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I picked up this book after reading Pound Foolish: Exposing the Dark Side of the Personal Finance Industry. In that book, the author exposes a lot of the conflict of interest and hypocrisy that are inherent to much of the personal finance industry (financial planners, most of whom are actually broker/dealers, as well as popular gurus), but she recommended Personal Finance for Dummies as legitimate good advice. Eric Tyson, the author, has a lot of experience as a financial counselor, helping people who've messed up (from a little to a lot) get themselves back on track. This perspective does color his prose a little -- for example, he seems to view most broker/dealers as barely better than swindlers, and has nothing good to say about most annuities and life insurance products -- but it makes for authentic advice. It can also make you feel bad if you've fallen for one of the bad ideas; but at least he probably would blame the dealer and not you. The other thing I noticed reading it cover to cover is that it can get repetitive (there is lots of hammering on the evils of consumer debt, for example) -- but that is partly by design so that you don't have to read it all the way through. The book is organized such that you can flip to any chapter dealing with whatever question you have, and he'll cross-reference with other parts of the book as needed. Happily, the table of contents is highly detailed as well, so that you can easily see which chapters might benefit you.
The best praise I can give this book is, "Boy, I wish I'd read this when I was in college!" I am grateful that my parents instilled in me such good money habits (for example, I've never [intentionally] carried a credit card balance), so I avoided most of the serious mistakes he rails against, but I would've felt so much more prepared and in control of my finances if I had read this before starting my career, and I would've improved some of my mediocre financial choices.
Key points that stood out to me:
- Our economy may run on consumption, but from a *personal* finance standpoint (which is, after all, the topic of the book), consumer debt (i.e., "bad debt," which was used to acquire something that won't appreciate in value) is always bad news. This includes carrying a credit card balance and taking out a loan for a car. [I am guilty of the latter because of attractive interest rates, but it's still non-appreciating property.] It is impossible to read this book and escape this point.
- All mutual funds and almost all insurance and annuity products can be found in no-load (commission-free) varieties. Commissions on mutual funds can be as high as 5% of your share purchase price; commissions on annuities may be as high as 100% of the first annual premium! You pay these commissions, either directly or in the form of lower performance or higher fees, as compared to the no-load varieties.
- The best way to hire a money manager, for all but the very richest among us (i.e., the 1%, and if you're in the 1% you're probably not reading this book), is to buy low-cost actively managed funds. The best money managers only work with enormously large balances, which you probably don't have. Both this book and Pound Foolish sing the praises of the Vanguard Group (www.vanguard.com) in providing low-cost, no-load funds, both indexed and actively managed.
- There's no such thing as free advice. Any free advice is always trying to sell you something. That may be selling you on their funds, or on the idea that day trading is a good idea because they make commissions on your trades, or directly selling you products for which they earn a commission even if other products might have better returns or be better for your strategy.
Incidentally, I find it curious that some reviewers gave the book a lower rating because "most of the book didn't apply to me." The best time to read advice, or at least know that such advice exists, is before you need it! Then you'll remember the advice (or at least remember to look it up) when the situation comes upon you. But I have also been told that unlike me, most 20-somethings aren't highly focused on long-term goals and planning for retirement. ;)
If you want this advice in shorter form, written to target a younger and hipper generation, look for Financially Fearless: The LearnVest Program for Taking Control of Your Money. Yes, she is also trying to sell you something (namely the LearnVest money management program), but I personally didn't feel like her company got in the way of her advice (which is not free, because somebody paid for the book :) ). Now that I've read both books, I don't see any conflict of interest in Financially Fearless; but I am older and stodgier than she is, so I needed more advice about things like child care expenses and saving for college.
The best praise I can give this book is, "Boy, I wish I'd read this when I was in college!" I am grateful that my parents instilled in me such good money habits (for example, I've never [intentionally] carried a credit card balance), so I avoided most of the serious mistakes he rails against, but I would've felt so much more prepared and in control of my finances if I had read this before starting my career, and I would've improved some of my mediocre financial choices.
Key points that stood out to me:
- Our economy may run on consumption, but from a *personal* finance standpoint (which is, after all, the topic of the book), consumer debt (i.e., "bad debt," which was used to acquire something that won't appreciate in value) is always bad news. This includes carrying a credit card balance and taking out a loan for a car. [I am guilty of the latter because of attractive interest rates, but it's still non-appreciating property.] It is impossible to read this book and escape this point.
- All mutual funds and almost all insurance and annuity products can be found in no-load (commission-free) varieties. Commissions on mutual funds can be as high as 5% of your share purchase price; commissions on annuities may be as high as 100% of the first annual premium! You pay these commissions, either directly or in the form of lower performance or higher fees, as compared to the no-load varieties.
- The best way to hire a money manager, for all but the very richest among us (i.e., the 1%, and if you're in the 1% you're probably not reading this book), is to buy low-cost actively managed funds. The best money managers only work with enormously large balances, which you probably don't have. Both this book and Pound Foolish sing the praises of the Vanguard Group (www.vanguard.com) in providing low-cost, no-load funds, both indexed and actively managed.
- There's no such thing as free advice. Any free advice is always trying to sell you something. That may be selling you on their funds, or on the idea that day trading is a good idea because they make commissions on your trades, or directly selling you products for which they earn a commission even if other products might have better returns or be better for your strategy.
Incidentally, I find it curious that some reviewers gave the book a lower rating because "most of the book didn't apply to me." The best time to read advice, or at least know that such advice exists, is before you need it! Then you'll remember the advice (or at least remember to look it up) when the situation comes upon you. But I have also been told that unlike me, most 20-somethings aren't highly focused on long-term goals and planning for retirement. ;)
If you want this advice in shorter form, written to target a younger and hipper generation, look for Financially Fearless: The LearnVest Program for Taking Control of Your Money. Yes, she is also trying to sell you something (namely the LearnVest money management program), but I personally didn't feel like her company got in the way of her advice (which is not free, because somebody paid for the book :) ). Now that I've read both books, I don't see any conflict of interest in Financially Fearless; but I am older and stodgier than she is, so I needed more advice about things like child care expenses and saving for college.
