I recently finished reading a good book called The Money Secret, by Rob Parsons. It was mentioned as a good read by UK wealth guru Gill Fielding, so I put it on my list of future books to read. When I saw it in my local library, I took it out immediately.
Here is my review of the book chapter by chapter.
The storyline can be compared to "A Christmas Carol". A lady named Amy is going to kill herself over her debts when suddenly the mysterious Lydia appears, like a ghost, and transports her to different scenarios where she learns a different finance lesson each time.
The Wishing Well:
Amy goes to a wishing well to kill herself. The mysterious Lydia shows up and prevents her from doing so. Lydia finds out that Amy has massive debts including student loans, 6 credit cards, 2 store cards, 4 catalogue debts, hire purchase debt, etc. She spends money and has overdrafts which she does not account for. She doesn't know where all her money goes. Lydia promises to teach Amy the money secret. She tells her "if you want to be free of debt forever, knowledge about money is not enough, you must find the money secret".
Know the worst:
Amy is taught to monitor her finances like she would monitor her weight, by checking regularly. She is taught to track her finances by writing a monthly budget and logging all of her income and expenditure. She finds that the little things really do add up, because she is spending over £1000 a year on sandwiches and drinks. Her gym membership is rarely used, so Lydia advises her to exercise outside of the gym, for free. She is told about how shops now have highly sophisticated ways to separate people from their money, so we must use appropriate financial techniques to counteract this.
Choose your weapons:
Lydia tells Amy about how shops have weapons such as credit cards and store cards as their weapons. She details how 25% of people use credit and loans to pay for household expenses. Amy needs weapons to fight back, and is told the most effective weapon is her own brain. Lydia says store loyalty points are a waste of time, as money is better spent buying cheaper goods from other shops. The weapons Lydia reveals here are to: make a shopping list, set a financial limit (budget), and guard against impulse buying.
Retail Therapy:
Lydia says you do not have to buy things to make yourself feel special. Many people buy things and then when they get them home, the items stay in the bags unopened. Spending money is an emotional thing, and we need to look at the psychological causes for spending money, rather than blindly going out for retail therapy. The shops selling to us know our insecurities, and target that through their advertising.
First Things First:
Lydia transports Amy to a scene where a woman is in debt. The woman is just an ordinary person trying to bring up a family. Lydia says that mere systems for dealing with money are not enough. The mental aspect must be tackled. People must be given hope. Lydia advises that the woman must prioritise her debts and pay the most important ones first.
A house of cards:
Amy is told about how the total debt on UK credit cars exceeds £50 billion and the average Briton has debts of over £5330 on credit cards. She is told about how the Chief Executive of the largest UK credit card company said "I don't borrow money on credit cards, it's too expensive". Credit card companies deliberately pick people with poor finance and offer them credit cards, as its easier to make money from a poor person than a rich person. That's why the poor person is poor.
Stupid Alice:
Lydia tells the story of Stupid Alice who kept all of her money in cups, and earned no bank interest. Her husband suggests that they start using a bank, so they do, but because they cannot now physically see their money, they end up in overdraft and get charged far more than the interest they earned. They went back to the cups, as it turned out that Alice was not so stupid after all. Even though they now earned no interest, they were better off as they did not get charged by a bank or go overdrawn. They were able to track their money accurately this way, and they had no debts, and could not go overdrawn, and this made up for the lack of bank interest. The story ends with all of their seemingly wealthy but indebted neighbours knocking on her door and asking Alice to show them how to use the cups!
Don't trust your Grandmother:
Modern banks and financial institutions have changed from being on your side, into being like the wolf in the little Red Riding Hood story, who pretended to be the girl's grandmother in order to eat her alive. Bank interest rates are sky high, they are businesses out for themselves, as we all found out in the great financial crisis of 2007. The banks are not your friends, and they are most certainly not your kind hearted grandmother.
Debt at the door:
Lydia takes Amy to an area where many poor people are in debt. Loan sharks, payday companies, loans advertised on TV, all are exposed by Lydia. The longer the repayments go on, the more money these companies make, and the more you lose. She says "It's the very poorest who need help the most, but ironically it's the poor that end up paying more for everything. More than half of households with serious debt are in the lowest income group". Lydia explains there are other ways of borrowing money cheaply such as credit unions but many people don't know about them.
