Tuesday, August 9, 2016

#32 [2016/CBR8] "The Money Class" by Suze Orman

John Oliver, always witty and informative, was discussing retirement plans one day, and I saw it on Youtube. That reminded me that I've been working for the same place for four years now, and I still haven't set up my own retirement plan. One of the problems is that I was always distracted by the many other things I could be doing with that money. But the main problem was that I had no idea what I was doing. When the economy was bad, I figured what's the point of throwing my money into a plan where it will just erode away? I also didn't know how much I should be putting in, how I should do my investments, or what I should do with all of the other short-lived retirement plans from my previous jobs. I also have approximately zero interest in this kind of thing. Oliver's piece focused primarily on how to avoid getting overcharged on fees and to find financial advisers that would look out for your best interests. He mentioned Suze Orman a lot when dispensing advice, so I figured, if Suze Orman is good enough for John Oliver, then she's good enough for me.

So I promptly went on Amazon and found a book by Suze Orman that looked helpful, which turned out to be The Money Class (2011). I was going to say this was the most helpful financial book I've ever read, but I'm also pretty sure it's the only one I've ever read. It is clear that this book is geared towards those who have some money coming in, and realistically, a lot of money coming in. Orman recommends having an eight-month emergency fund, buying everything with cash (instead of credit), saving for college (if possible and appropriate), and putting at least fifteen percent of earnings towards retirement. I am in a relatively (although I would very much like to win the lottery) stable position financially, and it seemed a little overwhelming. If I were just scraping by or unemployed, I would have to stop reading this book at the first chapter. However, I thought Orman was clear, encouraging, sympathetic, and practical. Sure, I finished this book about a month ago, and I still haven't set up my retirement fund, but I have a much more clear idea what I want and will be procrastinating no[t much] longer.

Orman wrote this book as a handbook for those dealing with the aftermath of the financial crisis of 2008. One of her themes is that you have to "stand in your truth." For example, you need to look at your mortgage, the value of your house, how long you plan on staying, and your income to decide whether you can afford that mortgage. If you can't, raiding your retirement fund or asking relatives to help you out, will not make any difference. In the long run, you will still have to leave your home, but now you also have nothing to live on in retirement. The best option is to look carefully at your finances and be proactive. She applies this principle throughout the book, including colleges. You can go into a little debt for college, but too much will suffocate you when you graduate. You (or your kids) may be better off going to a cheaper school or starting off at a community college. It is important to honestly look at your finances before making a decision.

Orman's book is split into subjects of: family, home, career, and retirement. She is concise on each subject but touches on a number of important points. Her family chapter advises on loaning money to family members, raising kids with financial savvy, and saving for college. Her home chapter focuses on when to buy a home, if you can afford a home, and when to get rid of your home. The career chapter gives advice to those both employed and unemployed and those looking to start their own business. Finally, the retirement section (and the one most helpful for me at this point!) was split into "Getting Going in your 20's and 30's," "Fine-Tuning it in Your 40's and 50's," and "Living in Retirement." I read all of them, but the chapter I needed was the "Getting Going in your 20's and 30's." Not only did she make clear how important it was that I start my retirement fund as soon as possible, I now have some clear advice on how to invest my portfolio. The later chapters were also helpful in seeing where my parents were in the process and what they will need. There may be better books out there, I wouldn't know, but I just wish I had read this book earlier.

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