was one of the very first personal finance books I read after my financial meltdown. At the time, this book felt too … touchy-feely for what I needed. I wanted solutions immediately, solutions that I could apply to my life – I knew there was a problem and I felt like this book was largely psychology, so I put it down and went on with life.
But then a funny thing happened on the way to the forum: when I’d reflect on my progress, a lot of ideas from this book kept popping up. The psychology of it, even though it seemed a little flaky at first, was actually spot on. Personal finance success relies a lot on having the right frame of mind – if you don’t have that, you become your own worst enemy.
Given that realization, I sat down to give this book another chance.
A Look At
Part I – Acts of Courage
The Courage to Look Within starts off with pure introspection – how does your personal finance position make you actually feel? Think about it for a minute – what’s your actual emotional response when you think about your finances? Does that feeling make you avoid thinking about it because it’s uncomfortable? If it makes you uncomfortable, that probably means that you know on some level that you need to be doing something different.
The Courage to Have More And To Be More Another block that people have is that of complacency. They often get into a routine with their lives and convince themselves that there’s nothing more really available to them. They have a house in the suburbs with two kids that they take to soccer practice, or they have an apartment in the city and fill their schedule with cultural events. The only problem is that complacency rarely leads to achieving your dreams. It takes guts to say that your current life can use some change.
The Courage to Make Room For More Money The title here is a bit misleading, as most people think “I have plenty of room for more money!” What the chapter actually discusses, though, is the huge pile of “stuff” that people collect and keep adding to. Often, people wind up with a house full of stuff that they don’t really want or need and this continual sense of needing to have more stuff pervades their life. The “making room for more money” means reevaluating all of that stuff, getting rid of a lot of it, and focusing on truly enjoying and valuing what you have instead of constantly buying more, more, more. That’s actually rather different than the standard lifestyle of many in the first world; it takes courage to be different.
Part II – The Value of Money
The Courage to Value Money argues here that people often just spend what they have, not really valuing the money itself. Even more interesting, Orman argues that making frugal choices often reveals the real value of money to you, and so the chapter is filled with about ten pages of specific, bulleted tips to reduce spending.
Defining Value and Worth What parts of your life really fulfill you? Think about that question for a second. For me, the things I most enjoy are spending time with my children, cooking, reading, writing, and a bit of gaming every once in a while. So why do I have a DVD collection at all? It’s not in line with the things that I value in my life, so why have it? What about my CD collection? Lately, I’ve found that I feel a lot better about my life if I just don’t spend money on things not connected to those central values. When I spend money now, I generally feel much better about it – I felt very little guilt buying a KitchenAid stand mixer recently, but I would have felt very guilty about spending money on the first season of Heroes on DVD.
The Courage to Face The Unknown At this point, I find it almost painful to think that people don’t have any idea how bad their personal finance situation might be, but then I think back to how bad my debt situation was and how I kept ignoring it for so long, not really wanting to think at all about how bad it was. Orman challenges people to actually sit down with the real numbers and figure out how bad it really is. It’s a very hard thing to do – I remember well how hard it was to face the music – but doing it is a major step in the right direction.
Rich Thoughts This chapter takes a look at conventional wisdom on many issues and how they lead down a financially poor path. For example, children: you love them and you want to give them everything, but that’s often the worst thing you can do. Instead, teach them how to stand on their own two feet. It might be hard to see your child wanting something and not having it when you have the power to make it happen, but they learn something valuable from that experience. Another topic is cars: many people like to drive a sparkling new car, but it’s financially devastating to do that. Instead, you should buy a car, pay it off in as few years as possible, then drive it for as many as possible.
Part III – For Love and Money
The Courage to Open Your Heart, The Courage to Open Your Hands Unsurprisingly (based on the title), this part of the book focuses on relationships, and the first chapter in the section starts at the beginning, providing some basic advice on relationships. Orman starts off by encouraging a deep level of honesty between any two people in a committed relationship and gives a long list of questions that people in a relationship should ask each other – things about personal philosophies and things about the past. Another key thing to look at during courtship is the behavior of your partner in relation to money: does the person talk big about money and have lavish tastes? Or does he or she keep a studiously balanced checkbook and not lust for expensive things? They’re big clues to the financial future you’re going to have.
The Business of Love When the relationship continues and the partners unite, you may want to consider a legal agreement protecting both people involved. Is a prenupital agreement something that you need? In some ways, it’s a philosophical issue, but the book suggests that if you’re in doubt, it doesn’t hurt to have one.
Yours, Mine, and Ours Marriage takes a lot of care and feeding (indeed, it does – trust me on this one), and money is often one of the big sticking points. Orman encourages conversation (a lot of it) and complete openness, something I agree with. I find that the advice in this chapter overlaps heavily with the book Smart Couples Finish Rich, which is a very worthwhile book for couples to read when trying to get their financial life in order.