The wealthy pauper:
Lydia takes Amy to a penthouse apartment where a stockbroker earning 70k per year is deeply in debt. Everything he has is expensive but he has borrowed money to buy it all. The more he earned, the more he was able to borrow. He is in arrears with his mortgage and his apartment is about to be repossessed. He looks super rich to the people around him, but the reality is that he is in more debt than most people. Lydia says "unless you deal with expenditure, you will never earn enough money to be debt free". She says many people who look rich are not wealthy at all, "they just earn enough money to borrow enough to buy enough to fool each other enough. They may talk grandly, but there is not much behind the facade". The stockbroker did not even despair over his finances, all he could think about was preserving his image. Lydia says the lesson is "I don't need to prove my worth by what I own".
The Last Day:
Amy is told that the inventor of the credit card Mr Dee Hock, does not have any credit cards because he never wanted to be in debt again. Lydia finally tells Amy the money secret as quoted by Dee Hock, (which I recognise as a quote from the fictional rich man, Mr Micawber, from a Charles Dickens book). The money secret is "Annual income £20, annual expenditure £19 19s 6d result happiness. Annual income £20, annual expenditure £20 0s 6d, result misery." Lydia says "if you earn £1 but regularly spend £1.10, there is no way back from debt. That works for individuals, for companies, for governments. In the long haul, it always comes back to that".
Conclusion:
This book has the human touch, it addresses the emotional side of money, alongside real facts, as many people are put off by a long list of systems about handling money. Finance is a daunting, embarrassing, and terrible subject for many people. By presenting the necessary facts about finance, wrapped up in a fairytale story, the subject of money is accessible. A lot of people are in debt in the world and cannot manage their money, and have never tried, this book makes it seem possible, and does not make a reader feel ashamed of their lack of financial acumen.
My favorite chapter is The Wealthy Pauper, as it reminds me of the first time I read the book "The Millionaire Next Door", and was blown away by the revelation that most of the people I used to think were rich are most probably living on borrowed money and deeply in debt.
This book reminded me of the website and books by financial expert Martin Lewis, The Money Saving Expert (who I highly recommend), the difference is that it wraps the facts in a fairytale story so it is easier for financial beginners to get to grips with.
This is a good finance book for beginners, it covers all the basic finance tips and has real facts. It is nothing I haven't seen before, so its not a classic for me. The classics books for me, with the same or better information than The Money Secret, which I recommend are: The Richest Man in Babylon, The Millionaire Next Door, The Three Most Important Lessons.
What is the money secret? Spend less than you earn. The same lesson promoted in the book, "The Richest Man in Babylon".
Here is my review of the book chapter by chapter.
The storyline can be compared to "A Christmas Carol". A lady named Amy is going to kill herself over her debts when suddenly the mysterious Lydia appears, like a ghost, and transports her to different scenarios where she learns a different finance lesson each time.
The Wishing Well:
Amy goes to a wishing well to kill herself. The mysterious Lydia shows up and prevents her from doing so. Lydia finds out that Amy has massive debts including student loans, 6 credit cards, 2 store cards, 4 catalogue debts, hire purchase debt, etc. She spends money and has overdrafts which she does not account for. She doesn't know where all her money goes. Lydia promises to teach Amy the money secret. She tells her "if you want to be free of debt forever, knowledge about money is not enough, you must find the money secret".
Know the worst:
Amy is taught to monitor her finances like she would monitor her weight, by checking regularly. She is taught to track her finances by writing a monthly budget and logging all of her income and expenditure. She finds that the little things really do add up, because she is spending over £1000 a year on sandwiches and drinks. Her gym membership is rarely used, so Lydia advises her to exercise outside of the gym, for free. She is told about how shops now have highly sophisticated ways to separate people from their money, so we must use appropriate financial techniques to counteract this.
Choose your weapons:
Lydia tells Amy about how shops have weapons such as credit cards and store cards as their weapons. She details how 25% of people use credit and loans to pay for household expenses. Amy needs weapons to fight back, and is told the most effective weapon is her own brain. Lydia says store loyalty points are a waste of time, as money is better spent buying cheaper goods from other shops. The weapons Lydia reveals here are to: make a shopping list, set a financial limit (budget), and guard against impulse buying.
Retail Therapy:
Lydia says you do not have to buy things to make yourself feel special. Many people buy things and then when they get them home, the items stay in the bags unopened. Spending money is an emotional thing, and we need to look at the psychological causes for spending money, rather than blindly going out for retail therapy. The shops selling to us know our insecurities, and target that through their advertising.
First Things First:
Lydia transports Amy to a scene where a woman is in debt. The woman is just an ordinary person trying to bring up a family. Lydia says that mere systems for dealing with money are not enough. The mental aspect must be tackled. People must be given hope. Lydia advises that the woman must prioritise her debts and pay the most important ones first.
