Confused about where to start, he approaches his father.  His dad sends him to a surprising mentor - their barber, Roy.  The father explains that Roy taught him everything he knows about money, and offers to call Roy and let him know that Dave is coming in for a lesson.

Dave, joined by his sister Cathy and best friend Tom, go to the barber for a financial lesson.  Roy is a small town barber who has amassed a small fortune on a small salary.  He explains that he did this by following a few simple rules, and offers to teach them to the trio on a monthly basis.

The lessons include:

1. Take 10% of your salary, and save it by paying yourself first.  This is not a retirement or emergency fund – it’s a get rich fund.  Every time you get paid, take 10% of your paycheck and invest it.  The author suggests mutual funds, but I’d be willing to bet that if I had a newer copy, he might suggest index funds too.  I’d add the caveat that you should invest 10% or your pre-tax salary if you really want to get ahead.
2. Make sure you have a will and life insurance.  You need to think of your dependents, even if you’re not around.  No dependents?  Don’t worry about life insurance
3. Save for retirement, and don’t rely on social security.  No advice on how much to save, but he explains the different types of retirement plans available, including 401K, 403B, IRA, pensions, SEP (Simplified Employee Pensions), and Keoghs (for the self-employed).
4. When deciding whether to rent or buy, do a comparison and make sure you think of the consequences.  Roy leans heavily towards buying a house due to tax advantages, increasing value, and leveragibility, but he also points out that depending on your situation, renting might be a better value.
5. Be thrifty and frugal in your day to day finances.  The barber suggests having a budget, but also says if you’re saving and planning for retirement, you can afford to be a little wasteful. 
6. Make smart investments (even if the investment is paying down debt), and learn how to minimize your taxes
7. How to handle emergency funds – only have a small one.  This one of the few areas I disagree with.  The author says that you don’t need to worry about having a significant emergency fund, as you can always use credit cards or loans in a crunch.
8. How to save for your childrens’ education
9. The importance of disability insurance.  I agree completely.  All it takes is one accident to change your way of life and ability to earn an income.  You need to protect against this if you want to protect your lifestyle.
10. The importance of staying informed of financial news.  You don’t need to check your investments continuously, but you should at least be aware of what’s going on in the economy.  An informed investor is a smart investor.

Unlike many books that make finance seem too complicated, the Wealthy Barber emphasizes that anyone can get rich.

The fictional story line makes for an entertaining read, even if the jokes are corny.  The three protagonists provide a good sample of the potential audience: a married man with a family, a single business owner, and a single worker.  The diversity shows that the lessons apply to you, regardless of your situation.

This is a great read for everyone.  It covers the basics of finance well, and also makes the principles of building wealth available to everyone, regardless of income.  It’s an enabling and encouraging point of view.

Executive Summary:

Title:  The Wealthy Barber

Book Jacket Summary:

Regardless of your income, you are probably making a salary that would have looked like a small fortune just a few years ago.  And yet, if you’re like most people, you are not on your way to financial independence.

The amazing thing is that even if your income were twice what it is today, or more, you would not necessarily be any wealthier.  Most people simply become broke at a higher level – the more they earn, the more they spend.  And if you’ve tried budgeting, you’re realized that it is as ineffective as dieting – it only makes you feel deprived.

Thankfully, with this special book, there’s a way for you to become wealthy gradually, starting today.  The Wealthy Barber has already shown hundreds of thousands of people how to improve their fortunes by taking a few simple and painless steps.  And by successfully helping so many get ona  sound financial track, it has proven that a small salary is no barrier to financial well being - as long as you follow its simple, easy, and enjoyable plan.

Author:  David Chilton

Target Audience:  Everyone

Pages:  200

Topics / Chapters:

1. The Financial Illiterate

2. A Surprising Referral

3. The Wealthy Barber

4. The Ten Percent Solution (saving and investing money to get rich)

5. Wills, Life Insurance, and Responsibility

6. Planning for Retirement

7. Home, Sweet Home

8. Saving Savvy

9. Insights into Investment and Income Tax

10. Graduation

Should I Read It?  Read it twice

I’ve never taken the time to figure out exactly how much money I need for retirement.  And more importantly, I’ve never stopped to think about what I want to do when I get there.

Lee Eisenberg tackles both of these topics in “The Number – A Completely Different Way to Think About the Rest of Your Life.”  For me, the book was an eye-opener.

The Number is that magical net worth you need to stop thinking about a career and start thinking about fulfillment.  It’s best summarized by a Wall Street broker in the book: “it’s f*ck you money”.  After your net worth reaches this number, you have freedom.  Freedom to walk away from your job and travel the world.  Or start your own business.  Or dedicate yourself to a higher cause.  All this assumes that you’ve planned accordingly, and have reached your goal.

