Show Me The Money! (Your Money or Your Life - Alvin Hall)

Member Name: collingwood21

Product:	Your Money or Your Life - Alvin Hall
Date:	27/06/09 (121 review reads)
Rating:

Advantages: Lucid, Entertaining, Well structured, Covers a wide range of topics

Disadvantages: A couple of chapters are weak links, Sometimes feels a bit patronising

First written in 2002, "Your Money or Your Life" is intended as a user-friendly financial handbook for ordinary people who want to get the most from their money. I bet if I had written about this book back when it first came out, a lot of people would have rolled their eyes or sighed in boredom at words like "personal finance" and "budget", but I suspect that this is no longer the case for many of us. I recently dusted down my old copy in the light of my changing financial situation (recently married, looking to buy our first home) and was reminded of just how helpful it can be. The author, Alvin Hall, is an American financial guru and is reasonably well known in this country as a commentator, writer and broadcaster on all things fiscal, but is probably best known from the series "Your Money or Your Life" (shown on BBC2 between 1999 and 2003) that spurred him to write this book of the same name. I can recall watching the show, and while I liked Alvin and his friendly, straightforward manner in helping people to regain control of their money, the participants who benefitted from his financial makeovers usually just exasperated me, as they were almost without exception people on good incomes who were up to their ears in consumer (i.e. non-mortgage and non-student related) debt. The episode that sticks most clearly in my mind is of one woman who considered herself too good for shop changing rooms, so she tried out everything she bought (and there was a lot of it) at home instead - if it didn't fit her, it was just put in the back of the wardrobe and forgotten about. So, despite being deeply in the red from all this spending, she had hundreds of pounds worth of unworn (and unwearable) clothes and shoes just sitting around and gathering dust. It rather despaired me that she could be so careless and wasteful, while I was as prudent as I could be but barely able to afford to put the heating on at the time.

The book goes much further than the TV series that inspired it was ever able to, however. While the show followed a set routine of helping one person tackle their debts, construct a budget and start planning for the future each week, the book aims to be a complete "DIY guide for your money". As well as helping you to give yourself a financial MOT (understanding why you spend like you do, addressing debts and starting saving), it also goes into related issues such as insurance, pensions, making a will, starting investing and buying shares. Not everything in this book will be of help to everyone of course, but the clear chapter structure and headed sub-sections makes it easy to target the parts that are currently relevant to your needs (in my case this time "financial partnerships" and "property choices" were the key ones) while avoiding material that you don't need or already are familiar with. The book is as clear and well explained as you might expect from such an articulate and knowledgeable broadcaster as Hall, although I did find in places that the tone slipped over from being instructional to being a bit patronising. As a reasonably small paperback it is never going to be totally comprehensive, but for the fiscally challenged it provides an excellent starting point - it is arranged into an introduction and 12 sections, which I will cover below.


Introduction
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Setting the scene for the book, Alvin starts out by admitting that he was once in the position of those people he had set out to help in his TV show; deeply in debt, spending too much and wondering how to take control of his "financial demons". But this is not written smugly. Rather, Alvin talks about his past to prove to readers that it is possible to change, to improve yourself and turn your fiscal life around to be able to afford a life worth leaving. He makes the important point that "perhaps the most tragic thing about poor money management is this: it takes away your choices in life". The key example he cites is of a woman who was unable to give up work to care for and spend time with her infant daughter as she would have liked - the reason being earlier excesses had left her with too many loans and credit cards that needed paying off for her to afford to quit her job. Good money management, the point is, would have made this possible. If that isn't reason to at least give the rest of the book a chance, I don't know what is!


1) - Money and Your Mind
====================
The sub-heading for this chapter is "understanding and taking charge of the ways you spend", and aims to "uncover the secret meanings that money, risk and reward have for you". This chapter sets out to answer the magic question that a lot of poor money managers have - where does it all go? If you have this problem, you are encouraged to photocopy the example of a daily spending diary from the book and use it to track your outgoings each day for a month, crucially alongside entries for "what I was doing" and "how I felt". This tool will therefore not only show you exactly where your money goes, but help you identify where you are over-spending and hopefully why. Although I have not done this particular task (I have ways been a saver rather than a spender and I know well enough just where my money goes), I have done something very similar with a food diary. It is quite simply a tool to make you face up to how much and why you spend (or eat) - boredom, to make yourself feel better, to calm hurt feelings, and out of habit that used to be a treat just once in a while but has developed into something you do on a weekly basis are common reasons (for both). Alvin's point is that with this self-knowledge you are better able to take control, and to set a budget that is both realistic to your needs and self-disciplined enough to cover all your outgoings with some left over each month. It is a helpful and interesting start to the book.


