I like to get a little recreational reading in when I am on vacation, taking me away briefly from the legal and technical reading that fills my workdays. I guess you could say that I am a “beach reader” because I am fond of those action paperbacks that you read, enjoy, then forget what the book was about a week later.

The book I am finishing is Dave Barry’s Money Secrets. This book covers every possible money issue you can think of (and some you would never think of). The author’s name should tell you that not one word of this book is to be taken seriously. Dave Barry is my favorite humor writer and this book is true to his hilarious style. If you want to think about our government and money and laugh at the same time (hard to do right now), give this book a try.

The other book I plan to read is serious: Worry Free Investing by Zvi Bodie. Bodie is a finance professor at Boston University. He disputes conventional wisdom that postulates that stocks are a reasonable risk for long term investors. His advice is to keep out of the market entirely and invest in TIPS and I-Bonds. His book is supposed to explain all of this in detail. I actually downloaded a copy from his website for $5.00. If I enjoy it, I will write a full review here eventually.

For an introduction to Bodie’s conservative investing philosophy, check out this Bodie interview video:

(RSS and email readers may need to click through to see the video.)

So that’s what Mr. ToughMoneyLove is reading this summer about personal finance. What about you?

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As I write this review, Congress is working hard to load the Wall Street rescue bill with dozens of extra provisions in a costly and misguided attempt to save segments of the middle class from themselves.  (Those that bought homes they could not afford.)  I’ve also read that some Democrats are clamoring for a provision that would cap compensation for corporate executives, striking another blow against the free market.  There will be others and it will be ugly.  Our economic system is being transformed in an accelerated devolution. 

What “Principles of Economics” Covers 

Back to the book, which I “read” in the form of a seven CD audio book that I borrowed from our local library.  It is part of the Modern Scholar Series of audio courses.  Written and presented by Peter Navarro of U.C. Irvine, Principles of Economics provides a real world overview of both macroeconomics and microeconomics.  I had taken courses in microeconomics and engineering economics way back in undergraduate school and remembered a little of it.  But I felt a strong need to expose myself to macroeconomics which is more directly relevant to government policy and how it affects our personal investment and tax planning.  So I borrowed this from the library and listened to it in the car while commuting. 

The seven CD’s contain fourteen lectures.  Navarro does a very good job of organizing the content of each lecture and in transitioning from one lecture to the next.  He periodically refers to a printed “course guide” that is included with the CD’s but it is not essential that you use it.  Also, he makes reference to the mathematical concepts that are often associated with economic theory but does not try to teach you those.  This makes the course very accessible to the casual learner. 

The lectures on macroeconomics were of the most interest to me because of its focus on government fiscal and monetary policy, inflation, money, credit, banking, unemployment, international trade, and the international monetary system.  All of these topics are highly relevant to what is happening in the U.S. and around the world right now.  Refreshingly, Prof. Navarro presents these topics in a balanced fashion, without openly taking sides on issues that can become highly politicized.  I found the lectures on microeconomics less interesting.  However, for readers who work in a manufacturing industry, the information on supply, demand, and pricing theory would be very helpful.  

Who Should Listen to Principles of Economics 

Mr. ToughMoneyLove is going to preach for a second.  Because our politicians don’t know anything about economics, it is incumbent on taxpayers and voters to act as a gigantic “economic oversight committee” for the collection of bumble heads in Congress.  This means that all of us need to have baseline knowledge of economics that goes beyond monitoring our credit score and bank account balance.  This audio book is a perfect way to get that basic economic education if you lack it. 

Long and short term investors also would benefit from this book.  Understanding how inflation, interest rates, international trade, and currency valuations are interrelated will make you a better investor.  There is no question about it. 

Hard Truth Bottom Line 

If you are inclined to jump on Mr. ToughMoneyLove’s “learn about economics” bandwagon, the Principles of Economics audio course would be perfect.  Try to find it a local library and start listening.  After you do, you will cringe even more when you learn what is being discussed in Washington. 

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Many of you will recognize Ben Stein, perhaps first from his appearance as the whiny high school teacher in the semi-cult film Ferris Bueller’s Day Off or more recently from his various TV gigs, including Win Ben Stein’s Money.  What many of you may not know is that Stein was educated as an economist and worked as an economist for the Department of Commerce.  He has also written on matters of personal finance for many years for Barron’s and the Wall Street Journal.

