Category Archives: Book Reviews

David Bach versus 529 Plan Qualified Expenses, Sometimes Even Financial Gurus Get it Wrong

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Let me start by saying that David Bach is one of my favorite personal finance authors!  You can read about my assessment of David Bach and some of the more popular type of financial authors in this article: “Which Financial Author Should You Follow?”

Okay, now with my statement of admiration with regards to David Bach and other financial authors out-of-the-way, I’ll continue…

Financial authors are just like you and I, except that they are famous and have studied or read up on the personal finance areas.  In fact, they may or may not know as much about some financial areas as you and I.  Take David Bach for instance, perhaps he not planning on using a 529 plan to put his kids through college (I’m sure he’ll have enough money…), so he might not know as much about it as parents that are using such a mechanism. Perhaps that’s why in his newer book “Fight For Your Money” he states the following incorrect line about 529 Plans:

all the proceeds are supposed to be used for your child’s college or graduate school expenses (basically, everything you have to pay for as a condition of enrollment, such as tuition, fees, books, supplies, and equipment – but NOT room and board, living expenses, or transportation).

As I was skimming his book (which I borrowed from my local library), I had to take a double take and re-read the above line 3 times, thinking that I must have misread is somehow!  Everything that I had ever read (including the info at the IRS web site) stated that you can use the 529 money for room and board as qualified expenses in the 529 plan.  To read the official government take on qualified 529 expenses click here!

While we all make mistakes, I just want to put this article out there in case someone is reading about 529s and reads David’s book that “room and board” aren’t qualified expenses and rethinks their college savings stategy based off of that particular mistake.

The funny thing is that almost any nonfictional author has mistakes of some sort.  I remember when I was in college, often times I would put a slash through the incorrect statements in textbooks and put the correct above the slashed out works or figures in pencil.  I used pencil because I wasn’t always sure and wanted to check with my professors first.  Most of the time I was correct and I only had to erase my slash mark once.

The point is, if you believe that something you read from an expert (any expert, not just financial ones) is incorrect, or partially incorrect, look into to it via a higher source.  In my example above, I went to the IRS site to make sure I was right.

Not to pick on David, but I’m sure if I read the book cover to cover I would find some more errors of some type.  But then again, given almost any book, I’m sure we can all could find errors in them if we look hard enough or know a topic area well enough.

Care to share any errors in recent financial books that you read?  Please share them in the comments section if you do.

Bests,

MR

How Rich People Think (Book Review)

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How Rich People Think

When I first received this book, I thought it was going to be another “This is Bill, he lives next door and he is rich and here is his story” kind of book (which I eat up, I love that kind of stuff).  Boy, was I wrong… but in a surprisingly good way!

The book “How Rich People Think” by Steve Siebold,  contrasts the thoughts of the middle class and the “world-class” (rich) groups.  The author does this through many interviews with some of the richest people in the world.  Let me quote two chapter headings from the book:

Middle class minimizes the importance of money with their kids…  World class teaches their kids the importance of money

Middle class thinks about money in linear terms…  World class thinks about money non-linear terms

Each of the  two examples above has a page to a page and a half of material that expands on his thoughts.  Those thoughts were very original and refreshing!

What I really loved about this book though was it is a perfect “quick read while waiting” book.  So when you are in a dentist or doctors office this book is perfect for reading while waiting.  The books was also practical for getting your oil changed, traffic jams, or in a drive though line, etc.

The thoughts the author writes are perfectly digestible in small chucks.  I also enjoyed the famous quotes and the recommendations for other books to read for further information on each chapter.

So the question is, do I recommend this book?  Yes, it has digestible and interesting material.  Is it my utmost favorite book, no, but it is very good in its own right.

I guess I like the convenience of the style of the book.  I wish more books were like it, just to add a little change of pace every now and then.

Have you read this book?  and if so what was your take on it?

-MR

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Getting Rich – Levels of Wealth – Part 2

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As mentioned in my previous review of the book, the full name of Getting Rich is “The Complete Idiot’s Guild to Getting Rich“.  But also as I mentioned before, don’t be fooled by the title!  It’s a good book!!!

Today, I’m going to talk about a portion of the book that I identified with and which influenced the way I approached my financial habits with respect to wealth creation!  The most powerful portion of the book for me was “The Five Levels of Wealth”  (also called Waschka’s Wealth Levels).

Before reading these levels, let me explain the book’s definition of TSG.

Target Savings Goal (TSG) is simply the amount invested yearly, so that after so many number of years of continual contributions, your investment nest egg will last (an hopefully outlast) you when you retire (or for some other goal).

The Five Levels of Wealth

  • Wealth Level 1
    You are able to maintain your standard of living and at the same time, save enough money to achieve your Target Savings Goal (TSG), the annual amount you need to save to meet your needs at retirement.
  • Wealth Level 2
    Your portfolio is large enough to produce, on its own, a total return each year equal to your TSG, as well as keep up with the inflation.
  • Wealth Level 3
    Your portfolio produces a total return large enough to cover your desired lifestyle and inflation.
  • Wealth Level 4
    You have accumulated enough assets to produce a total return sufficient enough to substantially increase your current and future lifestyle while at the same time keeping up with inflation.
  • Wealth Level 5
    You have accumulated enough assets to produce a total return well beyond what you would ever spend.  You now have the option not to work, raise your standard of living, and bestow large charitable gifts.

Some level (especially Level 2) has sub levels within them.  Currently I am withing Level 2, my got is Level 3!  Anything above Level 3 is just gravy 🙂

Wealth level 2 is special because it has sublevels until you get to Wealth Level 3!

Thanks for listening to me take a small trip down memory lane…

-MR

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Getting Rich (Book Review) Part 1

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Getting Rich

Getting Rich

The real book title is “The Complete Idiot’s Guide to Getting Rich”, and it was the 2nd book that I read on finances.

Don’t let the full title, fool you… its a great book, written by Larry Waschka (who was a registered investment advisor and once owner of Waschka Capital Investments, a fee-only investment advisory firm).

Unfortunately, the author died by drowning in Mexico while on vacation.  However, the book continues to be a great work and is on its 3rd edition.  It’s new co-author is Stewart H. Welch III, and while the core from Larry is the heart of the book, Stewart has kept it modern and has done an overall great job!

Much like Evan at “My Journey to Millions“, Larry also worked with very rich people and over time he was able to learn much about them.  This was one of the reason Larry wrote the book, to share what he had learned!

This book introduced me to some of the advance investing strategies that I still use today!

Unlike most financial books, this book actually lays out the formula step by step on how to get rich, not to mention the TSG (Target Saving Goal) calculation!  Most financial books are hype, inspirational, but mostly hype…, but this book’s author actually took it a step beyond by designing a wealth building strategy for his readers!

While this book might not get the credit and acknowledgment that it deserves because of its orange cover and silly title, it was instrumental in setting me on my financial path!

Tomorrow, I’ll dig a bit deeper into the book contents and explain what influenced me that most!

If you get a chance, check it out at the library or purchase it (it’s one of the few financial books that I have purchased in my life…), I think you’ll find value in reading it.

-MR

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