2) - Consumer Debt
===============
This is a chapter that has never been that applicable to me, as the only debt I have ever carried was my student loan (now thankfully fully paid off). It focuses on credit cards, and I like it because it discusses them in a remarkably balanced and honest tone. So many personal finance articles are quick to dismiss credit cards as pure evil, and anyone who gets into trouble with them as the blameless victims of unscrupulous companies, and they often ignore the positive points (they can actually help you manage your money, can give you cash-back on purchases, and give access to services that are virtually impossible to secure on a debit card alone). It is therefore refreshing that the book states, "if too many people have got themselves too deeply into debt - the blame must be placed squarely where it belongs: on the people themselves". A finance expert actually promoting the idea of personal responsibility - how refreshing! If you are thinking that it sounds just too uncomfortable to read, fear not, as Alvin provides a step-by-step guide to sorting out and paying back credit card debt, before turning his attention to explaining about loans and credit agencies. He never pretends that this won't take work and effort, but reading his illustration on how credit interest can conspire to make your purchases vastly more expensive if you don't clear your card promptly is a sobering thought that gives you a big incentive to do it.


3) - The Joy of Saving
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Once your debt and credit cards have been tackled, the next logical step is to convince readers to put away some of their money into savings - or in other words, how compound interest can work for you rather than against you. I need no convincing of this, and although I was quite familiar with the subject matter of this chapter, I found the explanations of easy access savings accounts and ISAs, and the sample savings plans and personal balance sheets, to be good (so good in fact that I swiped the personal net wealth balance sheet model to help me plan how much I could afford to put into a house deposit). The information in this chapter is nothing startlingly new, but offers good, sensible tips to help reluctant savers get started on the road to success.


4) - Property Choices
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All of the chapters thus far had been on subjects that I felt were either not relevant to me, or that I was already familiar with, but at last we reach one that addressed a topic I was less confidant about and really needed some no-nonsense advice on. As a prospective first time buyer, I really appreciated the clarity of the explanations of how mortgages work and how to calculate the amount you can borrow without dangerously over-stretching yourself - the jargon buster has been invaluable in helping me to understand the differences between different mortgage products and helping me work out which is most appropriate for my situation. This is a chapter I would highly recommend to other people in my position as one of the best explanations of mortgage mysteries you are likely to find...and he even takes the unfashionable view that property is a house first rather than an investment, which is something I very much approve of.


5) - Financial Partnership
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This is one of the key chapters that I wanted to revisit in the book, where Alvin covers handling money in family and relationships. Having recently married, Other Half and I were keen to reorganise our finances to reflect this, rather than continuing to manage our own money like two single people, and I had hoped for some helpful advice on how to do this easily and without arguments. While the chapter was interesting in that it approached how we get our attitudes towards money from our families, it gave surprisingly little substance on the practicality of how to handle the change in your personal finances when you move from being single to being married - surely an issue that would concern a good many people. In fact, I don't recall seeing the words "joint account" once, which I found quite odd. There were good points in that it encouraged readers to make a will and to teach financial responsibility to our children, but unfortunately this section simply didn't offer what I needed at this point and lacked the practical advice that had made other chapters so worth reading. This section was definitely a weak point for me.


6) - Investment Basics
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This chapter sets out the differences between saving and investing, and makes clear that you should only turn to the potentially riskier task of investing once you have already built up a cushion of savings. The different forms of risk are outlined to the reader, and the chapter covers the basics of investment vehicles such as shares, bonds and unit trusts, but quite surprisingly does not mention tracker funds or the advantages of holding investments in a stocks and shares ISA (which were around at the time the book was written, but usually referred to then as equity ISAs). I think this may be a reflection on the fact the author is American - unit trusts are far more popular in the US than the UK - and I accept that stocks and shares ISAs have changed and improved since the book was written, although I still think it is a major omission to leave them out of this chapter altogether. Still, I do intend to revisit this chapter in the future with a mind to reviewing some of the options for investing once the more pressing issue of a house purchase has been dealt with.


7) - Investing for Life
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Following neatly on from the previous chapter, here were are given a more in-depth look at buying individual shares - which shows just how much emphasis the author places on this activity for building your personal wealth and giving yourself a comfortable future. A chapter like this is of course not sufficient background for novices to then be let loose on the stock exchange, but what it does do is give you the basic knowledge you would need (e.g. pound-cost averaging, how dividends work, diversification, how to read a company report) to then go off and read more in-depth material with confidence. There is so much technical information you need to understand before buying shares, that a beginner's overview like this that cuts through the jargon is a great asset for anyone who would be interested in going down this route but who doesn't know where to begin. I think the "how to open a brokerage account" is perhaps taking things a step too far down the simplicity route, though. If we are adult enough to be reading about buying shares, I think we are adult enough to be able to open a share dealing account by ourselves.


