Liz Weston is a popular financial expert because of her advice and understanding of everyday people. She gives clear advice and understands the psychology of people’s behaviors with money as well as the situations that can lead to money troubles.
In recent years, one of those situations is the economic downturn. In The 10 Commandments of Money, Weston compares the old school rules of money management with the bubble economy rules. Then, she gives new rules to help you thrive in our new economic situation.
1st Commandment: Create a Budget that Works in the Real World.
As an example of the rules, the old school rule for creating a budget is to live within your means. The bubble economy rule is to live to the max with easy low payments. The new rule is to follow a 50/30/20 budget to know what you can and cannot afford. In addition to explaining the 50/30/20 budget formula, Weston also gives practical, no nonsense advice for curbing your expenses.
2nd Commandment: Create a Survival Plan with Cash and Credit.
Weston takes the overwhelming statement that you should have a nine to 12 month emergency fund and breaks it down into manageable steps including starting small with your emergency fund as well as 25 jobs you can do on the side to earn more money.
3rd Commandment: Pay Off Debt the Smart Way.
Weston divides debt into three piles–toxic, neutral and good. Unlikely some financial experts who advocate paying off all of your debt first, she advocates getting rid of the toxic and neutral debt, and then building your emergency fund significantly before moving on to eliminating the good debt.
4th Commandment Don’t Avoid Risk. . .Embrace It–but Sensibly.
This chapter is all about investing in stocks. Weston urges sensible diversification. She also suggests you lower the fees you pay brokers as well as stay calm during a stock drop.
5th Commandment: Your Home Is Not a Piggy Bank–Preserve Its Equity.
Weston offers plenty of advice in this chapter that is contrary to the advice most of us have grown up with, and I find that this is the real strength of this chapter. One important point is that you can’t count on your income growing each year to reduce your overall mortgage payment burden as most of us don’t get substantial raises every year in this economy.
6th Commandment: Saving for Retirement Must Come First.
You should save for retirement aggressively, according to Weston. One of her suggestions that I liked the most was to save half of every raise you get. If you get a 3% raise, put 1.5% additional in your retirement account every year. Year after year, this will make a significant increase in your retirement savings.
7th Commandment: Get a College Education You Can Afford.
Sure you may want your child to go to Princeton, but if you and your child can’t afford it without being overly burdened with debt, it probably isn’t where your child should go. Weston speaks frankly to both parents and college bound students to pick realistic college choices they can afford.
8th Commandment: Reserve Insurance for the Big Losses.
Weston shares ways to save on expenses as well as additional protection you may need to cover gaps in your insurance.
9th Commandment: Treat Your Marriage Like a Business.
Too many married people heap all of the financial decisions on one spouse, and the reality is that both should be involved. Weston shares how married couples should work together as well as potential ways money can cripple your relationship.
10th Commandment: Defend Yourself in the War on Consumers.
Credit card companies and banks have increased fees for their customers, and Weston explains how to fight back. She also analyzes other industries that are not friends of consumers.
The 10 Commandments of Money is an excellent read to help you dispel some of the long-held financial myths you may cling to as well as to teach you new ways to handle your money. You’ll appreciate Weston’s experience and common sense approach to money management.
Have you read this book? What are your thoughts?