Well Jean Chatzky wants to help you with that. She recently came out with a new book called “Money Rules” that’s different than your average personal finance book. 

It’s a collection of the money rules she follows and has spent the last 20 years developing on the personal finance beat.  There are 94 rules organized into sections: Make Money, Save Money, Avoid (Most) Debt, Spend Wisely, Invest for Tomorrow, Cover Your Assets, Do’s and Don’ts.

The Money Rules

The rules are short, each just a sentence or two.  She follows most of the rules with a paragraph or two that goes into more detail.  None of the rules and the accompanying description are more than a page long. I like how she kept each one short and concise, this actually allowed her to do something a little different with the layout of the book.

The actual dimensions of the book are pretty small. I was able to slip the whole thing into the pocket of my shorts when I took my kids to the park and browse the rules as they were running around the playground.

I like the idea that not only are the rules short and easy to remember, but you can also take the book along with you and refer to it when you need it.

The rules Jean lists out are good ones to follow. Some are common sense and seem rather obvious. Other are kind of neat, that you might not think of off the top of your head, and so they’re kind of neat little useful nuggets.

There are a few that I might change a little bit and there are some that I agree with 110%. Here’s a list of my 25 favorite rules:

• Know your worth on the open market.
• More money won’t always make you “more happy”.
• There’s no such thing as chump change.
• Financial plans don’t fail, people fail.
• Aim for progress, not perfection.
• Saving is more important than investing.
• Doing nothing can be very expensive.
• Just because someone will lend you money doesn’t mean you should borrow it.
• Just because you have a coupon doesn’t mean you should go shopping.
• Don’t shop angry / Don’t shop sad / Don’t shop hungry
• The salesperson is not your friend.
• In any transaction, ask “what’s in it for them”?
• Bottom line is only line that matters. (don’t ignore investment fees)
• Nobody cares about your money as much as you do.
• If you can’t figure out what an investment (or advisor) is costing you you’re overpaying.
• If there’s a bandwagon you’re too late.
• Date your stocks, don’t marry them.
• The market doesn’t make mistakes, people do.
• Hope is not an investment strategy.
• The harder the sell, the faster you should run.
• Quit Smoking / Lose Weight
• Spend more time building a legacy than an inheritance.
• Don’t lend money to friends and relatives.

Easy to Read

This book is a short read because it’s pretty small. It’s one of those books that you can actually read a little bit at a time, each page is a lesson in itself. You can stuff it in your pocket or purse, and just pull it out when you are standing in line or sitting in the waiting room.

If you sit down and read it all at once you can get through it pretty quickly. One cool way to do it would be to read a rule a day.  So over a 94-day period you could absorb one rule each day – you could read the rule multiple times to have it stick with you.

Summary

I really like Jean’s approach to this book – it kind of reminds me of the book “Eat This, Not That” that helps you decide what you should or shouldn’t eat when you’re out at a restaurant. Money Rules does something similar for your money. If you’re out shopping you can quick flip to the spending section if you’re debating something and read the rules to help decide whether you should buy it or not.

Being able to take a complicated and lengthy subject and simplify them into small concise explanations and rules is a talent. I think what Jean has done, taking her years of experience in the personal finance world and consolidating it into this valuable set of rules, is a very useful thing for readers and I would recommend that you check out the book.

The first chapter in a new book about lending and borrowing on Prosper is entitled “How & Why Prosper.com Will Revolutionize America”.  The book is called “The Complete Guide to Prosper” and is authored by Sean Bauer, a borrower, lender, and group leader on Prosper.

It’s nice to see an author enthusiastic about the topic they’re covering but I think “Revolutionize America” is a little over the top. Perhaps a more appropriate title for the first chapter might have been “How and Why Prosper Can Become Your Personal Banker”.  Bauer explains how Prosper makes this scenario possible by cutting out the middle man.  Of course, when you remove the bank from the borrowing and lending equation new risks are introduced.

Peer Lending Risks
The first chapter responsibly covers these risks right up front to help people understand the potential downside risk that peer to peer lending does face in terms of loan defaults.  Really the only risk that I saw listed for borrowers is that they might spend their time building a listing only to not have their loan funded. I suppose another possible risk for borrowers would be that they could over extend themselves and borrow more than they could afford to pay back. 