Eisenberg doesn’t tell you exactly how to calculate your Number.  Instead, he suggests some resources and gives you some things to think about.  First, you have to know what you want out of retirement.  Where you want to live (and how many houses you’d like).  What kind of lifestyle you want.  How much money you’d like to give to charity, or to your family.  How often you’d like to travel.

Most importantly, he gives advice on the hardest part of retirement: figuring out what to do with your time.  Even if you have all the money in the world, it won’t bring you happiness unless you use it to do something that brings you a sense of fulfillment.  This is what sets “The Number” apart from other books.  It doesn’t tell you what to do.  It forces you to think about what drives you.

Its secondary goal is to help you prepare for retirement.  To do this, you have to consider the difficulties and uncertainties you’ll face along the way.  Among them are an uncertain economy, social pressures to spend, and the potential of being drowned in a sea of complicated and ever-changing financial choices.

This book is definitely aimed at an older crowd – baby boomers on the verge of retirement – but I don’t understand why it is not marketed at a younger crowd.  The principles apply to all ages, but you’re in a better place to adjust your plans at a younger age.  After all, time is our best friend in the financial world.

Title:  The Number: A Completely Different Way to Think About the Rest of Your Life

Book Jacket Summary:

It’s the burning question for 76 million baby boomers.  It is a question that ought to burn for everyone over thirty.  It is a life-defining issue.  most of us don’t want to face it, but we have to.  It’s The Number: How much money do you need to secure the rest of your life?  Do you know what your Number is?  Do you know how to think about it?  Do you know what you want to do with it?

In this new and fascinating book, Lee Eisenberg looks at The Number as no one has before.  The Number allows all of us to face our inner demons, and our dreams.  The concept, and the book, are impossible to forget.

Lee Eisenberg left a successful career in journalism in search of his Number.  Along the way he realized that he was but one of millions setting off for the rest of their lives without a good map.  He took an intriguing and entertaining tour – speaking to wealth gurus, life coaches, financial advisers, everyday investors, and many others, to explore the secrets of The Number.  The result is a provocative field guide to our psyches and finances, and an urgently useful book for every man and woman over thirty.

The Number will help you have the money conversations you have been avoiding.  It will help you think about the kind of life you wan, and the kind of help you need to achieve it.  It will make you laugh, ruefully and otherwise, and it will scare the living daylights out of you.  It will help you discover:

- whether you are a Number procrastinator, plucker, plotter, or prober

- why you wander through your financial “lost years” until it is almost too late

- why young people always under call their Number

- why downshifting into retirement is so challenging

- how the second half of life is being reinvented as we live on for decades, forging new patterns of work and recreation.

The Number will help you answer the biggest questions of all: What should you do with the rest of your life, and at what cost?  It is the one book to read before you talk to an investment adviser, before you flip open a retirement guide – and above all, before the rest of your life slips by, unexamined.

Author:  Lee Eisenberg

Target Audience:  People over thirty, but I think any age can benefit

Pages:  248

Topics / Chapters:

1. Welcome to Numberland

2. A Field Guide

3. The Eisenberg Uncertainty Principles

4. Debt Warp

5. The Lost Years

6. Alone at Sea

7. The Forest for the Trees

8. Crash Dummies

9. The Health and Welfare Crash

10. Covering your Assets

11. Advice Squad Confidential

12. Night Sweats

13. Downshifting with Jung

14. Sun Spots

15. A Needleman in the Haystack

16. Deep Breathing

17. Bottom Lines

Should I Read It?  Yes.  It’s aimed at an older crowd, but everyone should think about this topic, even at a young age.

Are you saddled with debt and have no idea where to start?  If so, then this is a good book for you.  If you don’t have debt or you already have a plan, you may better off skipping this one.

The author starts by helping you assess your spending problem by clearly listing out all of your monthly expenses and incomes.  This shows the (presumably negative) net income you have.  This is a great idea, because I think you have to be fully aware of your problem before you can do anything about it.

Once you realize the extent of your problem, the author helps you make a plan for fixing it.  I like her approach – for a goal to be useful, it has to be specific, have a timeframe, and be measurable.  A good example is to “Be debt free is three years by spending $10 a day paying down debt”.  I think all goals should follow this format, because you can see how well you’re achieving it at any time.  Vague goals won’t help if their open ended.  A goal that’s not measurable isn’t a good goal either.

After that, the book focuses on tracking your spending, and identifying ways to save money.  If you’ve been budgeting for a while, you probably already know all these.  If you’re just starting out, it could be helpful.

The goal of the author is to help you free up $10 a day to put towards debt or buidling wealth.  It’s a good idea, but shortsighted.  $10 is a good start – but by no means a destination.  I think she should have put more of an emphasis on constantly increasing the money you put towards debt or building wealth.

