The 10 Commandments of Money – How to Survive and Thrive in the New Economy by Liz Weston copyright 2011 published by the Penguin Group Hudson Street Press.
In this book Weston proposes just 10 ‘commandments’ that you need to follow to do well in this first part of the 21st century. For each commandment she starts with her idea of Old School rules, Bubble economy ways (pre 2008) and New rules (how you should do it now).
Although my opinion is that there is no new economy (whoever coined that term was just into marketing), Weston did teach this old dog a few new tricks in this book. These new tricks were how to deal with some things my life did not cover – inability to pay off debt, documentation needed for credit counseling, how to get a report from the insurance database on your claim history and etc.
For the most part, her ‘Old School Rules’ are basic tenants I have lived by (although there were a couple I just flat out disagreed with).
On the whole, she gives sound advice and a few good resources. Each chapter provides a summary of action steps at the end and embedded within each are definitions in boxes for potentially unfamiliar terms.
Read this book to understand and address:
How to create and live within a simple to make and keep budget.
She advocates not plowing through reams of check registers or online transaction reports to see how you spend money. Instead she suggests that you should budget 50% for must have things; 30% for wants and 20% for savings from after tax income.
She also suggests automating as much of your finances as you can and having a targeted pool of money for the big needs and wants in your life (such as new roof, next car or vacation).
How to structure an emergency fund.
She suggests that this should be a combination of cash and credit availability. There are hints on how to build a better credit rating and when to use that instead of cash to deal with an emergency. One surprise for me was that if you have equity in your home, she suggests setting up a home equity line of credit and then not using it unless you have a disaster that severely damages your home.
What the best way to pay off debts is and what to do if you can’t.
She goes deep here on how to get credit counseling, what documents are needed and when you should consider foreclosure.
Why you should be invested in the stock market, in spite of the risks.
Here she thinks you should match the risk you take on to the goals that you have.
How to view the equity in your home.
Her approach is that a home is a home, not a piggy bank. Buy less than you can afford, keep it a long time and remodel only when you want, or if you can get some of the expense back when selling. She shows the best areas to remodel and gives tips on sprucing up at sell time.
When and how to save for retirement.
Her new rule is that you have to start saving as young as you can and for as long as you can. She lists steps to take as you get nearer and nearer to retirement, starting at 20 years out.
Why you should carefully consider your post high school education.
Don’t take on so much college debt that you are burdened for life. She gives alternatives and choices and guidelines for how much to borrow. There is good information on the best way to save to maximize chances of financial aid, ways to manage the student debt load after graduation and what to do if you can’t make the payments.
Basic insurance you should consider.
Her cruise by on insurance covers all types and has 4 basic guidelines: use high deductibles, max out liability coverage, drop unneeded coverage and make few claims.
How to treat finances in a marriage.
She believes that one person should be in charge of day to day money management and both people should make and adhere to the goals and budget. I believe that each marriage is unique and the partners need to work out their own relationships.
How to be an intelligent consumer.
Here she gives free ranging tips on everything from airline and car rental rip offs to advice on how to make complaints or save on your phone bill.
What I liked.
The book was organized well and clearly written. There were several facts presented that were new to me and a few resources I hadn’t found yet. Her old school, bubble economy and new rules were a catchy way to introduce each chapter, however, I felt they didn’t really hold true. As I said above, there is no ‘new economy’ – just more people doing stupid things in the same old economy.
What I wished for.
She didn’t really get into anything much on how attitudes about money affect our finances – which is important enough to be a ‘commandment’.
“What did explain who accumulates wealth and who doesn’t? Venti and Wise concluded it was this: how much the families chose to save. Those who made it a priority to save built wealth, regardless of their income level, individual circumstances or choice of investments.”p 44
“One of the biggest gambles people take in their financial life isn’t related to how they invest, how much insurance they have or any of the other topics that come up when risk is discussed. The biggest risk is having all your income come from a single source.” p 48
“Your home is not a piggy bank” p 107
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What money ‘commandments’ do you live by?