Book review: The Finish Rich Dictionary

A few weeks ago, a publicist with Oxford University Press kindly sent me David Bach's new book, The Finish Rich Dictionary, to review.

I've been a fan of David Bach for some time, since I read his book, The Automatic Millionaire. In fact, I could have sworn this was a book that I purchased at one time, as The Automatic Millionaire presents personal finance concepts succinctly and in layman's terms. It is also incredibly motivating without being overwhelming or 'preachy'.

In addition to the Automatic Millionaire, David Bach writes the 'Finish Rich' series, including: Start Late, Finish Rich; Smart Women Finish Rich; and Smart Couples Finish Rich. I've only read the 'Start Late, Finish Rich' version, but it's another book that resonates with me and provided some additional motivation that led me to consider increasing my retirement savings.

Bach's latest book, The Finish Rich Dictionary, can be seen as a companion piece to any of his other books as well as to any other personal finance book, magazine or blog you may be reading. The book is filled with short, relevant definitions for many of the words we stumble across (and scratch our heads over) in the journey to financial independence. I know that I have tossed aside a book on investing more than once because I was frustrated by the terminology and the assumption that I have a degree in finance (which I most assuredly do NOT). An added bonus for me is that many of the words are defined along with their linguistic origin---I love languages, and learning that the word bankruptcy, for example, comes from the Italian banca rotta ("broken bench") is fascinating.

Having this book by my side will allow me the confidence to delve into the more in-depth discussions of IRA's, mutual funds, certificates of deposits or municipal bonds. In addition to defining various finance terms (and demonstrating common usage), Bach also inserts chapters devoted to brief discussion of topics such as:

• The Latte Factor
• Saving for retirement
• Determining if you have a credit card problem
• Becoming a homeowner
• Top ten personal finance mistakes people make
• How to choose a personal finance advisor

I should note that the chapter on becoming a homeowner was apparently written in 2003 (possibly distilled from some other David Bach book), in the midst of the housing boom. As you can imagine, the advice in this section seems a bit outdated. For example, Bach mentions several times that with the historically low interest rates, people can purchase more home than they think they can afford. Added to this is the comment that banks are willing to loan homebuyers 95% or even in some cases 100% of the purchase price! Of course, this is how I've been able to purchase two homes since 2003, but with the economy in a tailspin and credit becoming tighter by the day, this chapter sounds a bit silly.

In reviewing this book, I read the personal finance chapters and the first few sections of definitions, while skimming the rest of the vocabulary chapters. I will say that I learned something within moments of opening this book: my second mortgage is set up for a 'balloon payment' in 15 years, something which wasn't fully explained to me when I signed the paperwork. I happened to notice this detail when I was taking a closer look at my bill, to see how much interest I pay versus principle. At the time I purchased my home in 2006, real estate values were still soaring and my loan officer probably assured me that I could refinance and obtain a standard 30 year loan before the balloon payment was due. In reading Bach's book, I learned the following about the definition of a balloon payment:

"A repayment of the outstanding principle sum made at the end of a loan period, interest only having been paid hitherto. Usage: Even though the terms may seem easier to meet, the borrower may not have the money required to make the large final payment."

I pay a whopping $20 a month in principle on my 15 year balloon loan. Which means I'll still have a hefty sum to pay when (or if!) I make it to the final balloon payment in 12 years or so.

All in all, I find this book to be a worthwhile investment if you are someone who wants to increase your knowledge of personal finance, particularly if you find yourself avoiding more technical investment reading because the vocabulary is unfamiliar to you. This is not a book you will read from cover to cover in one sitting, but would be a wonderful resource to have by your side as you delve into some of the more complex personal finance topics.

As I have in the past, I would like to pass this book on to one of my readers (sort of a 'pay it forward' concept). With that in mind, I will mail a free copy of The Finish Rich Dictionary to the first reader to comment to this post with the correct definition of the word 'pogey' (hint: Canadian slang). Once you've commented, I'll contact you via email for your mailing address. . . .

Good luck!

The ultimate frugal ride. . . .

When I first moved to Portland almost three years ago (!!!), I was awash in extra cash from the sale of my first house. One of the things I wanted to do at the time was buy a scooter, so I could be mobile without paying a ton for gas or parking. Of course, my savings ended up dwindling quickly after I purchased a home here (Home Depot definitely benefited) and I ended up forgetting all about my Vespa dreams. I still have scooter envy from time to time (usually on sunny days when rain and wind are but a fading memory), but this is a purchase that will probably need to wait until I'm completely financially secure---and maybe living in an area that gets more than 100 or so days of sun per year.