Benefits of Peer Lending
People borrow on Prosper for a wide range of reasons such as funding a new business, consolidating debt at a lower interest rate, or simply just improving their credit score.  Bauer lists the ways that Prosper benefits these borrowers:

• Borrow for a fixed 3 year term, unlike the perpetual debt of credit cards
• Get the amount you need, not what the bank’s willing to lend
• Access to funding not available through traditional banks
• Potentially lower interest rates
• Ability to use groups for support

One benefit I don’t think he mentioned is the ability to apply for a loan from the comfort of your own home.  This could be especially beneficial to someone who has a disability that can’t easily make it into a bank or even a single mother who doesn’t have the time or patience to drag her rambunctious kids into a waiting room while she applies for a loan in person.

Bauer also covers how Prosper benefits lenders, here are the key points:

• You can beat the interest rate offered by your bank
• Lend as little or as much as you’d like, minimum $50 – maximum $25,000
• The ability to lend small amounts allows you to easily diversify your investments across multiple loans

Since the book is all about Prosper it doesn’t mention that you can get involved in peer to peer lending with an even smaller initial investment, only $25, at another peer site called Lending Club.  Lending Club is actually offering a $25 bonus for new lenders so you can basically give peer lending a try at no risk.

Complete Guide to Prosper
After explaining what Prosper is and how a borrower or lender could benefit from it’s use Bauer goes on to provide a users guide to borrowing and lending on Prosper in subsequent chapters.  The chapter list is below:

• Getting Started on Prosper: Creating an Account
• Borrowing: Should You Borrow With Prosper?
• Borrowing: Creating Your Borrower’s Listing
• Borrowing: Endorsements Give You a Helping Hand
• Borrowing: Managing Your Loan
• Groups: Take Advantage of Their Huge Potential
• Groups: Starting Your Own
• Groups: Managing Your Group for Success
• Lending: Becoming a Lender
• Lending: Listings
• Prosper.com Fees
• Tools for Using Prosper.com
• Forums & Conclusions

Book Review
Peer lending is a relatively new addition to the personal finance industry. Anytime something new and different is introduced people look for resources to help them understand the new development. After reading through the The Complete Guide to Prosper, I think it would be a good resource for anyone that’s heard about peer lending but isn’t really sure how it works or how they could benefit from it. 

Book Launch Special Offer
The book goes on sale today on Amazon.com and as part of the book launch the author is offering several bonus gifts to anyone that buys it within the first 24 hours.  You can see the details of the offer and how to claim it here.

If you’re interested in learning more about peer to peer lending, I have an extra copy of The Complete Guide to Prosper that I’m giving away. I’d prefer to ship the book to someone that will make good use of it, so I’ll mail it to the first person that opens a Prosper account through this link and sends me an email with their new Prosper screen name.  Hopefully the book will guide you through your first borrowing or lending experience on Prosper.

My recommendation was The Intelligent Investor by Benjamin Graham, here is what I had to say about it:

I’d recommend this book to anyone wanting to understand fundamental analysis of a business and its stock. I love the distinction that Graham draws between an investor and a speculator; it runs through my head every time I make an investing decision. I’d go with the revised edition of The Intelligent Investor with commentary by Jason Zweig; it really helps apply Graham’s principles to today’s financial markets.

The list includes books on how to get out of debt (No Credit Needed), how to be a millionaire (Generation X Finance), and how to be a passionate entrepreneur (Wise Bread).

Reading a personal finance book won’t do any good unless you take action after soaking in the message or tips but if you can apply what you learn the time you spend reading a good book can be a valuable investment in itself.

I’d also recommend not trying to charge through a bunch of books at once.  Pick one, take the time to go through it and really understand the concepts it’s trying to get across.  That being said, there are ten other great book recommendations that Nickel covers so you have plenty of reading to tide you over for months to come. Enjoy!

As I read through the Quiet Millionaire I ran across a list of things that can be damaging to our personal finances.  I’ve given my take on each one:

1) Undisciplined Spending
Discipline is not a fun word; a lot of times we associate it with the opposite of fun.  However, the truth is that being disciplined doesn’t mean you can’t have fun.  It really just means you have to do a little more planning for your fun and be able to find ways to have fun that don’t cost so much.

