Thursday, January 17, 2013

Worth It...Not Worth It? Simple & Profitable Answers to Life's Tough Financial Questions by Jack Otter

Credit union or bank? Rent or buy a house? Buy or lease a car? Take or decline the rental car insurance? Renovate the kitchen or finish the basement? Buy stocks or a mutual fund? Every day we are forced to make financial decisions, but the right answers all seem to require complicated, mind-numbing research. And who has time for homework when you're paying for a bag of Fritos at 7-Eleven? Or filling out a benefits form on the first day of a new job? Thankfully, there's WORTH IT...NOT WORTH IT? [This book] demystifies complex, real-world dilemmas and breaks the answers down into simple, do this, not that solutions. Organized around six basic topics - Getting Started, Shelter, Automotive, Investing, Family Matters, and Retirement - this handy book is the Swiss Army knife  of personal finance.

I love finding little books like this, something simple that will hopefully give me the sort of help/advice I'm looking for. Sadly, while it looks good on the surface, this book doesn't really fit the bill.

Oh, there's good advice here, such as choosing the credit union over the bank, using your credit card over your debit card for things like gas (anyone who has ever been burned by the "hold" they place on your account has learned that lesson the painful way) and major purchases (fraud and damage protection), buy & hold over timing the market.

But for much of the rest of the advice here, there's one thing you need first: money. Otter advises buying over renting, pretty much what every other financial advisor will tell you. And that's fine, but it's almost worthless advice if you don't have money in the first place. I dare you to tell someone that you know for a fact is living paycheck-to-paycheck that they're crazy for renting, that they should take advantage of the low, low rates and bargains on houses right now. And I find it funny that the author advises buying, then turns right around and also says you should go with the 30/20 rule, that is, a 30-yr fixed-rate mortgage with 20% as a down-payment. OK, if I had that sort of money in the first place, would I have picked up this kind of book? Yeah, probably not. And what Otter and every other financial advisor seem to forget is that it's not just the mortgage. Sure, I could probably swing paying a mortgage payment right now, especially if we were able to find a house/mortgage that would have us paying approximately the same amount we pay right now where we rent. But there's also the increased costs to think about, too: the insurance for the home, the utilities, the taxes, the incidentals you have to purchase to care for said home (like a lawn mower). Once you factor in those costs, it's a bit of a different picture, one that isn't often discussed.

The section on investing has the basic advice I expected, but again, you have to have the money to invest in the first place. If I'm barely able to put food on the table, I have no business worrying about whether I should be stocks or get into a mutual fund. It's that sort of thing that a lot of advisers miss out on, the do you or do you not already have some money? I don't think one needs to be rich to start taking some of this advice, but yes, one does need to have some discretionary income at best. And let's face it, a lot of people these days are just not in that boat. Many are still licking their wounds from the Great Recession, still trying to keep their heads above water.

Short and simple, which I'll admit is nice. But disappointing overall.

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