A house of cards:
Amy is told about how the total debt on UK credit cars exceeds £50 billion and the average Briton has debts of over £5330 on credit cards. She is told about how the Chief Executive of the largest UK credit card company said "I don't borrow money on credit cards, it's too expensive". Credit card companies deliberately pick people with poor finance and offer them credit cards, as its easier to make money from a poor person than a rich person. That's why the poor person is poor.
Stupid Alice:
Lydia tells the story of Stupid Alice who kept all of her money in cups, and earned no bank interest. Her husband suggests that they start using a bank, so they do, but because they cannot now physically see their money, they end up in overdraft and get charged far more than the interest they earned. They went back to the cups, as it turned out that Alice was not so stupid after all. Even though they now earned no interest, they were better off as they did not get charged by a bank or go overdrawn. They were able to track their money accurately this way, and they had no debts, and could not go overdrawn, and this made up for the lack of bank interest. The story ends with all of their seemingly wealthy but indebted neighbours knocking on her door and asking Alice to show them how to use the cups!
Don't trust your Grandmother:
Modern banks and financial institutions have changed from being on your side, into being like the wolf in the little Red Riding Hood story, who pretended to be the girl's grandmother in order to eat her alive. Bank interest rates are sky high, they are businesses out for themselves, as we all found out in the great financial crisis of 2007. The banks are not your friends, and they are most certainly not your kind hearted grandmother.
Debt at the door:
Lydia takes Amy to an area where many poor people are in debt. Loan sharks, payday companies, loans advertised on TV, all are exposed by Lydia. The longer the repayments go on, the more money these companies make, and the more you lose. She says "It's the very poorest who need help the most, but ironically it's the poor that end up paying more for everything. More than half of households with serious debt are in the lowest income group". Lydia explains there are other ways of borrowing money cheaply such as credit unions but many people don't know about them.
The wealthy pauper:
Lydia takes Amy to a penthouse apartment where a stockbroker earning 70k per year is deeply in debt. Everything he has is expensive but he has borrowed money to buy it all. The more he earned, the more he was able to borrow. He is in arrears with his mortgage and his apartment is about to be repossessed. He looks super rich to the people around him, but the reality is that he is in more debt than most people. Lydia says "unless you deal with expenditure, you will never earn enough money to be debt free". She says many people who look rich are not wealthy at all, "they just earn enough money to borrow enough to buy enough to fool each other enough. They may talk grandly, but there is not much behind the facade". The stockbroker did not even despair over his finances, all he could think about was preserving his image. Lydia says the lesson is "I don't need to prove my worth by what I own".
The Last Day:
Amy is told that the inventor of the credit card Mr Dee Hock, does not have any credit cards because he never wanted to be in debt again. Lydia finally tells Amy the money secret as quoted by Dee Hock, (which I recognise as a quote from the fictional rich man, Mr Micawber, from a Charles Dickens book). The money secret is "Annual income £20, annual expenditure £19 19s 6d result happiness. Annual income £20, annual expenditure £20 0s 6d, result misery." Lydia says "if you earn £1 but regularly spend £1.10, there is no way back from debt. That works for individuals, for companies, for governments. In the long haul, it always comes back to that".
Conclusion:
This book has the human touch, it addresses the emotional side of money, alongside real facts, as many people are put off by a long list of systems about handling money. Finance is a daunting, embarrassing, and terrible subject for many people. By presenting the necessary facts about finance, wrapped up in a fairytale story, the subject of money is accessible. A lot of people are in debt in the world and cannot manage their money, and have never tried, this book makes it seem possible, and does not make a reader feel ashamed of their lack of financial acumen.
My favorite chapter is The Wealthy Pauper, as it reminds me of the first time I read the book "The Millionaire Next Door", and was blown away by the revelation that most of the people I used to think were rich are most probably living on borrowed money and deeply in debt.
This book reminded me of the website and books by financial expert Martin Lewis, The Money Saving Expert (who I highly recommend), the difference is that it wraps the facts in a fairytale story so it is easier for financial beginners to get to grips with.
This is a good finance book for beginners, it covers all the basic finance tips and has real facts. It is nothing I haven't seen before, so its not a classic for me. The classics books for me, with the same or better information than The Money Secret, which I recommend are: The Richest Man in Babylon, The Millionaire Next Door, The Three Most Important Lessons.
What is the money secret? Spend less than you earn. The same lesson promoted in the book, "The Richest Man in Babylon".
No comments:
Post a Comment