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youngandthrifty Book Review and Giveaway: Smart Women Finish Rich by David Bach

young — Mon, 29 Aug 2011 15:15:43 +0000

Because this month was seemingly all about women and money (Are Financially Independent Women a turn on? drew a record 89 responses on my blog, woot!), I thought I would do a giveaway for a book tailored to women, as well. I’m a big fan of David Bach’s books, namely The Automatic Millionaire. He’s the one who taught me that paying yourself first is the way to go, and that if we skip daily luxuries such as that Starbucks latte, we will be on our way to financial freedom.

When I stumbled upon Smart Women Finish Rich: 9 Steps to Achieving Financial Security and Funding your Dreams at a bookstore, I had thought it might just be another spin off of his bestselling book, with a focus on women. I was pleasantly surprised and actually think this book is better than The Automatic Millionaire.

He begins by talking about why women nowadays are taking control of their financial futures, and gives anecdotal evidence as to why this is crucial (more divorces, women are in the dark about the finances because the husband usually handles the finances). He then goes on to explain WHY we need to do more financial planning than men- we live longer than men (sorry guys!), we earn less than men, oftentimes women are the ones let go by corporate downsizing… the list goes on.

In the next step, David asks you to re-evaluate your values, and list them. Money is a vehicle in which we can express our values. He says men often seek to gain money for the sake of gaining money (e.g. “I want to make $100,000 a year by the time I hit 30″) and women seek money to so they can use that money to manifest their values (be it: have more time for family life, being financially secure etc.). I really enjoyed this chapter because it made me think hard about where my values lie- this is something I don’t do often, admittedly.

In the next few chapters, he talks about finding where your money is. Really finding out where your money is, and how much you’re paying in commissions and fees etc. how much is in your registered portfolios, how much is in your non-registered portfolios, how much cash you hold. The nitty gritty.

Of course a David Bach book isn’t complete without mention of the Latte Factor, in which he explains that if you cut out your daily needs (like that daily lunch out, daily coffee and a muffin) you can amass some serious wealth. He does use a 12% annual return, which to me sounds somewhat unrealistic, though.

David Bach’s Grandma instilled some pretty sage advice about money into little David Bach. So much so that he writes about her advice, namely the three-basket approach to financial security. One is your security basket, one is your retirement basket, and one is your dream basket. Dreams are categorized into short term dreams and long term dreams. You know which basket is my favourite! Dreams!! In this section, he goes into detail about how to invest, and why you need to invest (and not just put your money in a high interest savings account earning next to nothing after inflation). I really like how he does it “step by step” and its easy to read.

Another thing that’s different from his initial book is that David Bach talks about the major mistakes investors make and how to best avoid them, he writes about how to raise children so that they are not financially incompetent, and how to attract greater wealth. Basically how to make sure you are getting paid for what you’re worth. Men may make more than women because they’re not afraid to ask for a raise, they’re not afraid to quit a job and move onto another job if they aren’t getting paid well (uh, case in point: boyfriend is on his 5th or 6th job and he’s been out of school for 6 years!).

All in all, I was really impressed by this book and I think I can safely say Smart Women Finish Rich is my favourite David Bach book now. I like how he incorporates empowerment of women in the book (coming from a GUY I thought it would be difficult to do, because I was thinking “what do you know about being a woman, boyyyy?”). Grrrrl power! I would highly recommend this book to any female.

Book Giveaway:

I’m giving away the book I just read (am I being minimalist?) to a lucky Y&T.ca reader (females, good luck! Males, maybe you can give it to your wife/girlfriend?)! It’s the Canadian edition, so it talks a lot about Canadian finances (like RRSPs and the whole gamut).

There are two ways to enter:

Subscribe by RSS for one entry and comment below OR YOU CAN
Subscribe by Email for two entries and comment below
If you already subscribe, thanks for reading (I heart you)! Just let me know below and I’ll give you one entry
For an additional entry (you have to do 1,2, or 3 as well), spread the word of the giveaway by tweeting this:

David Bach’s Smart Women Finish Rich book giveaway (ends Sept 7 @youngandthrifty) http://bit.ly/n4ksDS

Winners will be drawn via random.org and announced on September 9, 2011. Contests closes September 7, 2011 (Wednesday) at 11:59PM PST.

Good luck everyone! Thanks for reading Y&T!

The Financial Cleanse- Make your Savings Automatic

young — Wed, 21 Apr 2010 16:11:05 +0000

In Part II of the Financial Cleanse, we’ll talk about Making it Automatic.

In the Automatic Millionaire (by now, you must think I’m in love with David Bach since I mention him non-stop) he talks about making it automatic. You pay your cell phone bill, your rent, your utilities, and then you have some money left over. You spend like usual, and at the end of the month, you have $25 to spare, so you put it away in savings. The next month- same thing, you have $15 to spare, so you put it away in savings.

I used to roll like this and it didn’t work.

I would dip into my savings and take some money out for my trips, and at the end of the day, couldn’t really say how much I was putting away per month. I THOUGHT I had a budget I stuck to…I had AIMED to put away X amount of dollars per month, but looking back at my transactions, this didn’t really happen all the time. I had made excuses like “oh, I just need only a few hundred here, I’ll return that amount next month”. It didn’t happen. It is human nature not to have much will power! The more you tempt yourself to stay away from something, the more you gravitate towards it and succumb to it. Kind of like that chocolate bar that you told yourself you wouldn’t have and ended up eating two..or three. Or that bad-ass boyfriend who treated you poorly, wasn’t returning your calls or texts and you tell yourself you won’t text him again for fear of coming off as a loser-stalker but you did anyway… and came off as a loser-stalker (said scenario isn’t from personal experience, yeahhhhh……..).