Stein has partnered on this book with Phil DeMuth, who has a Ph.D. in psychology and is a Registered Investment Advisor.  DeMuth has also been a prolific writer in areas of personal finance and retirement planning and is president of a wealth management firm for high net worth individuals.  Stein and DeMuth have written other personal finance and investing books together.

Bottom line:  The authors bring major credibility to this joint writing project.

Who Can Benefit from Reading This Book

If you are interested in straight talk and specific recommendations about retirement planning strategies, then this book is for you. 

If you are a person of any age who appreciates the value of planning ahead for your financial future, this book has much to offer.

If you are a baby boomer or a late-starter in saving for retirement, this book is a must read because of (a) the hard truth it brings about what lies ahead and (b) the detailed help and guidance it provides about how you can recover from a difficult pre-retirement financial picture.

The book content is separated into distinct three parts, each of which provides a specific focus on different aspects of retirement planning as well as the authors’ unique insights and recommendations.

Part I:  Yes, You Can Still Retire Comfortably

The first part of the book is a clarion call for everyone who is concerned about his or her financial future.  The authors also direct this part to those who should be concerned but maybe have ignored what is happening in the money world around them. 

After summarizing their “21 Basic Rules of Retirement” and thoughts for “Retirement Planning Decade by Decade”, Stein/DeMuth explain in detail what is likely to happen in what they call the “baby boom retirement crisis.”  What I appreciate from this section is that the authors provide real data to support the warnings they present about what lies ahead for all of us.  Then they bring the real hard truth:  Not everyone will be lucky enough to retire comfortably and it is up to you – the reader – to “save yourself.” 

Even of you don’t read this book, Mr. ToughMoneyLove wants you to please remember those words:  Save Yourself.  They are so true.

Part II:  How Much to Save and How Much to Spend

This section contains the nuts and bolts – Stein and DeMuth style – of how to do the following:

Determine how much you will need to retire

Develop a custom-tailored savings plan 

Invest for retirement

Invest for income

Design and implement a retirement draw down plan

I want to emphasize again that Stein and DeMuth do not just spout platitudes and rules of thumb that can be found in a multitude of other sources.  They provide specific graphs, charts, and tables that allow the reader to plug-in their own data and circumstances and come out with a real retirement plan for themselves.

The authors are not afraid to back-test their retirement planning strategies using actual historical data.  The testing charts they provide can be re-assuring to the reader that the recommendations are not based on pure speculation or theory.

A unique bonus feature provided by the authors is a website that contains updated information, planning charts, tables and worksheets related to what is discussed in the book.  I have visited the site and the data can be helpful for anyone who wants to implement a financial plan using the Stein/DeMuth strategies.

Part III – If Everything You Have Isn’t Enough

Stein and DeMuth are realists and understand that many readers of their book will determine that they are well behind the retirement planning curve.  This section of the book is for those folks.

The authors start with extensive coverage of fixed and variable annuities.  Apparently, Stein’s parents did very well with annuities so he is favorably disposed to their use in some retirement plans.

Relocation is another topic of this section.  Many retirees fail to appreciate how much money they are bleeding away in taxes, mortgage payments, insurance, and in other spending categories because of where they are living.

Finally, the confusing topic of reverse mortgages is discussed for those who may be house rich but cash poor.

In an Appendix, the authors summarize the “25 Big Truths of Retirement Planning” and introduce the retirement withdrawal strategies of other experts.  I found the comparison of the different withdrawal strategies enlightening.

Final Thoughts

Mr. ToughMoneyLove enjoyed reading this book, all the more so because I am a fan of Stein.  I cannot say that I agree with everything he recommends but I do appreciate that he and DeMuth can support what they say with data and logic.  In short, you should read this book.

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I admit it, I’m a baby boomer.  That means I read books with words like “fifty” in the title, including this one.  It could have been titled “Investing for Baby Boomers” (as I’ve listed it in the title of this post) because that is the essential focus of the book.  I suppose my title just doesn’t have enough “pop.”   The title tag line is a good one because I feel like I truly am in the second half of my life.  (Mathematically I’m probably more than half-way through, at least of the parts that I will remember!)

Why I Read this Book

OK, first a disclaimer.  I didn’t technically “read” this book.  I listened to it.  I found the audio CD version (five CD’s) at our local library.  I noted right away that it was published in 2000, so that had me concerned that the content would be dated.  On the positive side, I saw that it was written by Charles R. Schwab.  I was intrigued by that because I knew that he was a successful investor and brokerage owner.  I had never read anything of his so I was curious about his personal investing and retirement planning strategies.  I figured what the heck,  I could listen to it in my car, going back and forth to work.   So that’s what I did.