2) Materialistic Thinking
Being happy is not about what you own but rather what you look forward to.  Take this sentence for example:

“I can’t wait to drive my Mercedes to our $1 million home, catch an episode of “The Office” on our $2000 TV, and then enjoy dinner with my wife at our $1000 dining room table.”

Now compare that to this sentence:

“I can’t wait to drive home, catch an episode of “The Office”, and then enjoy dinner with my wife”.

Does it really matter whether it’s a Mercedes, a $1 million dollar home, an expensive TV, or high end dining room table?  What is it that you’re really looking forward to, that’s what matters the most.

3) Burdensome Costly Debt
Everyone wants to be in charge of their own future.  How can you be in charge of your own life when you owe everything to debtors?  Not only will debt prevent you from building wealth, it can also prevent you from building a life.

4) Taxes
This is a tricky one.  We have to pay taxes but they definitely eat away at the amount we have to spend now or invest for the future.  Tax planning to minimize or defer the amount of taxes you pay can give you more money to work with.

5) Inflation
This obstacle is a sneaky one.  Since you never have to write a check or pay a bill to inflation it’s easy to forget that it exists. The Quiet Millionaire refers to it as the “silent erosion of wealth and purchasing power”. You should factor the effect of inflation into all of your long-term financial planning and calculations.

6) Poorly Structured Investment Portfolios
“Undiversified investments possessing an unjustifiable amount of risk relative to the potential for reward.” The simplest way to overcome this obstacle is to put your money in index funds across the spectrum of asset classes. We met with a certified financial planner to help us evaluate our current investments and choose the best index funds for us.

7) Unforeseen Life-Changing, Financially Devastating Events
This is the scariest obstacle to me since a lot of it is largely out of our control. The book gives examples of things like medical expenses, divorce, job loss, disability, death, and law suits.  You can work to prevent some of these but the best defense is to insure against them so you have some help if and when they do occur.

What is a Quiet Millionaire?  I’m not exactly sure yet but I imagine I’ll figure it out as I read the book the Quiet Millionaire – A Guide for Accumulating and Keeping Your Wealth by Brett Wilder. The publisher sent me a copy of the book to review and I broke it open this weekend. I’d like to be a millionaire of any type; loud, quiet, or any volume so we’ll see if this book is helpful for reaching that goal. I did particularly like one paragraph in the book intro:

“Financial miracles do happen, but the quiet millionaire does not wait for a miracle in order to become financially successful. Depending on what and how much you want, you need to commit to taking action and to making some well-thought-out, informed choices, regarding what is really important to you and your financial life. This may require you to throw in some willing sacrifices, steadfast perseverance, and rolled-up sleeves hard work.”

The Importance of Money
The first chapter, “What is Important about Money to You”, is really about defining who you are, what your goals are, and what you want out of life.  This is a pretty standard intro for many personal finance books and for good reason.  In the end it’s not really about the money, it’s about what the money does for you.  As Wilder says, “Money is the fuel for achieving your life goals and objectives.”

Personal Self Discovery
The book offers two interesting methods for personal self-discovery that can help us reflect and perhaps re-evaluate our thoughts about money. 

The first is “Listening to Yourself”.  It’s pretty simple really, just setup a microphone and start talking out loud to yourself about your financial situation and what changes you want to make.  Wilder suggests that as you play back your recording you’ll notice places where either you’re not being honest with yourself in your answers or you’re not really sure of what you want.  These are the areas you need to clear up before making financial plans.

The second method is “Writing to Yourself” a daily diary.  Basically, a daily diary of your thoughts; he recommends doing it first thing in the morning with a fresh mind.  The approach he likes to take is to “let it all out” as you write then go back and review it later on.  The goal here is to learn more about your about your inner self and later build your financial goals around your hopes and dreams.

So far, a good start to the book.  I’ll write more in the future when I find time to progress on to the next chapters.

