Originally penned more than a decade ago by Beth Kobliner, a former staff writer for Money magazine and financial columnist for Glamour, the revised and updated new edition, is a model personal finance primer. Its return to the bookshelves couldn’t come at a better time for a new crop of young people beset by today’s financial meltdown.
The latest version delivers a dose of present day reality. For example: “It’s easy these days to write off the idea of contributing to retirement savings accounts like 401 (k)s,” Kobliner writes. “You’ve heard scary stories of people losing half their life savings in the chaos of the market. …You don’t feel like you have any money to squirrel away. … You’re off the hook, right? Wrong.
“401(k)s are the best savings opportunity you can possibly have — in this or any economy. And not taking advantage of them while you’re young is a huge (and costly) mistake,” she writes.
She goes on to discuss how 401(k)s are “supersmart savings accounts” that “offer terrific tax advantages that allow your money to grow exponentially fast.”
Aside from the occasional au courant nod to collapsing investment portfolios, in general, Kobliner sticks pretty close to her original recipe of straightforwardly defining basic financial terms, such as mortgage, mutual fund and money market accounts.
After all, she’s addressing an audience she presumes is clueless, or at the very least, one that has given little thought to these matters. That is until now, when they’re holding a diploma and $25,000 in student loans and credit card debt, looking for a job in this tight economy, living on an entry-level salary or hoping to buy a first home.
Kobliner’s a gentle guide, carefully walking her money neophytes through the nuts and bolts of personal finance — from health insurance, paying off debt, contributing to retirement plans to building an emergency cushion, investing in stock and bond funds, finding your credit score and improving it, buying a house or car. She even dabbles in income tax strategies.
There’s no magic formula for taking control of your financial life here, but rather frank meat and potatoes money management moves that have proven the test of time.
To help readers evaluate whether their current saving and spending habits are “right on track, wildly off base, or somewhere in between,” she lists a few tried and true financial rules:
•Your debt payments (not including your mortgage) should be less than 20% of your monthly take home pay.
•Spend no more than 30% of your monthly take-home pay on rent or mortgage payments. This might not be reasonable, if you live in a major city like New York or Miami, but in a small town or city, it works. No matter where you live, it’s something to shoot for.
•Save at least 10% of your take-home pay each month. It’s critical to think of your savings as a fixed monthly expense that’s part of your budget, just like your car payments or rent.
One good way to start saving is with $50 a month in an automatic investment plan, she advises. Some no-load mutual funds will waive or lower their minimum initial investment requirement if you sign up for their plan. With these plans, you can have a fixed amount “siphoned off once or twice a month from your checking account and funneled into your mutual fund.” You can set this up online with your initial investment.
“After that, you won’t have to do much except sit back and watch the money accumulate,” Kobliner writes. Fingers crossed.
If you serve or have served in the military or have a parent who did, she suggests USAA (www.usaa.com) as a good savings option. “It offers some low-cost actively managed bond and stock index funds, charging just 0.19%. It will also waive its usual $3,000 minimum if you sign up for its $20 per month automatic investment plan.”
While Kobliner presents a sweeping course on personal finance, she’s not fooled into thinking she has given her readers all there is to know. Tucked into the back of the book is a handy section, called Further Reading. It lists books she tells her friends to read which range in topic from investing to insurance to taxes and debt. She includes interesting blogs and message boards such as Get Rich Slowly (www.getrichslowly.org) and free online pamphlets and publications on subjects including choosing a credit card, how to build a better credit report and dispute errors — all available from the Bureau of Consumer Protection (www.ftc.org).
There are just a few key steps you need to dig out of debt, jumpstart saving, and plan for the future, Kobliner writes with assurance. “Once you nail these easy concepts, you’ll be on your way — in good times or bad.”
Get a Financial Life: Personal Finance in Your Twenties and Thirties, By Beth Kobliner, Fireside, $16.00, 336 pages