Who This Book is For (Not Just Baby Boomers)

Obviously, the book is intended for investors over the age of 50.  (Duh)  But after reading it, I will add that “investing for the second half of your life” probably should start earlier.  It could also be called “investing for accumulation” because that is what Schwab wants us to do – aggressively invest to accumulate wealth for when we aren’t working so hard.  Let me emphasize the word “aggressive” because in this book, Charles Schwab is big time pushing growth stocks as the investing vehicle of choice.  I’m talking a very high percentage of growth stocks, much higher than most other personal finance writers would recommend for the over-fifty crowd.  That makes the book a good read for younger investors as well.

This book is probably not for the sophisticated investor.  By “sophisticated” I do not mean having lots of money to invest.  I mean an investor who knows where his or her money is invested and why.  Unfortunately, there are lots of boomers and others who turn their portfolios over to wealth managers and advisors and then really don’t pay any attention after that, except to the bottom line.  That is not a sophisticated investor.  That is a reckless investor.

What this Book Covers

Being a book intended to introduce folks to lots of financial planning areas, the book starts with a discussion on investing and retirement planning philosophy.  It explains the different asset categories and what role each should play in an investors portfolio, both to grow the portfolio and to generate income.  But let’s be clear – Schwab is a growth guy.  He doesn’t even like high yield dividend stocks.  He wants baby boomers – all investors really - to focus on funds and stocks that provide the potential for high growth.  Not much data to support it – just Schwab’s personal experience.

Investing “Core and Explore”

Schwab uses this phrase a lot in the book.  I kind of like it myself actually.  It refers to Schwab’s belief that a long term investor should have a core set of mutual funds, usually indexed funds, that provide the core growth potential for the portfolio.  He then urges us to “explore” beyond this core by finding actively managed funds and stocks in different asset categories that provide even greater growth potential.  By making this recommendation, Schwab places a lot of trust in his readers that we will take the time to carefully do the research for these “explore” holdings.  He may be forgetting that we do not employ legions of analysts to do this research for us.  Overall, though, it’s a nice concept to consider.

Beyond Stocks, Bonds, and Mutual Funds

A nice feature of this book is that Schwab moves beyond the pure investing arena into other areas.  Those include disability insurance, life insurance, estate planning, how to select an advisor, and even charitable giving.  It is apparent that he has a great deal of knowledge in each of these areas, and provides enough of that knowledge to get the reader at least thinking about the subjects.

What is particularly helpful about the content is that Schwab obviously has a passion for what he is talking about.  He works hard to inject that passion into his words and to keep the book from devolving into a world of pure dollars and cents.  He genuinely wants the readers to invest and plan for their lives and for the lives of those around them.   I should add here that except for brief opening and closing remarks, Schwab does not read his book to us.  He uses a professional actor who has a great voice and knows how to keep listeners from falling asleep.

Should You Read this Book?

If you are a baby boomer, or even in your 30′s or 40′s, this book is definitely worth your time and effort.  If you are already knowledgeable in the areas of personal finance, investing, and retirement planning, this would not be a “must have” read.  However, if you are like me, and have commuting time on your hands, then I still recommend that you at least borrow or buy the audio CD version.  If you can’t find it at your local library, they are available new and used at Amazon and other retailers at discount prices.  At the very least, you can say you’ve listened and learned from Charles Schwab.  Nothing wrong with that.

Now please excuse me as this baby boomer must return to living the second half of my life.

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Of course, I regularly read posts and comments on dozens of finance and money blogs.  Some of those posts are quite informative but others are mostly fluff and/or are recycled from other blogs.  Thus, I think it is important to regularly move beyond the money and finance blogosphere for other points of view and to get information that is closer to economic science.

Right now I am reading “Yes, You Can Still Retire Comfortably“, a book by Ben Stein and Phil DeMuth.  I also am listening in my car to the audio CD series of “You’re Fifty- Now What (Investing for the Second Half of Your Life)” by Charles Schwab.  The Schwab series is somewhat dated but I am particularly interested in determining how Schwab’s views may have migrated since then, based on current market conditions.  I intend to publish reviews of these when I am through, probably in the next two weeks.  I have a number of other personal finance books I have read recently that I intend to review as well.  Thus, if you are interested in personal finance education, you will be getting a lot of information about personal finance books in my posts.

I am always open to suggestion from others about good reads in personal finance, investing, and retirement planning, so let me hear from you if you have a favorite.

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