The Courage to Transcend the Pain of Divorce The ending of the ties that bind can be an extremely painful step in a person’s life. This pain, unless faced, can bear down on you over time, a constant weight of stress. The real key to getting through it is realizing that you have value and that this value exists because of you and you alone.
The Courage to Live After a Death Getting past a death is extremely difficult. Suze basically recommends focusing on taking care of the mechanical things that need to be done, but allow yourself to grieve. As for your own mortality, remember that what lives on after you is your legacy – how did you impact the lives of other people? Was it a positive impact, one that will leave your actions touching the lives of others for many years after your passing? It’s a good question to ask yourself every so often.
Starting Over If for some reason (a death, a divorce, or something similar) life has forced you to hit the reset button, don’t make any rash decisions. Instead, lock up what you have for six months and spend that time grieving in whatever way you need to. Many people simply go through the motions of life for a little while after the loss of a spouse or a child – don’t make major decisions during that period.
Part IV – Buying A Home
Seeking Shelter Many people are attracted by the siren’s call of home ownership, but for many people it’s not necessarily the best option. The key to buying a home is to separate yourself from your emotional desires. Define what you actually need for living conditions, then find a residence that matches that need at the lowest price. I found this was a great exercise for us when deciding on what house to get – and we ended up getting exactly what we needed for our family to grow.
The Mortgage Menu The big thing to remember here is that you are the buyer and the bank is the seller. If you don’t like the products that they’re selling, go somewhere else and see if you can find a better deal. Also, you should again let go of any psychological blocks and see whether a 15 year or a is better for you – if interest rates are low, a 15 year is probably a better deal.
Your Home and Your Future For many people, fully owning their home mortgage-free provides a very powerful sense of security. Don’t undervalue this sense of security – make being debt free and owning your home a real goal. There might be ways for you to have more money in the long run if you pay it down slowly, but the freedom of not having the mortgage bill eating up a big chunk of your monthly budget allows you to make spiritually fulfilling choices that wouldn’t be possible otherwise.
Part V – Thinking Ahead
The Courage to Create Your Financial Destiny One of the biggest mental blocks is to move from a “today”-based perspective to a “tomorrow”-based perspective. Many Americans focus on a “today” perspective – and when tomorrow comes and brings an emergency, they’re gobsmacked. The only way to be prepared for the inevitable tomorrow is to do it today. Start by creating an emergency fund and planning for retirement, and then, if you can, begin investing.
Making Sense of Investments The chapter’s title is a bit of a misnomer, as it talks almost exclusively about annuities. Annuities are investments that you buy that pay out a certain amount every year for a certain number of years (usually bookended by the remainder of your life). This is an extremely conservative type of investment as the only purpose of it is to ensure you an income forever – it doesn’t build in value. However, for people who don’t like to worry about such things and just need to ensure enough to live on for a long time, an annuity can be a good choice.
Seeking Safety in Bonds The book moves on to discuss another conservative investment choice, bonds. The investment issues discussed here are very conservative, which makes sense because this book is about the courage to make financial moves, and often that first step is the scariest – a conservative investment is a very nice place to start.
How Does Your IRA Grow? Finally, some talk about stocks. The information here mostly relates to retirement accounts and focuses on a question and answer format. The real key is actually putting the money away. Given that for many people it means “giving up” that money to a future that’s so far off that it’s basically cloudy, it’s a pretty significant challenge.
Part VI – The Courage to Be Rich
The Courage to Connect to the World Charity is a word that’s very hard to talk about in a personal finance context – how does giving money away help you to get ahead? The real truth about money is that it’s a way to connect with the world – with your money, you can totally transform the lives of others. I find charity to be a compelling personal challenge.
The Courage to Be Rich The closing of the book ties it all together: richness has nothing whatsoever to do with the amount of money you have, but the uses you put it toward. Do you use money to enable yourself to live a fuller life and to spread that fullness to others? If so, it doesn’t matter whether you’re a billionaire or you make minimum wage – you’re rich.
Buy or Don’t Buy?
If you’re looking for a book to tell you exactly what to do and provide you a step-by-step detailed plan for financial freedom, is probably not the right book for you – try looking at The Total Money Makeover instead.
Where succeeds is pushing you over psychological hurdles and getting you in the right mindset so that you can tackle a detailed financial plan.
For some people, this book is entirely unnecessary. Howwever, if you’re finding yourself knowing what you need to do financially but somehow just not quite able to do it, is an absolute must-read. I found it to be the best book I’ve read by Suze Orman, and I’ve liked her other ones – but it’s not going to be useful for some people who already have the psychological fortitude for financial success.
The Courage To Be Rich is the forty-fifth of fifty-two books in Money360’s series 52 Personal Finance Books in 52 Weeks.