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Money Rules Book Review

moneyrulesLet me start by saying that the book idea is great and it’s not full of math, theories and history. It’s simply a rule book and more specifically a book about money rules. You know I have been discussing that saving is really important. In my opinion, it’s equally important as investing when you are building your wealth and this book just goes over 261 rules to help you manage your money individually and as couples.

Sample of Money Rules

Each rule in the book Money Rules is about 1 to 3 pages with some very good details explaining the rules and providing some context to put the rules in perspective for your situation. The rules are split amongst a number of financial areas such as:

  • Credit
  • Taxes
  • Saving
  • Investment
  • Shelter
  • Reality Bites
  • Finding Balance
  • Family
  • Cash Management
  • Smart Shopping
  • Goals
  • Insurance

Below are some rules I picked that resonate with me or that I can use to make my own decision.

Rule #1: Renting is not a waste of money

Gail covers the rule with some very good points about the cost of renting versus the cost of home ownership along with the mind set you need to have to own a home.

Rule #4 : You Must Have Power of Attorneys

I like that she covers these kind of rules. It’s not often you cover that in finance but it’s quite important to understand. Just like a will, you don’t want to be relying on a pharmacy before you get your after life organized. Life is like a box of chocolate, you never know what you’re gonna get :)

Rule #21 : It’s not how much you make, it’s how much you keep

See a pattern here? It’s all about your savings or in this case, your spending habits.

Related: Your Saving Ability is Your Golden Goose

Rule #35 : Don’t obsess over your credit score

I totally agree here. I don’t even know what my credit score is. What I found our recently is that I have access to too much credit. Get your free credit report to ensure your personal details are accurate and no one is defrauding you.

Related: How To Get Your FREE Credit Reports

Rule #37 : Know Your Time Horizon

Before you invest, figure out when you might need the money. It’s funny how many use their TFSA as a short term savings. They earn a very low 1% in interest and they want to make sure it’s tax free … In my opinion, your TFSA is a long term retirement account and should complement your RRSP. Once you compartmentalize your accounts, you will resist the temptation to withdraw. to even go further, some people withdraw from their RRSP … It should only be for extreme circumstances.

Rule #59 : Never sign up for in-store Credit Cards

She makes good points about this rule but if you are on top of your finances, you mange your credit, you pay your bills on time and you can follow through and close it, then you should be able to take advantage of it for the discount you are usually offered. I did that at Sears and within a year, I had closed the credit card. My rule is to never have more than 3 credit cards. I have my trusted Scotia Momentum Cash Back, my Costco Amex and another card at RBC to receive free banking.

Rule #60 : Never buy mortgage life insurance

I just can’t believe the banks actually manage to still sell this products… The catch here is that banks only cover the remaining mortgage amount while they keep the rate the same. You are much better with a real life insurance policy with enough to cover your mortgage and other fees.

Related: Life Insurance & Estate Planning
moneyrules

Rule #74 : Don’t buy what you don’t know

This is an investing rule. It goes without saying that if you don’t understand it, you should not buy it. Buffett even said that if you cannot explain your investment to a fifth grader, then it’s too complicated.

Rule #133 : Don’t overpay your withholding tax

I like this rule. Your tax refund is not a gift and it’s not a savings plan. It’s the government making money with your money. Last year I had to pay taxes a little. I am so optimized up front that I might have to pay a little bit as opposed to getting a refund. There are a couple of forms you can fill with your employers to reduce taxes withheld when you participate in a company RRSP plan and if your spouse doesn’t work, you can have your taxes adjusted for your spouse tax break as well.

Rule #161 : Weigh MERs against Returns

I agree with Gail here. If you invest in mutual funds, you pay fees through MERs (Management Expense Ratios) and the rule is not to buy the lowest MER but to find the performance that matters to you. She has a great example that I will share. Which of the two would you want?

  • 9% return – 2.5% MER = 6.5% to you
  • 7% return – 1.5% MER = 5.5% to you

There are still many people who buy actively managed funds and it’s important to understand your return. I shared my setup to track my ROR and I also shared that I don’t think it’s worth comparing to an index.

Rule #232 : Don’t buy now and pay later

Even if you have the money, psychology will kick in and you might find yourself spending money that was already spent.

I picked a total of 11 rules to share with you and as you can see, they are pretty thought out and there are 250 more for you, your spouse, your parents or your children to learn and grow financially.

Who Is This Book For

EVERYONE should read Money Rules. The younger you are the better off you will be to avoid the mistakes later on in life. However, there are rules for every financial situation in life. Whatever your age, you will find something that applies to you. This is a book I believe can help many at different points in life. It’s the first book I think could be converted into a mobile app as a great reference. The categories above would make for great filters.

Readers: Have you read the book? Any thoughts?

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2 Responses to "Money Rules Book Review"

  1. Unfortunately, the book is only in English and not in German! ;-)
    But it does not matter, because I can read a little bit English.

    I am not agree with the rules, for example:
    Rule No. 1 – I hate to have to pay rent and the first thing I do with the age of 25 I bought a house. It is now debt free and no one can take it away from me!
    I do not need more money to be able to live there!

    Rule No. 4: I do not think that is necessary for a normal person.

    All other rules in this post I think they are good!

    regards
    D-S

  2. Erich says:

    Rule 1 – Many people feel a mortgage should be top priority regardless of your finances. Notice I said mortgage, not buying a house. This is a loan, with interest charges. Your rent does not have interest charges, and in many areas of the world it’s a lot cheaper to rent than to pay a mortgage. For a single income, it is generally more beneficial in this situation to invest the difference. You have 0 benefit for paying off your mortgage until the day you’re finished paying it off, and have more income to invest. MOST people would not be disciplined and invest all the money they were paying into their mortgage, so you end up losing even more. You also lose all that time in the stock market to absorb additional market fluctuations during your career. Also, real estate only grows in value 5% compound interest on average, while the stock market’s 100year average is around 10%. You’ll never get that 5% from your house unless you sell it and rent, so for most people that’s 0% capital appreciation, just reduced expenses.

    Rule 4 – Totally agree. If you don’t have a power of attorney and you have children, you are doing them a disservice if you were to die when they are still dependents. It makes managing of your estate far more complicated, at least in Canada (and probably the USA). I actually think it’s irresponsible for a parent not to have a power of attorney.

    I love rule 21, I am increasingly living by this rule. I wish I had less difficulty convincing my wife to follow that one and rule 232.

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