costs, but they cannot avoid them.

Nearly all choices are made at the margin. That means that they almost always involve additions to, or subtractions from, current conditions, rather than “all-or-nothing” decisions. The word “additional” is a substitute for “marginal.” We don’t make “all-or-nothing” decisions, such as choosing between eating or wearing clothes—dining in the nude so that we can afford food.

The foundation of trade is mutual gain. The motivation for trade is summed up in the statement: “If you do something good for me, I will do something good for you.” Trade is productive because it permits each of the trading partners to get more of what he or she wants.

An increase in government transfers will reduce the incentive of both the taxpayer-donor and the transfer recipient to earn income. Economic growth will thereby be retarded.

Competition for transfers will erode most of the long-term gain of the intended beneficiaries.

Programs that protect potential recipients against adversity arising from their imprudent decisions encourage them to make choices that increase the likelihood of the adversity.

Providing others with goods and services that are highly valued compared to their cost is the key to financial success.

I really enjoyed this book and highly recommend it. I borrowed it from the library, but I intend to purchase my own copy soon. Both for future reference and so I can loan it to friends. It makes for a great Economics primer and the section on Governments’ role in Economics is excellent…and quite timely given the current insanity in our nation’s bailout-addicted political climate.

Common Sense Economics Book Review

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Your Money or Your Life – Book Review

Eden — Mon, 12 Nov 2007 16:09:54 +0000

Review of Your Money or Your Life, by Joe Dominguez and Vicki Robin

Book’s website – www.yourmoneyoryourlife.org

Amazon.com link – Your Money or Your Life: Transforming Your Relationship with Money and Achieving Financial Independence

I actually started reading this book around the start of the year, but stopped after a couple of chapters because I found it too dull. Thanks to Trent at The Simple Dollar running an online book club with this book I decided to try reading it again. I think it’s true that this book gets off to a slow start, but I also think I gave up too soon before because I had no problem reading through the whole book this time.

Bottom line, this is a must-read personal finance book no matter where you are currently with your money. If you want to know more before you read it, I’ll cover the main themes of the book below.

Are you making a living or making a dying?
The first important theme deals with how we trade our life energy for money and figuring out just what it is we do with that money and why. Do you work 50-60 hours a week just to keep up with the bills and have money to blow on having ‘fun’ on the weekend? Do you know how many hours of your life you are actually giving up for the ‘stuff’ you own? Do you know how much you actually earn per hour at your job? This section shows you how to calculate your real hourly wage, which is likely much lower than you think, and how to start tracking every penny you spend and creating a budget. This section is laying the foundation for a sound financial plan, however the process of determining your real hourly wage and figuring out how many hours of you life you trade for ‘stuff’ was eye-opening for me.

How much is enough? Finding fulfillment.
The next big theme is figuring out what is ‘enough’ in your life. What do you spend money on that provides fulfillment and what do you spend money on that works against finding fulfillment? Not only does this apply to how you spend your money, but also to how you spend your time (life energy). Is your job fulfilling? Do you have to spend money and time doing things for your job that you wouldn’t do otherwise? These are important questions to answer because they lead to the ultimate question of determining what you should be doing to make a living and how you need to think differently about it.

Tracking your progress
You could do this on a computer, you could do this on a paper wall chart (as the book suggests), but the key is to somehow track your progress and keep a visual reminder. I use a number of things to track my progress- this website, an Excel spreadsheet, Quicken, and a whiteboard on my refrigerator with my current total debt and how much I have paid down on it since starting my financial turnaround. Whatever you do, do something and make it easy to see on a daily basis. Not only is this an empowering step on it’s own, but it leads to the next great theme, the Crossover Point.

The Crossover Point
This is the most exciting part of the book. If you are tracking your income and expenses like the previous section told you to do, you will be able to add a third component to your chart, which is income from investing or any source of passive income. The goal here is to add your passive income to the income and expense chart (it is likely a tiny number at the bottom of the chart now), but to project it out into the future and find a point where that passive income number crosses over your expense number. This is the crossover point, the point at which you no longer need to go out and earn an ‘active’ income. If you are anything like me, that crossover point is a very long way off right now, but it is the ultimate goal of taking control of your money and finding financial freedom.

Summary
The book isn’t perfect, and I would guess you could cut about 50 pages out to make it really great, but the overall message was truly life-changing for me. I highly recommend it for anyone who thinks that maybe they could be doing better with balancing money and life.

Your Money or Your Life – Book Review

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