This is one of the most useful financial books I’ve yet discovered. The most recent version was published in 2009 and costs about $11.00. Older versions are available for about $1.00. This review used a 2000 text.
Regardless of your education level, each of us must be able to handle our money wisely. I’ve given this book as a high school and college graduation present. Based on appearances, the recipients used the book to level their couch or dining table, because they sure aren’t making smart money choices.
Here is a quick synopsis of each chapter.
Chapter 1: Crib Notes
Kobliner lists the following items, in approximate priority order, for people who are in desperate straits and need a quick reference, or are too lazy to read the entire book.Insure yourself against financial ruin.
Get health insurance.
There are three alternatives to health insurance: debt, bankruptcy, and death. There are two broad categories of health insurance, HMO’s and PPO’s. HMO’s may cost less, but provide fewer covered services. PPO’s may cost more, but provide more covered services or a greater range specialists.Get life insurance. Life insurance is needed only if you have children or someone is financially dependent on you. There are many types of life insurance. Term life insurance will probably be the most affordable policy and provide ample coverage.
Pay off your debt the smart way.
One of the smartest moves you can make is avoiding — or at least paying off as quickly as possible, high-rate loans. Paying off a high-rate loan, e.g., 17% APR, is equivalent to earning the same amount on an investment returning the same rate.Start contributing to a tax-favored retirement savings account.
As soon as high-rate debt is paid off -- or even before it's paid off, contribute to your retirement accounts. It's possible to borrow for college expenses. It's impossible to borrow for retirement expenses. So prioritize your retirement savings over your child's college savings.
If your employer offers a 401k plan, fund it to at least any matching funds rate. For example, if your employer matches the first 5% of your pay, contribute at least 5% of your pay! That's a guaranteed 100% return. Each year, increase your contribution by 3-5% points until you've reached your the maximum contribution amount, e.g., $18,000/year.
Regardless of what vehicle you choose to with, IRA, 401k, or perhaps another investment vehicle, there are two broad categories of investment accounts, e.g., Traditional IRA and Roth IRA. Traditional accounts allow you to invest untaxed money, saving on your taxes in the current tax year. Roth accounts allow you to invest taxed money, but enjoy using the proceeds many years later -- tax-free.
Think of it this way ...
Traditional: Invest $5,000 untaxed dollars per year and eventually pay taxes on $1,000,000 many years later, or;
Roth: Invest $5,000 taxed dollars per year and withdraw $1,000,000 tax-free many years later.
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