The rest of the book gives advice for how to pay down debt, and what to put the money towards.  It also has tips on how to deal with financial hardships, like when you can’t afford to make minimum payments on credit cards.  Again, seems like the book is aiming low with it’s goals.

Some of her money saving advice is decent, but I disagree with her in some areas.  As an example, the author advises that you should be putting money towards an emergency savings fund even if you have debt.  I disagree with this.  Keeping money in a savings account when you have outstanding interest is a losing proposition.

Overall, the book is great for if you’re just starting out, have lots of debt, and have no idea how to reign in spending and start paying off debt.  If you’re already budgeting – including money for paying off debt – then you probably don’t need to read this.  Her ideas for how to set goals and how to save money could be helpful for anyone.

Executive summary:

Title: Pay it Down – from Debt to Wealth on $10 a Day

Authors: Jean Chatzky

Target Audience: People with debt who do not know how to reign in spending or make a plan for paying it off

Pages: 214 (small pages)

Topics/Chapters:

0. The Promise – Getting Ahead and Staying Ahead

1. Assess the Problem

2. Break Your Challenge into Manageable Steps

3. Know and Manage Your Credit Score

4. Track Your Spending

5. Find the Money

6. Find the Money: Consolidating Your Debts

7. Find the Money: Spending Less

8. Find the Money: Making Hard Choices, Selling Assets, Earning More

9. Pay it Down – Intelligently

10. How to Deal When Things Go Wrong

11. Staying Ahead of the Game

12. Afterword: Congratulations

Should I Read it? Read it if you have trouble with debt

Most money books just tell you what you should be doing – which most of us already know, but ignore anyway.

“Why Smart People Make Big Money Mistakes – and How to Correct Them” is unique in that it examines why we don’t do the things we know we should be doing.  It seeks to improve your finances by helping you examine - and more importantly - change the way you make decisions.

I’m a big believer that if you want to change anything in your life, you have to change the way you think.  This is the perfect book for that.

The authors tackle topics such as:

• Mental accounting – the tendency to value certain dollars more than others depending on where they came from or where they’re going
• Loss aversion – the fact that a loss tends to feel twice as bad as an equal gain would feel good
• Sunk cost fallacy – the habit of considering past expenses with regards to future decisions
• Indecision – why we hesitate to make decisions, and what it can cost us
• Number illiteracy
• Bigness bias – the tendency to overlook small costs or bury them in larger expenses
• Anchors – latching on to a piece of information that has nothing to do with question at hand

They examine each of these tendencies, showing how they help us, but more importantly how they hurt our finances.  They do so in a way that is witty and entertaining.  They frequently question the reader to prove how they are prone to the traps mentioned above.  Even when you’re aware that the authors are trying to trick you, you can’t help but fall for it.

By being aware of the tendencies listed above, we can avoid making mistakes, and genuinely change our life and our finances.  They don’t just treat the symptoms of poor finances – they treat the illness at its core.  It’s already had an impact on me, in that I’ve decided to start an IRA before my debt is paid off.  Thanks to the book, I realized that I was valuing today’s dollars more than I would a greater number of dollars in retirement.

As soon as I finished it, I read  it again.  It’s funny and entertaining, and the authors keep things interesting by using a mix of examples, psychology, and statistics to prove their points.  The emphasis is to change the way you think, but the book is also full of sound financial advice.

This book is a must read for anyone, regardless of their age or financial savvy.

Executive summary:

Title: Why Smart People Make Big Money Mistakes – and How to Correct Them

Authors: Gary Belsky and Thomas Gilovich

Target Audience: Everyone

Pages: 220

Topics/Chapters:

0. Introduction to the new science of behaviorial economics.

1. Not all dollars are created equal – how mental accounting can help you or cost you money.

2. When six of one isn’t half a dozen of the other – how “loss aversion” and the “sunk cost fallacy” lead you to throw good money after bad.

3. The Devil That You Know – How the “status quo bias” and the “endowment effect” make financial choices difficult.

4. Number Numbess – “Money illsion”, “bigness bias”, and other ways that ignorance about math and probabilities can hurt you.

5. Anchors Aweigh – Why “anchoring” and “confirmation bias” lead you to make important money decisions based on unimportant infromation.

6. The Ego Trap – “Overconfience” and the price of thinking that you know more than you do.

7. I herd it Through the Grapvine – “Information cascades” and the danger of relying too much on the financial moves of others.

8. Conclusion – Now What? - principles to ponder and steps to take

9. Postscript -Psychic income

Should I Read it?  Read it twice

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I always have a bag of mixed emotions towards the big name financial gurus – like Suze Orman, Dave Ramsay, Robert Kiyosaki, etc….

I think that they all have some valid and insightful points to make, but at the same time you have keep in mind that they are trying to sell a brand – themselves.

