Of course I was like "Elizabeth Warren? The one from Occupy Wall Street who called out some big industries on their bullshit and got elected to the US Senate, THAT ELIZABETH WARREN?" I thought she was invented in 2011!" Silly me, it turns out smart women don't just spring up out of protest gardens to be instantly fabulous, Elizabeth Warren is a Harvard law professor and author of several bestselling books about everything from public policy to personal finance. She had a resume before this senate gig. Go figure.
Well I like her even more now! Her book does not have seven chapters of criticizing poor, instead she criticizes the fact that we read books about personal finance by real estate mogules... you can LOSE a lot of money in real estate too, and their advice for typical middle class families about "oh stop buying fancy blenders!" is likely to miss the mark if they haven't been where we are. Ahem, Kiyosake, Ramsey, anyone? It's like reading books about success by the 1 in 1000000 people who make it as hollywood actors.
This book's advice is to budget thusly:
1) 50% of your income on needs & contractual obligations
2) 30% on "wants" - which she turns into a very broad, flexible category
3) 20% on savings & debt repayment
The last book I read was Dave Ramsey's Financial Peace, which told me that after I have $1000 saved up and debt repayed, step 3 is to build that 3-6 months savings account, which is taking forever and feeling stupid. And generally, stop buying crap... he does have some "personal" budget in some website stuff he's published but his book really downplays it, and it's kinda weird... like "7% for clothes" when who buys new clothes every month? Anyway the warren book also recommends that "step 1: save up $1000" tip that I agree with, but after that it has very different suggestions... mainly, having a budget for wants.
Which is a lot, that's how it becomes 30%. "Wants" includes any food above and beyond the USDA recommended allowances ($160/week for a family of four), all clothing (because if you lost your job, you could probably wear what's in your closet for a long time), fancy TV or phone plans, etc. Birthday parties, gym membership, furniture, all that. You find out the big amounts then figure out what you'll use a card/check for and give yourself cash for the rest so you really stick to the plan (well, of course she's against credit cards too, but they all are... I still have my cards, and I still pay my balances, so there ya go.)
The 20% savings and debt repayment includes 5% to pay extra on your mortgage every month... a nice ballpark target for me, since I want to pay extra but wasn't sure how to go about it since I don't have the ideal emergency savings yet, I just thought I was doing something wrong. The home ownership chapter is good, has lots of questions about how to decide you're ready, dispels the myth that renting is bad, etc.
Then there are interesting tips on how to get things in order. Like the 50% "needs" is a good way to tell if you've bought too big a house or car, and there are some tricks to get it down, like shopping for insurance... she has pages of how a LOT of insurance premiums are scams and you can save a lot by raising your deductibles. Just for fun I tried it... saved $120 a year by going to a $1000 instead of $500 deductible on our full covered car. Gambling. We'll see what happens. Other stuff I've wondered about, like pet insurance, are total scams, even some health insurance is a scam, they know people LOVE low deductibles because they feel like they're getting free stuff when the company pays out, but the companies make a lot of money on those high premiums.
Anyway I am not stretched to the brink so I can't really evaluate which books best help you sleep at night if you're deep in debt, in fact I kinda skim those chapters anymore. But this book in particular gave me a much better idea of how much I should take out for my next car loan, rather than just telling me to feel like crap about ANY loan. I just need to figure up how much is left of the "50% of my income on contractual obligations" quantity and that's the payment I could responsibly make. EASY. "Millionaire Next Door" made me feel like crap about my net worth, Dave Ramsey made me feel like crap about car loans and having credit cards, so with the idea that you have to pick what's right for you I'm going to go with the Warren plan here. Anyone can live on rice cakes for a week, she says. Budgeting needs to be about finding some balance.
And it's also made me realize that holy crap, I just bought a house less than three years ago and my savings went to NOTHING for that, as it should, the down payment was a big deal to get right. My savings account is really still recovering. I should not feel bad about that. If my budget is in balance, and my income is greater than my outcome, I should feel good about things. I do not need to tell my stay-at-home husband to hitch a wagon up to a bicycle if he wants to take two kids to the store because we're too broke to buy a car that fits baby seats... there's more to life than being as cheap as humanly possible.