Financial Matters...

Lately I've been on a personal finance kick. I'm on my third finance book, with many more on my wish list at Audible. This fascination started a few years ago, when, in an effort to make sure I'll be ready to handle my own income, I picked up a book called "I Will Teach You To Be Rich" by Ramit Sethi.

I wasn't looking for a get-rich-quick scheme, just some basic financial literacy, with common sense suggestions on budgeting, and saving. Living by myself for 7 months on my own salary as a JET was a great first step to find out how I handle money. Before JET, James handled all money related things, and before I met him, my income was barely enough to survive, so it was easy to handle. I wasn't bad about saving money, but I wanted to know more.

The first time I started reading this book (couple months before starting JET), I read only the first two chapters: dealing with credit cards and bank accounts. WOW! Luckily, I didn't have any CC debt, but even so, there was plenty of information about credit scores and how to make and keep them high. In some respects I was lucky, because my mom opened my first CC when I was still in high school. She also told me to use it to generate a credit history for myself. This wouldn't be so bad, but she also never paid off her cards until months later, thinking that's what meant to have them used. The only reason my CCs were empty, because I didn't want to buy things on future money, after they finally were cleared with James's help. So in the last couple years they were rarely used, and always paid off right away. Imagine my surprise, when I found out what it actually took to have the best credit score: generally no more than two or three CCs, used regularly, but always paid off in the same month, and having a big gap between credit limit and the debt on them.

The next section dealt with bank accounts, and it was chock full of information I've never heard about, but made perfect sense. It also talked about conscious spending, saving up for the big things, and ruthlessly cutting back on frivolous purchases. 

Then JET came, and the third chapter began talking about investing. INVESTING! "Like I would ever have the money or know-how to do it," I thought and put the book down, at least until I had enough saved to even conceive of investing.

Some time passed, and I realized Audible had this book! I was super excited, because I have been meaning to pick it up again, however, I had no time/opportunity for actual reading, and now I could listen to it wherever. The audible version was read by the author too, which I generally like. I started from the beginning, thinking it wouldn't hurt to review the stuff from before. I was right to do so, as there were a few things I forgot, plus this way I had a much better understanding of the author's overall philosophy.

This time I went on to listen to him about investing, and more about conscious spending, which was Chapter 4. Glad I did too, as most of the investing talked about 401K's and Roth IRA's, which are connected to most US salaries. But I would be lying if I said I was able to keep my attention on the topic all the time for 100%. It was good enough to get my feet wet in the subject though. The reason I stopped this time was because we don't have a US salary currently, and thought it didn't apply much to us at the moment. Plus I had this idea that whatever we end up saving up while in Japan will go towards a down-payment on a house eventually, not investing.

So once again I put down the book for some time, and focused on implementing things I've learned thus far, like cutting down even more on our monthly spending, and planning out long-term financial goals and how to achieve them, like saving up for a down-payment of a house.

Months passed, and I began thinking about our financial goals past the JET program. This put me on this final and biggest kick about getting financially literate. It also helped that the book "Rich Dad, Poor Dad" by Robert T. Kiyosaki was on sale at Audible. It's one of those books that I've heard about for years, being a best seller and all. Unfortunately, Kiyosaki's RDPD was so full of sleazy advice dripping with get-rich-quick schemes, and his attitude was so arrogant, that it's not really worth a read. It was mainly philosophical with nothing concrete, idealizing the rich, capitalistic, and consuming way of life. It mentioned all the ways the rich get away with not paying taxes, and how amazing these loopholes were. It called hard working people hamsters.

However, there was one thing that I learned from this book, and it's not a small lesson. It finally clicked that in today's economy, just because one is expected or wants to buy a house soon after marriage, doesn't mean that one should. Homes nowadays are liabilities (at least until they're fully paid), and it makes sense that in order to afford a liability, one has to have an asset to generate the money to keep up that liability. This was the only positive message I got out of this book: Use your money to aggressively build assets first, then take the money these assets generate to pay for liabilities. It also made me go back to my original book by Sethi, so I guess RDPD did two things afterall.

Armed with the understanding of the need for solid assets, I went back once again to Chapter 3, and this time listened carefully to Sethi talk about investing, portfolios, and how to slowly, but surely accumulate wealth. I'm not looking to get rich quick anyways, I just wish to not worry about the basic things in life, or our future when we retire. Now, after finishing the book for the first time, I have to say I see the world quite differently, at least when it comes to finance. Sethi's book is an amazingly simple step-by-step guide for young people to show how to get one's finances in order so that one can accumulate wealth over time. It might not be easy, but it's not impossible either, as long as a person is willing to put a little effort into learning about how to handle money well.

I do realize, of course, that we're very fortunate. Below a certain income/household, it's nearly impossible to get started, especially if someone is already stuck in the rat race. And even in our good circumstance, it took me three years (and a horrendous book) to understand the message this book is trying to show and teach. Will we reach the level of wealth we desire? Only time will tell, but at least I have some tools in my hand to guide us to the right direction.

In the mean time, I will spend a considerable amount of time and brain power to read more about personal finance, so that once we leave Japan, we know what we'll do with our money. To reach this goal, I checked out some blogs Sethi suggested in his book, like GetRichSlowly.org, and TheSimpleDollar.com, to see if I can find some book reviews or suggestions as to where I should start. The above links will take you directly to these book recommending entries of the blogs. The Simple Dollar even reviewed Sethi's book, which you can read here.

So here are the top 10 books I'm planning to read about finance:

1. "The Millionaire Next Door" by Thomas J. Stanley, Ph.D. and William D. Danko, Ph.D.
2. "The Bogleheads’ Guide to Investing" by Taylor Larimore, Mel Lindauer, Michael LeBoeuf, and John C. Bogle
3. "Your Money or Your Life" by Dominguez and Robin
4. "The Four Pillars of Investing: Lessons for Building a Winning Portfolio" by William Bernstein
5. "Smart Couples Finish Rich" by David Bach
6. "The Only Investment Guide You’ll Ever Need" by Andrew Tobias
7. "The Little Book of Common Sense Investing" by John C. Bogle
8. "The Money Class: Learn to Create Your New American Dream" by Suze Orman
9. "The Power of Passive Investing: More Wealth with Less Work" by Richard A. Ferri
10. "Lifecycle Investing: A New, Safe, and Audacious Way to Improve the Performance of Your Retirement Portfolio" by Ian Ayres and Barry Nalebuff

And a few more just to round out my financial literacy:

• "Born to Buy" by Juliet Schor
• "The Complete Tightwad Gazette" by Amy Daczyzyn 
• "America’s Cheapest Family" by Steve and Annette Economides
• "Miserly Moms" by Jonni McCoy
• "The Joy of Simple Living" by Jeff Davidson

Unfortunately, many of the main ones I hope to read soon are not on Audible. I checked our local library, but of course there's nothing in English about personal finance. The top 5 books I'm thinking of buying us for Christmas therefore are:

1. "The Bogleheads’ Guide to Investing" by Taylor Larimore, Mel Lindauer, Michael LeBoeuf, and John C. Bogle 
2. "The Complete Tightwad Gazette" by Amy Daczyzyn 
3. "Born to Buy" by Juliet Schor
4. "The Only Investment Guide You’ll Ever Need" by Andrew Tobias 
5. "Your Money or Your Life" by Dominguez and Robin OR "America’s Cheapest Family" by Steve and Annette Economides

I hope that this blog will help me keep track of our financial goals, and that maybe it serves as a jumping off point for anyone, who is yet to take a look into his or her personal finance, to become more finacially literate. We can't afford not to.