Book Review: All Your Worth
It’s amazing how things that were once way too boring to be bothered with can suddenly become an obsession. That’s how it is with me and personal finance topics, lately. In my usual fashion, once I decide to do something, I become obsessed with it. I scour the Internet, I read books, I watch videos. I learn everything I can about the topic at hand. Right now, the topic is personal finance. Hopefully by the time this obsession passes, I’ll be in great financial shape!
All Your Worth: The Ultimate Lifetime Money Plan
This book says right in the beginning that a lot of other personal finance books are really written for people who already have money and just want to know how to make more money. This book is not for them! This book is for regular people working regular jobs, trying to get their finances in order. It’s for those of us who make a decent wage, but not necessarily a great one, who struggle from paycheck to paycheck. It’s for those of us who wonder why others in similar situations seem to do fine, and yet we never have enough money to do more than barely scrape by. They wrote a book for ME!!
The premise of the book is basic. Just as we should eat a balanced diet for optimal health, so we should have a balanced plan for how to spend our money in order to remain financially healthy. Such a simple concept, and yet I’ve never seen it stated quite this way before. Does everybody else already know about this? How did I miss out?
Obviously, hard dollar amounts won’t work, as everyone’s situation is different. Instead, they provide percentage amounts for you to use when dividing up your take-home dollars. Yes, that’s right – TAKE HOME dollars. The after tax ones. The ones you actually end up with! Wow, common sense. What a novel idea!
Must-Haves – 50%
They suggest that an ideal balanced money plan allows 50% of your take home pay to go toward “Must-Haves” – Must Haves include those things we all need to live a basic life with dignity – housing, basic transportation, utilities, food. Also included in this section are things that you are contractually obligated to pay – student loans, for instance.
Savings – 20%
Next, 20% goes to Savings. That sounds like a lot, but when they break it down and tell you how you should be saving it, it all makes a lot of sense. First, the entire 20% goes towards building some basic funds that you should always have on hand. A $1,000 emergency fund should remain in your account, liquid and ready to go at all times. Once that is in place, you build your Security Fund – this is an amount equaling 6 months of your “Must-Haves” spending to be used in case you lose your job, major illness or something similar. Again, it should remain pretty liquid and easy to get to without major penalty.
Once those funds are in place, you start working it a little differently. Of your total 20%, 10% goes toward retirement savings, 5% is for paying down your mortgage, and the remaining 5% goes towards your personal goals – buying a house, starting a business, whatever it is you dream of.
So, while 20% of my take home pay seems like a lot for savings, when they put it that way, it does seem really important. All of those are things we really need. How can we not address them?
Wants – 30%
Finally, the remaining 30% of your take home pay goes towards Wants. That’s right – WANTS. First you have to realize that Wants include some things you might currently be thinking of as Must-Haves – cable TV for instance. High speed Internet. How about food above and beyond subsistence level? Those types of things all fall within Wants. But it also includes your fun money – movies, shopping, whatever blows your skirt up.
Coloring Inside the Lines
The trick here is getting your spending within those guidelines. There are a lot of little worksheets and questionnaires to help you identify where you’ve been going wrong thus far, but the bottom line is that you’re going to have to spend some time tracking your spending to figure out exactly where your dollars are going. The upside is that once you’ve done that, and adjust what you’re doing to bring yourself into line, you shouldn’t have to track every dollar you spend going forward. Once you know your fixed costs are right, and set up your savings to get pulled out automatically, basically the remaining amount is what you get to spend on your Wants.
Much easier than a big, hairy budget.
As many personal finance gurus do, the authors suggest using an envelope system for your spending cash. Once you figure out what your monthly Wants amount is, divide it into 4 weekly amounts. Each week, pull that cash out, put it into an envelope in your purse or pocket and that’s it. As long as you have money in your envelope, you can spend it however you like. The kicker is – when it’s gone, it’s gone. No more spending.
We’ve identified that our problem is actually in the Must-Haves area, not the Wants. It’s not going to be quick or simple to get those more into line, as our credit scores (way less than perfect right now) have to improve and some major home repairs / upgrades need to take place before we can really affect those monthly costs. But at least now we know what, where and how.
Goals & Inspirations
Maybe the Balance Money Formula is a no-brainer for other people. But for me it was an epiphany. Now that I have a framework, I can work towards getting things in line. Reading this book not only gave me the information I needed to set concrete goals and the tools to get where I want to go, but it gave me inspiration to really want it, even more than I already did! I can’t wait to get those debts paid off! I can’t wait to see that credit score improve so I can refinance my mortgage! I can’t wait to get a big, fat Savings Account statement one of these days!
It will happen. We’re going to make it happen! You just watch.
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