Rich people are a bit of a mystery to many of us.  I’ve never viewed the world from their perspective and sometimes find myself begrudging them for their success and vast resources.  I mean come on, who isn’t jealous of rich people now and then?  But without them, how would our economy survive?  Despite our occasionally envy of them, are they necessary to make the financial world go round?

Hunter Lewis recently released a book that discusses the question Are the Rich Necessary? I was given an advance copy of the book by the publisher to read and review but simply ran out of time.  There is an interesting review of the book by Thomas Kostigen on MarketWatch and another by Lisa Von Ahn from Reuters.

If you’re interested in reading the book, I’m giving away my copy.  Leave a comment on whether you think the rich are necessary or not. I’ll randomly select one commenter and send them my copy.  You might check out the articles first for some food for thought. Rich people shouldn’t leave comments, they can afford to buy their own copy : ) Just kidding of course, I’d like to hear perspectives from all sides.  Maybe we can get the rich Millionaire Mommy Next Door to lend her thoughts.

The Millionaire Next Door
I think the first personal finance book I read that really got me excited about the power of frugal habits combined with long term savings was the Millionaire Next Door. I like to think our family follows the basics of living frugally and saving/investing money as described in the book.

Smart Couples Finish Rich: 9 Steps to Creating a Rich Future for You & Your Partner
I also enjoyed Smart Couples Finish Rich; not so much because of its unique content but because it’s a personal finance book I could get my wife to read. Obviously having both partners in a marriage on the same page is necessary for successful financial planning and execution. 

One last comment on personal finance books; it’s not enough to just read them, you have to put the practices you learn about into place to make a difference. It’s easy to get pumped up about saving or making money after reading one of these books, it’s another to get out there and make it happen.

I’d say you’re much better off just reading one or two books about money and then taking the time to make changes in your life; rather than spending time staying up on the latest personal finance best seller. Once you’ve implemented what you learned, then move onto another book.

I knew I was in trouble when I read this on the back cover of the 4 – Hour Work Week. I’ve been beat up with high stress and long hours at work the last few weeks so quitting is a tempting option.

I’m not ready to jump ship just yet but The 4 – Hour Work Week has me looking at things a little differently in the office recently. The author, Timothy Ferriss, provides an interesting approach for valuing the income you receive based on the work you do.

He suggests four items to help value the money you earn:

• What You Do
• Where You Do It
• When You Do It
• Whom You Do it With

If you’re in control of all four W’s then you have much more freedom in your life and it’s easier to live with lower monetary compensation. I definitely earn decent money in my current job but the only W I have some control over is when, and that’s only because my hours are somewhat flexible.

This view on the relationship between the income you earn and the freedom you have resonates with me and the theme of this site. Earning a good salary is definitely important to meeting my financial goals but I need to look more closely at the four W’s in the future and evaluate the third of my life that I spend at work. How about you? How many of the four W’s do you control?

Escaping the Cubicle
I was reading about Trent’s speeding ticket late last night when I saw an ad for a new book Timothy Ferriss, the 4 – Hour Work Week. The title of this newly released book makes some promises that sound intriguing.

• Escaping the 9 – 5.
• Living Anywhere I Desire.
• Joining the New Rich.

Count me in!

Punching My Ticket to Easy Street
After checking out the site for the 4 – Hour Work Week and its reviews on Amazon.com I decided to take a chance on the book and see what Timothy had to say about these lofty goals.

I typically don’t fall for such grand promises but it was late and after reading reviews by some people of note, I was intrigued. I’m particularly interested in his experiences on outsourcing life. The book’s on its way, I’ll let you know what I think.

High School Money Book by Don Silver

“I want them to start thinking about money — to make conscious decisions for spending, saving and investing — so they can have financial and personal freedom throughout their lives” – Don Silver

The Ultimate Parenting Map to Money Smart Kids by Linda Leitz

Linda hopes to teach young people the following fundamentals:

“saving 10 percent of what you earn, taking advantage of any kind of retirement plan through your job, working toward owning a house, having enough liquidity to deal with an emergency, and avoiding debt.”

Getting Started: The Financial Guide for a Younger Generation by Brian Jones

Brian was inspired to write the book because “he felt many of the books aimed at 20- and 30-year-olds were dated.”