We review the best small business and investing books
All Your Worth: The Ultimate Lifetime Money Plan
By Elizabeth Warren and Amelia Warren Tyagi
All Your Worth: The Ultimate Lifetime Money Plan, written by the bestselling authors of The Two-Income Trap, is a solid book about the basics of financial planning.
The authors tell us there are many good financial planning books on the market, if you already have a great deal of money and are looking to make more, but there are few books written for the majority of Americans who are struggling financially and who worry about money.
All Your Worth: The Ultimate Lifetime Money Plan helps average people get their finances in order. Harvard law professor and consumer advocate Elizabeth Warren is America's leading expert about the causes of personal bankruptcy in America.
Warren and Tyagi suggest that individuals must get their expenses into balance with their income. In particular, the authors say we should spend no more than 50% of our income on "Must Haves" or expenses that must be paid no matter what (rent or mortgage, utility bills, health insurance, property taxes, etc.). Then, 30% of our income can be spent on our "Wants" (for example, cable TV, tattoos or, actually, anything you want). The remaining 20% of our income should be saved toward building your financial future. The savings become automatic, if you get your must-haves and wants in balance.
The authors point out that historically Americans only spent about 50% of their income on "Must Haves." But, today, there is a trend for Americans to commit more and more of their income to expenses that must be paid, no matter what.
If your "Must Haves" are over 65% of your income, the authors write: "Even the smallest hiccup can seem like a major disaster because there is no extra money to handle anything that goes wrong…. You need to get your Must-Have spending under control immediately."
To get your money in balance, Warren and Tyagi say you can't worry about saving a little bit here and a little bit there. Rather, look at your bigger expenses and find ways to save there. "Count the dollars, Not the pennies," they counsel.
For example, drive a less expensive car. They write: "Buy used…Drive it until it falls apart, and then keep driving it. Drive your car until the odometer flips. Drive it until you're on a first-name basis with your local mechanic. Drive it until you embarrass your kids. And then drive it some more. And laugh all the way to the bank."
The authors show us how to reduce insurance costs, mortgage costs, and other big-expense items. We learn that many people overpay for insurance and mortgages.
We also learn that, due to changes in legislation, it's easier for people to get into financial trouble today, than it was in the past. Years ago, when lenders could only charge reasonable interest rates, lenders needed to be sure people weren't taking on more debt than they could handle. So, if a person couldn't really afford a bigger home, they wouldn't receive a mortgage for it.
But, today, people who struggle to repay their debts are often the most profitable area of lending. This allows the lender to charge high interest rates and hefty fees.
The authors write: "The truth is, debt peddlers don't want you to think about what happens when something goes wrong… . Their only goal is to sneak that monster [debt] into your living room, in the quiet hope that something will go wrong in your life and they can make the big bucks. …That's right: Your credit card company wants something to go wrong in your life. Why? Because that's when they make the most money! That's when the interest piles on, the late fees and over-the-limit charges balloon, and the bank racks up big profits from your troubles."
So, today, consumers need to learn to limit their own spending. The authors write: "…practice saying something we've heard rich people say a thousand times: 'I can't afford that.' … Say it with anger. Put some real heart into it—loud and furious. Now say it with resentment. Fill your voice with bitterness and envy. … Say it with pain. Say it with disappointment. Say it with self-pity. …The best one: Say it with good cheer. Laugh out loud about it."
All Your Worth: The Ultimate Lifetime Money Plan is a great book for people who want to get their finances into balance and avoid financial disaster.