Apr
22
Book Review: On My Two Own Feet
April 22, 2007 | 1 Comment
On My Own Two Feet: A Modern Girl’s Guide to Personal Finance
Hopefully it will serve as an inspiration to the readers to find out more information. The book was purposely kept at less than 200 pages long pocket book in a fairly big font. It is not intimidating at all and people should be able to read it in a Sunday afternoon. Many people put off learning about personal finance because it initially feels an overwhelming topic. Knowing that you can start the journey in a few hours and be ahead of the majority of the population is comforting.
Important advice from the book include:
- Save and invest 15% of your gross (before taxes) income. (I personally advocate for a bit more, but it is good advice nonetheless).
- How to balance a trio of budget priorities (necessary expenses, luxury, and savings).
- To invest in stocks, for simplicity sake on Standard & Poor’s 500 Index funds. Gives web links to the major providers of these funds. How to make best use of retirement accounts.
- How to handle finances in a relationship.
- How to handle big ticket items like house and car. How to keep these expenses under certain percentage gross income limits to prevent financial disasters.
- The authors also provide very valuable tables that give the reader an idea of how to organize their finances, and at-a-glance tells you if you are outside the recommended guidelines.
There is an area where the authors fall short on the subject of trying to completely empower women into managing their finances.
I believe that one of the reasons men do marginally better than women is because we are told by family or society to be ready to support a complete family with only our income. This makes many men a bit more aggressive at succeeding in their careers and bringing more money to the home: thus increasing their power within the house and within society. For women to become equally strong on their finances, they should feel the same way: capable of supporting a family by themselves. [This doesn’t mean men can manage money better than women. They may try harder to earn more.] — more on: Salary Differences, http://www.moneyandinvesting.net
The book doesn’t expand on topics like supporting a significant other that becomes disabled or unemployed, the incremental expenses of having kids, or even provide detailed explanations on college education (a two page section on the two most popular college savings plans only). While I understand the interest of making the book brief, I am concerned that women will not be completely emancipated until they have equal or stronger money values than men: including the desire or perceived need to fully support a family on the economical sense (not only emotionally). Although some women will decide not to have kids, I believe the majority does ends up having them and may need to partially or even fully support them.
If you have been postponing learning about finances because it is an overwhelming topic or because you think financial books in the market where is not something you can relate to, then run and buy this book. It may help you establish a path to improve your financial situation.
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As I write this (11-27-2007), the markets are getting ready to open after closing down the previous day. The Dow Jones industrial average has fallen nearly 240 points and the headline in the local paper is screaming “Wall Street suffers another big hit.” Serious-faced announcers on cable-TV are saying the Dow is down 10.03 percent from its mid-October closing high, officially putting the blue chip index past the 10 percent threshold that signifies a correction.
For Steven R. Selengut, author of The Brainwashing of the American Investor, corrections such as this are as welcome as rallies. The market, he points out, is just doing what the market has always done.
“Here is some advice that you just won’t hear on CNBC or read in The Journal,” he writes in this revised edition of an earlier book bearing the same name. “It is based on one incredibly simple market fact: There has never been a market correction that has not succumbed to yet another rally. So when the doom and gloom noise becomes deafening, get yourself out there and party.”
When the markets move into a correction, Selengut’s investment strategy already has investors sitting on a pile of cash — accumulated profits taken on stocks as the market rallied — plus cash thrown off from fixed-income securities. As the NYSE-traded stocks he follows move down 20 percent or more, he moves back into them and waits for a 10 percent profit to cash out and then look for another opportunity to repeat the process.
Even better, for skittish investors such as me, Selengut’s unique “Working Capital Model” reduces the emotional factor by taking the emphasis off market value and focusing on growth of working capital, defined as the total cost basis of the securities and cash in the portfolio. As long as working capital is increasing, market value is irrelevant.
As a recent retiree, I appreciate this conservative approach to growing working capital. I implemented and followed the trading strategy myself for about a year and a half before turning my account over to Sanco Services, an investment management company founded and operated by Selengut. The Working Capital Model worked the way it was presented. My only reason for turning the account over to Sanco was to be sure that my financial assets would be handled in such a way that my wife would not have to worry about an adequate income in the event that I was no longer able to manage the assets myself.
The Brainwashing of the American Investor is a book I wish I had been able to read 30 years ago. Those of you who still have years of investing ahead of you would do well to buy this book and read it thoroughly two or three times. It will save you a lifetime of mistakes that come from following conventional wisdom.
This is the book that Wall Street does not want you to read.