Last week when I reviewed Four Hour Work Week by Tim Ferriss Reviewed, I mentioned that I hate books. I really do, but today I'm going to contradict myself. Almost a year ago, Dan Holt sent me his book Nobody Wants a Million Dollars and asked me to review it. It got lost in the shuffle, but this past weekend I had a chance to bring it up.
One of the biggest advantages of this book is that it's only 133 pages... and large type font. Despite being a slow reader, I could have probably finished it in an hour and a half if I wasn't watching the Bruins' game. With it being so short, Mr. Holt has to get to his point and move on... my attention span thanks him for that.
As for the contents of the book, I found myself agreeing with about 60% of the book's advice. The other 40%, are things that I wouldn't necessarily say is bad advice, but maybe not targeted at my philosophy of personal finance. All that said, I could see it as a gift to a student graduating college - it's a good starter on personal finance. If you go that route (and you might not be able to since I see you can't buy it on Amazon at the time of this writing), please direct them to this post. I have alternative viewpoints on 20% of the book. Here are some examples:
- Nobody Wants a Million Dollars - This is, of course, the title of the book. The idea behind this is tha if everyone really wanted a million dollars, they could do it by living extremely frugally and working 16 hour days. It's not that no one wants a million dollars, it's just that people have different priorities. Anyone who reads this website knows I surely do. Holt agrees with this. However, the idea that No Wants a Million Dollars in the context of working all the time seems like an overly exaggerated premise to start with.
- Needs vs. Wants - Holt disagrees with the idea of "paying yourself first" when it comes to saving. He believes in covering the basic needs (shelter, food, clothing, etc.) first (Not to be confused with a mansion, great steaks, and fine suits). I think that's an assumption in "paying yourself first." If we have to tell people to do the things that keep them alive, I think our society has failed. With that assumption in place, "paying yourself first" in the context of saving for the future makes great sense.
- Spending - Dan Holt seems to rely very highly on budgets. He checks his purchases to see if they are in the budget. That works for him. I "try to budget in my head" (as he puts it), but I succeed. He always sticks to his pre-determined buying plan when going into a store - even giving himself a speech to reaffirm that if necessary. I allow for the flexibility of picking up useful non-perishable items when they are on sale.
- The $21,000 Savings on a Car with a No Debt Plan - One of my biggest issues with the book was the comparison of a "Debt Plan" and "No Debt Plan."
- Debt Plan - The plan of living with debt is someone putting $5,000 down to buy a new (2007 at the time) $35,000 car at a 7.25% interest rate... thus paying $40,855 after 5 years (I've reduced the math details for brevity).
- No Debt Plan - The plan of avoiding debt is someone buying a used car for $5,000. That opens one up to use the payments they would have made on the new car to save money. After three years of saving, the person can buy the same 2007 car for $20,000 (and still have $4,300 left over).
The problem that I have with this is that the person with the No Debt Plan isn't getting an equivalent product. That person is getting two previously used cars instead of the new car that he/she set out for. It turns out that most of the $21,000 in savings from the No Debt Plan, comes from buying a product that deprecates extremely fast after that depreciation. It should be called the Buy Depreciate Assets After They Depreciate Plan. It's one that could be used not only for cars, but also for technology products (as long as you don't like new technology features).
In the end the biggest problem I have about this book is that it assumes the reader has a lack of self-discipline. Dan Holt admits to having problems with credit and getting in debt in the past and I think that's where his view comes from. He advocates using cash as a means of self-control (you can't spend what you don't have). When it comes to paying off your credit card each month he wishes you "Good luck" and further says, "you may be lucky enough to pay it off every month, but is it worth the risk?" Paying off your credit card balance each month has nothing to do with luck, it has to do with being disciplined in your spending. And yes the rewards of using my grandfathered 5% cash back card on groceries, gas and drugstores is worth it. It doesn't hurt that I get another 3% back on office supply, home improvement, and restaurants with another card. These rewards add up to hundreds (maybe even more than a thousand) a year for me.
As long as you can control the opportunity, I think it's worth trying to maximize everything you can to get ahead. I would include stacking up rewards.
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