This is true for Suze Orman’s “The Money Book for the Young, Fabulous & Broke”.  It’s her book targeting young adults.

The name is terrible, but the book itself is decent.  The formatting and writing are interesting and pleasant to read, and it’s easy to breeze through chunks of the book in one sitting (the mark of a well written book).  Chapters begin with a general overview, then drill down into details on the subject.  After that is a series of important and commonly asked questions.  It’s easy to read, and highlights the important stuff.

Content

More important than the style is the content.  The topics are all relevant, but the message and level of detail deliver mixed results.

She comes up big in areas such as explaining and improving credit scores, a general retirement approach, and balancing love and money.  However, she comes up short or career changes, investing, and real estate.

In the credit score chapter, she explains how credit scores are calculated and how to improve them with a tone that is accessible to beginners but still helpful to people with more of a financial background.

In the general retirement chapter, she explains all the options for retirement – 401K, Roth 401K, regular IRA, Roth IRA.  She then dives deeper and explains the tax implications of them, as well as the consequences of pulling out early.

In her chapter on love, she goes over some tricky topics for couples to manage, and gives advice on how to toe the line without starting World War III.  Also helpful are suggestions for often overlooked vehicles instruments like life insurance, wills versus trusts, and power of attorney.

 For the most part, Suze does a good job managing depth and tone.  However, she fails completely other times.  She has a tendency to overcomplicate simple things, and over simplify things that need more depth and consideration.

The career change chapter is a perfect example of this.  She tries to instill a can-do attitude for quitting and finding jobs which is great, but just not really practical, especially given the current economic landscape.

The investing chapter is perhaps the biggest failure in the book.  Nowhere in the chapter does it talk about balancing risks and returns – a potentially fatal error.  She preaches diversity and recommends how to balance indices and mutual funds, but doesn’t explain why or the benefits and drawbacks of each option.

The home buying chapter is another area that she tried to oversimplify.  She never suggests comparing renting to buying (which could make more sense depending on the situation).  Another big oversight is her unbridled support for 5/1 adjustable rate mortages – which she deceivingly refers to as “hybrid mortgages” before calling them the “Goldilocks” option.

She doesn’t stop there…later in the same chapter, she says how crucial it is to use a mortgage broker, and suggests that brokers can often get you a better deal than if you worked with banks directly.  I cannot disagree with this more strongly…I went to banks myself and got better deals through them than I could’ve through any broker. 

I feel like irresponsible mortgage brokers are one of the main causes of the real estate bubble and the subsequent crash and credit crunch.  Suze’s support for these snake-oil salesmen show that she can be out of touch with her audience at times.  After all, this is her first foray into young audiences.

Another area of frustration for me is her approach to budgeting…she doesn’t believe in it.  Her exact words are “screw budgets”.  She compares them to fad diets, but this is a bad metaphor.  Budgets – like your diet – should be sustainable and flexible.  Not something that is done temporary, but maintained and adjusted as your goals and motivations change. 

To suggest that young people – who need budgets more than anyone – should ignore them altogether is irresponsible at best.  Making a budget and tracking finances can be hard work, but it’s absolutely necessary.  If being rich was easy, everyone would do it.

Another failure is her assumption is that young people are living within their means, they just don’t have enough money to cover their needs.  Chances are that most young people aren’t living within their means.  If someone doesn’t have enough money to cover the essentials, then they need to change.

Again, I think this was a big miss for Suze.  For the most part, it’s easy to look at the math of finance and wealth.  What’s harder is to convince people to change their mindset, and Suze abandons the topic altogether.

Online Tools

The book comes with a password for a corresponding website, which might be more useful than the book itself.  It contains calculators for everything from debt reduction to mortgage amortization to life insurance.  The book gives you the background info, and the site tells you what to do with it.  The calculators really hit home how much of a difference small factors can make in your finances.

Another great tool is a personalized plan for financial improvement.  You enter information about yourself, such as your debts, mortgages, savings, bills, etc… and it creates a detailed, step-by-step plan that can be updated as you complete each step, or your life changes.

Summary

If you can take what Suze says with a grain of salt, there is valuable information and advice in here.  The trick is to read everything with a critical mindset.

In spite of some of her failures, this book is an asset for financial beginners and intermediates…as long as it’s not the only thing you’re reading.  The price of the book is worth it just for the website alone.

Executive summary:

Title: The Money Book for the Young Fabulous and Broke

Author: Suze Orman

Target Audience: Financial beginners/intermediates

Pages: 394

Topics/Chapters:

1. Know the Credit Score

2. Career Moves

3. Give Yourself Credt

4. Making the Grade on Student Debt

5. Save Up

6. Retirement Rules

7. Investing Made Easy

8. Big Ticket Purchase: Car

9. Big Ticket Purchase: Home

10. Love and Money

My Recommendation: Read It

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