March 23, 2005

News & Opinion: The Last Personal Finance Book You’ll Need

By: 800-CEO-READ @ 7:38 PM – Filed under: Management & Workplace Culture

There are some unfortunate genres, such as self-help books, that are littered with crap. Personal finance books are another field of dreck. Let’s not name names. But in the former I shy away from cheesy, desperate, unctuous, and superficial books; and in the latter I pretty much avoid…the same.

Good news. The last six months have been a very good time for finance books, with a new release capping this encouraging phase. Any discussion must start by touting Eric Tyson and his lovely Personal Finance for Dummies. This book certainly isn’t new, but it occupies a special place in my heart—not simply as the best of the (often dismissed) Dummies line, but as an excellent blend of wisdom and practicality and clear advice on how to proceed.

But what’s new? First off, three titles from Portfolio. Last year Jean Chatzky spoke to us about her new, excellent book Pay It Down: From Debt to Wealth on $10 a Day. Her publisher has wisely reissued her prior book The Ten Commandments of Financial Happiness: Feel Richer with what You’ve Got, which is another smart guide that addresses the key human and emotional aspects that lead to financial discipline, and health.

Add to this list the clever Bad Debt, Good Debt: Knowing the Difference can Save your Financial Life from Jon Hanson. Debt, says Hanson, is neither good nor bad. It simply is. Having too much is bad, while having a manageable level in terms of the overall picture is acceptable. His book benefits enormously from his perspective, as he shares how himself was plagued by the demons. He speaks as one who learned his lessons from hard experience. A smart and engaging read.

But the real deal is All Your Worth: The Ultimate Lifetime Plan by Elizabeth Warren and Amelia Tyagi Warren.

Why? This book raises the bar for all other personal finance books by shifting the way in which it is discussed. These authors have a fundamental understanding of both the economic context driving household decisions, and the individual makeup that often leads people to poor choices. They deal with both threads, and in the process present the challenge of managing money proportionally in the scheme of life. Their core argument is that people must balance their financial life—to allocate wisely between essentials, wants, and savings. Sure, this sounds like common sense. But when is common sense common? And how many of us really do live by a consistent set of financial principles?

Principle is actually the key word here. For while the authors share a wealth of tips, many of their tactics, while wise, feel almost perfunctory, an almost tacit admission that so much financial advice is a mere intellectual commodity. These authors seem more comfortable drawing from a deep and abiding set of principles culled from experience. Mom teaches bankruptcy law at Harvard Law School; daughter is a former consultant and HBS grad. Together they wrote the The Two-Income Trap: Why Middle-class Parents Are Going Broke, a brilliant book detailing the vast changes in the personal finance landscape of the past two decades. The rules have changed profoundly, they argue, for most Americans. Paying for the essentials of life, such a mortgage and health care has become a more difficult challenge for myriad reasons, among them a different attitude about lending standards.

Their background deeply informs this personal finance book. They understand the primary importance of establishing a budget that deals with first things first—the essentials of life that occupy a disproportionately high a percentage of spending for too many Americans. They focus their advice on achieving a balance of paying for essentials, for fun, and for savings. Their advice doesn’t offer trivial solutions to profound problems (by showing how to clip coupons for example.) It helps people stay focused on the most important financial issues that rule their life.

The enduring value of this book comes from a sensible, informed, and even passionate voice of reason about how individuals today can make the right financial decisions. Moreover, given the current march of the terrible bankruptcy bill in congress, the book couldn’t be more timely.

To read the intro to the book, click here. And, click here for an author Q&A.