Wayne and Rebecca Madsen

I don't know much about investing, or retirement plans, or buying a house. These all seem like good ideas in theory, and I thought some general book about making wise financial choices would help me at least define some terms and help me know what I want to learn more about. This book did that pretty well. David Bach has several books all along this "finish rich" train of thought. I can only assume that Smart Couples Finish Rich and Smart Women Finish Rich have similar lessons.

Not all of the chapters were that helpful -- I'm already familiar with "pay yourself first" and "don't live off of credit cards" and how interest can build your loan (which is bad) or your savings (which is good). He also had several chapters on the "true meaning of life" and defining your purpose. I didn't get much out of those chapters. (of course money isn't the true meaning of life...and of course knowing your purpose in life is good) I found the "latte factor" chapter interesting, but not particularly practical because we already incorporate that in our approach to money. Little things add up, yes. Actually, this contradicts other financial advice books that say the little things don't matter and it's the big things -- like rent or housing costs -- that make the most difference. Perhaps Bach's advice on what to do with the little you save on not buying or buying cheaper versions of things makes the difference? He says not just to not spend the money...but to put the money you would have spend into a growing investment of some sort.

The last couple of chapters were on getting a raise or switching to a career or company in which you can move up to get the pay you deserve, and the biggest financial mistakes couples make. Again, interesting, but not much I hadn't heard or read elsewhere. Teach your kids about money -- don't make them learn it on their own. Don't day-trade stocks. Take credit card debt seriously. Get a 30-year mortgage but pay it off in 15. I disagreed with the prenuptial agreement suggestion. But the rest is all good advice.

The chapters I really got a lot out of were right in the middle. Chapters 5-7 were about building your retirement, security, and dream baskets. Bach printed charts illustrating investing in retirement early versus starting to invest later; it always make me feel guilty seeing things like that and thinking I should have been investing in retirement since I was 16! But better late than never. (Unless 401k plans and other retirement plans are going to change the rules or the government collapses between now and when we "retire." It also begs the question, do artists ever really retire? :) ) I also learned that you can withdraw up to $10,000 from your IRA/401k "early" (before you're 59 1/2) without the usual 10% penalty to go to the cost of your first home. You still pay income tax when you withdraw, but you don't have a penalty. We might actually do that. Someday we won't live in California, and maybe then we could buy a house or something.

He also makes good arguments for setting up a will or living trust...especially if you have kids at home still, so you designate what you'd like to happen should something (patooie patooie!) happen. He suggests having life insurance not just on the breadwinner of the household, but on the other spouse too; because if something happened to the stay-at-home parent, costs for day-care and house cleaning and whatever can add up quickly.

Besides considering a 401k, the chapter we might also act on is building your dream basket. Our dream right now is to own a house somewhere somehow. We don't expect that to happen here in Silicon Valley. But after Wayne's done with school.... And so we'll look into mutual funds as well. That seemed to be the best fit for the amount we have to work with and the time frame we have ahead of us. Bach recommends index funds, because they work on the stock market, but your money is being combined with others so you don't need lots of money to get a varied portfolio. And varied is good. Don't put all your eggs in one basket, right? That's the idea here. The stock market in general gets a 10-13% average annual return, but who knows which stocks specifically do the best? We'll have to do more research on load versus no-load, and where to choose a mutual fund from, and whether we can invest more each month (with each paycheck) or not. But I definitely got Wayne interested from the snippets I read him.

So, lots of advice, lots of things to research more fully (why take one person's advice when you could look on the internet for lots more?!). And it wasn't that dry of a read either. For a financial book.