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Book Review: The 10 Commandments of Money

Liz Weston Writes About How to "Survive and Thrive in the New Economy"


Liz Weston, a writer for MSN Money, is the most widely-read personal finance online writer on the web, according to Nielson Ratings. She's also the author of several bestselling personal finance books, including The 10 Commandments of Money: Survive and Thrive in the New Economy, released in 2012.

If you're looking for a personal finance primer, I highly recommend this book, which covers basic money management staples. The book is both simple and comprehensive.

It's suitable for beginners, but even advanced personal finance adherents will probably learn something new.

What are the 10 commandments that Weston advocates?

1) Create a Budget That Works in the Real World

Weston recommends the 50-30-20 budget, which is also the budget that I've recommended multiple times on this site.

Simply stated, the 50-30-20 budget advocates spending 50 percent of your after-tax income on your needs, 30 percent on your wants and 20 percent on savings.

Learn the basics of the 50-30-20 budget in this article, and find a more advanced explanation in this follow up piece.

2) Create a Survival Plan with Cash and Credit

Weston recommends maintaining an emergency fund, which you can tap for unexpected expenses. In addition, she also recommends developing a second or third stream of income, like a side job, so that even if you lose your main job, you'll still have some money coming in. Finally, she recommends that as a last-case resort, you have access to a home equity line of credit. (I'm not sure that I agree with her final recommendation, but you can feel free to read the book and reach your own conclusion.)

3) Pay Off Debt the Smart Way

She defines "toxic" debt as high-interest debt with loads of fees, like credit cards. "Non-toxic" debts tend to be lower-interest debts that allow you to sensibly leverage, like modest home loans. She says to pay off toxic debts first.

Prioritize the debts that stress you out the most. If a zero-interest loan to your brother is causing you the most stress and personal grief, pay that one off first.

If you're not sure what to pay off first, attack the debt with the highest interest rate.

4) Don't Avoid Risk -- Embrace It, but Sensibly

Diversify your risk by investing in a combination of stocks, bonds, CDs, real estate and small businesses. Allocate your portfolio assets among domestic and international equities, large-cap and small-cap companies, and corporate and junk bonds.

5) Your House Is Not a Piggy Bank

Don't tap your home equity to buy things, Weston says. Before the recession, plenty of people borrowed against their home to make renovations, take vacations and otherwise support their lifestyle. She says this isn't a wise idea. Don't treat your home like a piggy bank. Keep home equity in your home, and pay for repairs in cash. Don't move too often, either, since that incurs transaction costs and moving fees. Move only when necessary, like for a job or for a rapidly-growing family.

6) Saving for Retirement Must Come First

Remember how the 50-30-20 budget says you should save 20 percent of your income? Within that 20 percent, prioritize retirement savings first. You should save 10 percent or more towards retirement. Get your 401(k) company match, if you have the opportunity for one. Once you've mastered that, then start saving for an emergency fund, car repairs, medical bills, vacations and other expenses.

7) Get a College Education You Can Afford

Don't spend wildly on your education. Think carefully about what your expected starting salary will be when you finish college, and borrow an amount that's proportionate. (One good rule of thumb -- borrow no more than what you expect to make during your first year out of school.)

8) Reserve Insurance for the Big Losses

Get low-premium, high-deductible insurance. Pay for minor repairs and claims out-of-pocket, though money you've set aside specifically for car repairs, home repairs and small medical bills. Save insurance to cover only the big expenses.

Read more: Make a Car Payment to Yourself

9) Treat Your Marriage Like a Business

It's fine for one partner in a relationship to take care of day-to-day money management, like paying bills, checking bank balances and reviewing receipts. But both partners should be aligned in sharing a common vision about where they're headed. Talk to your partner about topics like how much you want in your portfolio when you retire, how much risk you want to undertake in your investments, and what age you want to retire at.

Read more: How to Talk to Your Partner About Money and Are You and Your Spouse Financially Compatible?

10) Defend Yourself in the War on Consumers

"War on Consumers" sounds pretty extreme, but Weston argues we live in a "buyer beware" atmosphere. She says that without sufficient consumer-protection laws, it's your personal responsibility to read the fine print and make sure you're getting a fair deal on your purchases.

The Bottom Line: This is a fantastic book that does a great job of educating people about how to manage money. Whether you're a personal finance novice or an advanced money-management hawk, I highly recommend Weston's book.

Disclosure: A review copy was provided by the publisher. For more information, please see our Ethics Policy.

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