However, since some of YOU may be living in warmer and drier climes, and since I love daydreaming about this particular topic, I decided to do a little research on scooters. Here are some of the issues to consider if you're downsizing to a cute little Vespa, as I'd like to do someday.

• Think about where you'll be riding the scooter. If your commute or your drive to the grocery store requires a freeway jaunt, a scooter may not be for you. Even though many scooters these days have the juice to drive at freeway speed, think about safety---do you really want to be exposed to the elements with only a helmet and a leather jacket between you and the SUV driving 65 mph behind you?
• Speaking of grocery shopping, think about space issues. Do you make one giant trip to the grocery store each month, bringing home 20 bags of groceries at a time? A Vespa---even one with a storage box---isn't going to do it for you. Same for trips to Home Depot, Target, Ikea, or any other stores that you regularly haunt.
• Check with the DMV. Depending on how 'large' the motor is (e.g. 50cc versus 150cc) you may need to get a motorcycle license.
  
• Find out about parking. I, for some reason, assumed that scooters could park for free--simply because they don't take up much room. Unfortunately, it turns out that even scooter and motorcycle riders are charged for parking, whether it's on the street or in the university parking garage.
  
• Purchase insurance. As I cruised the internet trying to find information about scooters, one of the issues that arose more often than not was theft. Apparently, it's pretty easy--and common--to steal one of these babies. The upside is that scooter insurance will cost much less than auto insurance.
  

In the end, I think riding a scooter (in a weather-appropriate city) would be fun. I think it would also save money, given that scooters get very good gas mileage and the insurance and parking costs are less than that of an automobile. Will I be buying one in the near future? Nope. But I can still dream about it. . . .

Can you smell the fear?

Last week, I went to a union meeting at my university, to discuss the upcoming contract negotiations. Our particular contract allows departments to send us yearly 'pink slips' six months in advance of the end of the fiscal year, basically telling us that we may or may not have a job in six months. Of course, since the end of the fiscal year is June 30, the letters go out right around Christmas of the previous year. Merry Christmas!!!

Although my department has thankfully neglected to send these out (recognizing what a morale buster they are), apparently members of other departments have not been so lucky. So, at this union meeting there were probably five or six instructors from the same department who had received these rather ambiguous letters last December. Now, during a regular year, the letters are a reminder that our contracts could end in six months' time. In a year in which there is 9.5% unemployment in the state, administrators are talking about mandatory and voluntary furloughs, and we're being asked to cut our budgets anywhere from 5% to 12%, these letters take on a much more frightening tone.

Basically, the instructors who received the letters were incredibly anxious about what they meant: in other words, would they have a job, come June 30, or should they update their resumes, contact Human Resources, and set up their COBRA accounts pronto? It's a tough call. I'm not sure what I would do in their situations. Luckily, I have the second job, but my earnings are a drop in the bucket compared to my mortgage payment, let alone costs for utilities and food.

Here's what the experts would say my colleagues should do:

• Pad that emergency fund! Start tracking your spending, cut the fat in the budget and start sending any extra money to savings. You'll thank yourself later, whether you lose your job or not;
• If employees in your field typically receive a severance package, start researching this. You'll want to negotiate the best possible package when or if your layoff becomes reality. Of course, in my world (the field of education) there are no such things as severance packages! I suppose the six months' notice we receive is considered severance enough.
• Start becoming indispensable to your boss. The first to go (usually) are those who contribute the least. Make sure your supervisors know which projects you're working on as well as the outcomes.
• Start talking to friends, family members, neighbors, the postman, everyone you come into contact with about the opportunities that might be out there for you. Make networking your best friend--you never know what could come of it!
• Make sure you know the steps to apply for unemployment insurance. I, for one, would have no idea how to go about this. And because it can apparently take weeks for that first payment to come in, it's imperative that the paperwork is taken care of at the first possible opportunity.
• Balance adding money to savings accounts with paying down credit card debt. If you find that you won't be able to make your credit card payments, be sure to communicate with the credit companies---in this economy, they've heard it all before, and may be able to assist with a smaller payment temporarily.
• If you do lose your job, consider part time or temporary jobs in the interim that you might not have considered before. Waitressing, home health aide, data entry, anything to keep the money flowing could be of help, especially if unemployment insurance runs out.

It was painful watching my colleagues wring their hands about something over which they have little to no control. I wanted to reassure them, but couldn't---ultimately, none of us knows what the next year will bring. Their anxiety reminded me that I need to keep working and saving, preparing myself for the worst while expecting (and hoping for) the best.