More Financial Book Reviews
Giving it some thought, I'd have to say that all in all, Your Money or Your Life is the best book on money I've read - both on the philosophical side (the life-hour to dollar conversion is a very similar metric to what I've been operating from my own conclusions for the past few years) and on the nitty gritty of tracking expenditures and such.
The main place where I'd say this book falls short is the investing advice. The recommendations both for calculating financial independence (projecting capital against the current long-term interest rate) and for investing (100% investment in a long-term treasury ladder) seems to me to be a strange combination of extreme conservatism wrapping into foolishness because:
- that type of investment historically hasn't provided enough return to sustain buying power against inflation and that even in worst-case market scenarios you're better off with a different mix (equity/fixed income)
- because of that, and by using those calculations for calculating one's FI point, it seems like you're not getting the most accurate projection for your expenses and actually may end up in some trouble later on (see end for more info)
Still, this is a great book and I'm surprised no one has created a Web 2.0 version of the income/expense/capital daily wall-chart
The Only Investment Guide You'll Ever Need (what's with financial books and their drama-queen titles?) is also a pretty good book, and despite its grandiose title I think it mostly lives up to it. It's been recently updated so includes descriptions of new stuff like ETFs, iBonds, etc while being completely on target as far as the "forest from the trees" goes: tax efficiency (tax drag, tax sheltered investments, CGT strategies), inflation, risk vs time horizon, and of course your likelihood of beating the market (really low) and why you're probably better off not trying to.
If there's any weakness to the book is that despite that warning, and despite the author's claims of being "chickenhearted", the book is peppered with anecdotes of deals/trades he's done, which while entertaining, gives a slight of "do what I say, not what I do" feeling.
That being said, the actual advice is sound and there's a lot of interesting stuff to follow up on.
Also, there's some really great financial math in there (calculating annualized returns off of what you'd finance for buying items in bulk; how saving 10% a week by buying in bulk on a consumable equates to an annualized 177%) and Chapter 11, on retirement investing is very reasonable, both in asset allocation and in calculating realistic withdrawals.
- FIREcalc - this is a financial calculator that does runs against worst-case historical market scenarios. The advanced version in particular is super-useful because it lets you model a bunch of different strategies (reducing withdrawals on bad years, etc)
- The Retire Early Homepage - Lots of articles on Safe Withdrawal Rates, etc. Standouts include: risk/reward over varying time horizons, and comparison of actual performance of various allocations
- 4% SWR (save up 25X your annual expenses)
- at least 1yr of cash (money market or other liquid fund)
- 75/25 equity/fixed income or something similar (ie, 33/33/33 US index, international index, TIPS)