Anyways, so why fight it? Since then, I have made it automatic. And it’s really working. I transfer X amount of dollars from my chequing account into my High Interest Savings Account. I haven’t actually set up “pre-authorized deductions” biweekly because I am the type of person who needs to keep some sort of control (in case I need to keep some money in my chequing account, you know). Soooo to fix this problem, I set up “future transactions” and set them up on the day I get paid. I can always change the date or the dollar amount to be transferred. I set up future transactions for about 2-3 months, then repeat.

I would say this is the hands down EASIEST thing you can do to take control of your finances. So start off with $50 a month automatically and work your way up to 10-30% of your gross biweekly paycheck. A budget planner to keep track of where your money’s at (credit accounts, debit accounts, bill payments) doesn’t hurt either- and it’s easy to stick to, if it’s automatic too.

Do you make it automatic? Are you a big fan of automatic savings as much as I am? Please share!

What’s your Latte Factor?

young — Mon, 01 Mar 2010 14:20:27 +0000

I know a lot of personal finance bloggers have mentioned the Latte Factor at some point or another, but I really like it- it really ‘hits home’ for me so I wanted to write about it too. What is the Latte Factor, you ask? The Latte Factor is a phrase coined by David Bach, the author of The Automatic Millionaire. He says that most people have these small seemingly insignificant purchases daily (like the latte that you get at Starbucks before you head to work) that really add up.

If you spend $3.50 on a latte every day when you go to work, that adds up to be about $17.50 a week (for a five day work week). Multiply that by 52 weeks and you get $910 a year. Yes, that’s almost a grand per year on coffee!

Let’s say for example you decided to sock away the $3.50 per work day into savings instead every year for 25 years. If you compound interest that amount at a reasonable rate of 6% per year for 25 years, you’d end up with $56,827.91. So that grand that you end up saving per year becomes 55 grand in 25 years. Pretty crazy, huh?

If you somehow manage to cut those daily expenses out, you’re saving money big time. I’m not saying deprive yourself of your life and its perks, like if you absolutely HAVE TO HAVE that latte, maybe you can buy one of those machines to make your own before work. Compromise, right?

What’s MY Latte Factor?

I don’t drink coffee (I know! Blasphemous, huh??) but I did often go out for lunch at work before. I would spend an average of $8 a day on lunch. In a year, I spent about $2000 on lunch. That’s a lot of money that I would rather spend somewhere else (like traveling, for example! or save it for my downpayment).

Since I read that book, I’ve been more vigilant about saving my money and not spending it on day to day things that I could do without. So I pack my lunch regularly now and only occasionally do I go out for lunch at work. I guess it also helps if your colleagues don’t go out for lunch at work too! Sometimes I cave and have a craving for stuff and end up buying a pizza or something, but that’s pretty much it.

What about you? What’s your Latte Factor? What’s one thing that you can do without on a day-to-day basis that will save you money over the long run?

youngandthrifty book review: The Automatic Millionaire by David Bach

young — Mon, 28 Dec 2009 08:12:49 +0000

The Automatic Millionaire:

A Powerful One Step Plan to Live and Finish Rich

By: David Bach

The Automatic Millionaire was one of the first financial books I have read. David Bach is an international best seller with his books- he has multiple books that spawn off the idea of this first book (For example, Start Late Finish Rich, Smart Couples Finish Rich, The Automatic Millionaire Homeowner. The Automatic Millionaire has a simple and key message. He says that it is human nature to screw up budgets.

Budgets are no fun and they are hard to keep, he says even the most disciplined can’t keep track of budgets (I guess they are similar to diets! diets and budgets are no fun, period.) So his trick, to be an “automatic millionaire” is to Pay Yourself First. To pay yourself first, instead of paying your credit card bills, cable bills, phone bills first. And to do it automatically by setting up a pre-authorized deduction from your chequing account (or whichever account you get money deposited form work) and not think about it. For example, he recommends setting aside 10% (or 20-30% if you are able to do it) of your paycheque and putting it aside. He draws on the idea of compound interest, or assuming that you get a 10% rate of return (which is pretty idealistic currently given the market in my opinion).

He also talks about the Latte Factor in which most people spend $3.50 a day on that grande nonfat latte with soy milk- he says that basically you are spending your money before you start work. The $3.50 adds up to almost a $1000 a year. Not to mention if you add the muffin, or eat out for lunch at work…

The great thing about his suggestion is that it is so easy. It’s almost like common sense. He gives good concrete instructions, but not so solid on HOW to earn that magic 10% interest yearly. He gives good suggestions on how to be able to save money. I don’t know how you can be an automatic millionaire though, just by saving 10% of your income every paycheck.

The rest of the book basically reiterates the basic message in the beginning of the book. It’s an easy read though.

Setting up a preauthorised deduction from your bank account is actually really simple. I now do a preauthorised deduction for my RRSP TD efunds account. And a preauthorised deduction from my regular bank account into my Manulife bank high interest savings account. It’s quite nice- this way I won’t go dipping into the savings account and know that every two weeks more money goes into it. And whatever is left over is my “fun fund”. =)

Do you have a “latte factor” that you’re guilty of?

Do you try to “pay yourself first”? Do you think it is a good way to save money?