8) - Insurance Options
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Perhaps the least thrilling of the chapters in the book - Alvin himself admits that insurance is not fun - this chapter dissects all major forms of insurance (life, health, motor, home, travel) and discusses which we really need and which we don't. I think this chapter would be the most useful for anyone considering taking out a life insurance policy, as the comments on how to save on your car insurance ("drive safely") are less than useful in a practical sense. Another weak link, I got nothing helpful out of this chapter.


9) - Yes, You Can Retire
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While this should realistically be sub-titled, "but not for another 30 years at least and only then if the stock market doesn't crash in the years proceeding your retirement", Alvin does his best to explain the impending pension crisis to us, and uses the horrible vision of an old age living on a pathetically small income as a spur to get us to each take responsibility and do something to help ourselves. He explains the three arms of the British pension system - state, occupational and private - and provides a soberingly realistic vision of what happens if you just leave things to the state. Not forgetting, of course, that you are never too young to think about planning - "for you as an individual, the key is to start thinking about retirement as soon as possible", he notes. As a reality check for those of you who think they are too young to bother about saving for retirement, he notes a simple formula - take the age at which you plan to begin saving for your old age, and divide the number by two to get the percentage of your income that you need to put aside. So, someone who starts saving at 20 needs to consistently save 10% of their income each year, but someone who waits until they are 40 has to find a way of saving 20% of their pay. Clearly, this little task shows that the longer you wait, the harder the job will become. I applaud this attitude, and welcome his sensible and realistic approach to retirement planning. I especially liked the method of calculating your retirement goal and monitoring if you are on track to achieve it as a useful application, and thought this a valuable chapter indeed.


10) - Passing On Your Wealth
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This chapter goes into a subject most of us feel uncomfortable about and would prefer to avoid - what happens in the event of our death. Covering intestacy rules (which are far more complex than I appreciated), he encourages us to bite the bullet and make a will, and to start considering estate planning and inheritance tax (which is even worse) to help protect our families if the worst does happen. This is an area that I, along with most people I suspect, know quite little about and I appreciated having it simply laid out for me. It is certainly a chapter I will revisit once I have (hopefully) become a homeowner and have something worth passing on.


11) - Who To Believe?
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This section of "Your Money or Your Life" covers an area I have never had cause to venture into - choosing and using a financial advisor. Now, this is not something that tends to be discussed much in the financial press, so a clear guide to who needs a financial advisor, what sorts there are (stockbrokers, tied agents, IFAs, etc) is I think something that would be highly valuable, but only to a relatively small section of the readership (the very wealthy, the highly indebted and people with wanting to consolidate a wide range of investments spring to mind). This chapter was therefore of little use or interest to me in my present position, but at least I know I can turn to it with confidence if my circumstances change in the future.


12) - One Hour A Week
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So we reach the final chapter of the book: "one hour a week: creating and maintaining your personal money plan". The first 11 chapters have all been about taking control, taking action, and creating organisation and structure ("the creating and planting of your money garden") - this chapter is a reminder that to stay in control you need to revisit your plans, goals, strategies and budgets on a regular basis to keep yourself on track for what you want ("to maintain healthy growth"). He sets out key financial tasks into things you should do once a week, once a month, once a quarter and once year, but I find these a bit too prescriptive for my liking. I do everything on his list, I have just developed my own best approaches and timings over the years to doing these tasks that simply wouldn't suit this highly regimented design. To someone new to money management it may well be useful, but I was left just feeling a bit patronised by it all.


In total, "Your Money or Life" is overwhelmingly a book suited to people new to managing their money - I think it would particularly suit anyone who has had trouble doing this in the past and who is willingly to learn and change, and to those living independently for the first time. More experienced money managers would find it of less use unless there was a particular topic they wanted a good introduction on. The book is strong on the areas of debt control, understanding credit, saving, explaining mortgages and encouraging saving, but weaker on the areas of insurance and financial partnerships. I found it lucid and well written throughout, and there was no point that I felt confused, bemused or that explanations were moving on too quickly for me; if anything, I found them a bit too long-winded and I was getting impatient for him to get the point! At its original publishing price of £7.99 the paperback copy (which I read) is good value for money as a book that is readable and good as reference material that you can refer back to again and again, though second hand (as widely available on Amazon Marketplace at the time of writing) it provides stunningly good value and is an excellent asset to add to your bibliographic portfolio. I learnt quite a lot from this book and enjoyed reading it at the same time, so it comes highly recommended from me.



"Your Money or Your Life" by Alvin Hall (2002)
Paperback, 353 pages
Published by Coronet
RRP £7.99, currently on Amazon.co.uk Marketplace from 1p

Summary: A good DIY guide for the fiscally challenged