Budget Book Review

Money for Life: Budgeting Success and Financial Fitness in Just 12 Weeks by Steven B. Smith


I like to pick up budgeting ideas from wherever I can find them. I suppose I am searching for a magic solution that will make us rich overnight. All the books I have read so far just tell me to do what I already do with perserverance over time.

I found the title of this book on some other blog that I can’t recall. I picked it up at the library (aren’t libraries great) and had a chance to read most of it. I was surprised to see that someone had written a whole book on the envelope system that I have been using for almost 2 years. But this guy took the envelope system to an new level by creating software to streamline what I sit down in my word document and do manually. Not only does the software add and subtract and total envelopes (my husband keeps telling me to make my system do that in excel but I don’t have the patience or time to figure it out) but he also has some online service or something that you pay for. The book comes with a disk and a free trial period. It seems counterintuitive to pay for something that you can do yourself when the whole point is to become financially successful by not spending unnecessary money, however, I can see where his program would benefit certain people who do not have the time perhaps or patience to deal with the details that my system does.

I liked his chart on debt reduction and the debt reduction roll down principle. Basically he suggests that you list your debts from left to right in order of highest interest to lowest with the balances and payments. As each balance is paid off you do not absorb the payment into your regular spending, but instead add that payment amount to the payment amount of the next highest interest debt until all the debt is gone. For instance (I can't seem to get the tabs or spacing right so I'll try to demonstrate):

20% Visa 3,000 Payment $50
7% Home Equity 12,000 Payment $75
5.75% Mortgage 170,00 Payment $1200

When Visa is paid off, add the $50 payment to the $75 Home Equity payment and pay $125 until the Home Equity is paid off. Then add the $125 to the $1200 mortgage payment and pay $1325 until the mortgage is paid off. When the mortgage is paid off put the $1325 into savings. Of course you want to maximize the payment you make to the highest interest rate debt to trickle it down.

There are some other simple things spelled out in the book that I also liked. I always wonder what we should be saving if we have debt that we are trying to eliminate. Should we put ALL of our money towards the debt and then when it is paid off start from zero? He suggested saving 10% of your income if possible until the debt is paid at which point you would put the payments that had gone toward debt elimination plus the 10% into savings.

The book was long and drawn out and presented in a rather lame manner. Maybe I thought that because of where I am coming from in my own budgeting process. Perhaps the story would be helpful for someone who has not yet budgeted. The book told a fictional story about a couple who was spending 10% more than they earn each month but because they were not budgeting or paying attention to what money was coming in and out. They had taken a home equity loan out to pay off credit cards but two years later they were back in the same credit card situation. Then the story tells of their meetings with a financial advisor who helped them get on an envelope system. I have never heard of a financial advisor that does that, but how nice would that be? The envelope budgeting system changes their lives and their marriage and trickles down to their parents and some other friends through word of mouth. They also have a friend, a single mom, who had been using the envelope system for several years and they run into a couple, millionaires, who had been using the system for 30 years. At the end of each chapter there are learned principles with instruction on how to apply the principles. There are charts that break down the budgeting system into very simple terms. That is probably the intention of the fictional characters, to try to explain the system in a way that everyone can understand it.

I skimmed a lot of pages about the characters and rolled my eyes quite a bit. The story made it sound like everyone they talked to about the envelope system thought it was just great and peachy and they ended up thinking that they should also do it. I have tried having these same conversations with friends that are struggling and that is not how it goes. I find that just the discussion stresses people out if they are in a financially bad place and do not budget and do not really have a grasp of what money is coming in and out. I have found that people resist this sort of budgeting at all costs which is why Americans are so in debt and in such a bad financial state. Mr. Smith threw in a lot of those scary statistics in his book that we keep hearing in the media to convince the reader that to be financially fit you have to do what others do not do. You have to be a little abnormal in a sense to find financial freedom and peace within. It is always reassuring to read that what you are doing is weird and abnormal but that it is the right thing to be doing. So for that I thank Mr. Smith.