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الخميس، 10 أغسطس 2017

Book Review: ‘The Millennial Money Fix’

I am proud to say that I’m a millennial who fixed his finances. I went from deep in debt and financially illiterate to debt-free and thriving over the last eight years. Thus, I was intrigued when I came across the book “The Millennial Money Fix,” by the husband and wife writing duo of Douglas and Heather Boneparth.

What wisdom did it contain? If I had read this before college, could I have avoided taking on so much debt? Since it was written by millennials and for millennials, could I see it engaging my 21-year-old sister, a fierce critic who rolls her eyes at everything finance related I try to get her to read?

I decided to dive in and find out.

The Premise

Douglas Boneparth, the co-author who takes the reins and speaks in the first person, sees a problem: Financial illiteracy among his fellow millennials. The first chapter is spent making the case that we millennials are ill-equipped to navigate a complicated financial landscape.

He places much of the blame on our K-12 education system. It was pretty shocking to learn that “only 20 states require high school students to take an economics course, and only 17 require a course in personal finance.”

If that wasn’t bad enough, Boneparth argues that our parents can’t help, because they’re as clueless about handling money as we are. Also, we’re staring down the barrel of a $1.3 trillion student loan bubble, manufacturing jobs are disappearing, we graduated college into the Great Recession, and the landscape of the labor market is constantly shifting beneath our feet.

It’s very fire and brimstone, and it doesn’t sugar coat any of the problems. Thankfully, the rest of the book is spent giving advice on how to deal with these issues.

The Solutions

The first step on the path to fixing our collective finances is to set savings goals. The Boneparths recommend sitting down and figuring out what you’re saving for, and why. Once you’ve done that, you should set concrete monthly savings goals for big-ticket items such as a house or a wedding. Simply take the total you’re willing to spend, divide it by the number of months you have to save, and put aside that amount every month.

The book then transitions from a focus on goal-setting to defining some basic financial terms. They want to get the average millennial from a place of complete ignorance to at least being able to understand bedrock concepts: Compound interest, investments, payroll taxes, employer benefits, and estate planning are all discussed.

After laying that groundwork, they get into the meat and potatoes of the book: how they think you should approach, and pay for, college.

This discussion spans two chapters and 50 pages, but it can be condensed into a couple of main points. The first is that higher education is very expensive. Because of this, millennials are taking out student loans at an extraordinarily high rate. Over-borrowing is especially pernicious when it comes to grad school loans, and the problem shows no signs of slowing down. If you attend an expensive school without a concrete idea of how you’re going to pay for it, and without studying for a job in a growing field, you will get burned.

They spend a bit of time specifically mocking those who go to Harvard and take classes such as “Folklore and Mythology.” They consider that wasteful and imprudent. As someone who attended Harvard and actually took a Folklore and Mythology course, I just have to say that I can’t believe they would say something so… absolutely right. Spend your time in college wisely, folks! I haven’t had a chance to use my knowledge of ancient Celtic symbolism yet, and I’m starting to doubt I ever will.

Their advice throughout these two chapters is of the sort you see on The Simple Dollar repeatedly – keep costs down, choose a practical major, consider community college, and don’t worry about attending a highly-ranked yet expensive school. They wrap up their college discussion by advising that every student understand what they’re getting into when they sign their loans, and they break down what each type of loan entails.

The book winds down by covering a few more basic financial topics, such as how to fill out a W-2, what to look for in a retirement plan, and how to choose an appropriate investment strategy based on things like risk tolerance, time frame, and the fees being charged by the financial institution. As you’d expect, the advice here is pedestrian and straightforward: Don’t invest until you have an emergency fund, don’t invest money you’re not willing to lose, and try to minimize fees if you use index funds.

Is ‘The Millennial Money Fix’ worth reading?

At its core, “The Millennial Money Fix” provides rock solid advice. If you live within your means, work hard, and set concrete goals, you will set yourself up for success. The book fulfills one of its promises in that if you are financially illiterate, it will give you a broad understanding of basic financial concepts.

But, it’s hard to shake the feeling that if you want very basic terms defined for you, the answers are just an internet search away. The authors themselves recommend checking out Investopedia.com, and I second that. Much of the book is devoted to simple questions such as “What is a Mutual Fund?” or breaking down concepts at a staggeringly basic level — for example, “Income is money coming in. Expenses are money going out.”

That wouldn’t be so bad if the book was marketed as a compendium of handy definitions and encouraging tips. Unfortunately, it promises a lot more. It’s supposed to give us millennials a “fix,” after all.

Upon finishing, I was still wondering what that fix was. The book did a good job of making me think twice about ever taking out a grad school loan, but all the advice was generic, and could be applied just as easily to a baby boomer or a member of Generation Z. The authors were making it seem like they had some secret sauce that would change the way I look at the world, and I was left wanting.

Finally, I would be remiss if I didn’t mention what I feel to be the glaring flaw of the book: At times it feels like a piece of marketing material for the author’s wealth management firm, which is geared toward millennial investors.

The chapter on investment strategies veers from basic overview to heaping praise on financial advisors faster than you can say “shameless plug.”

I think it’s worth sharing the author’s thoughts on this matter in full, from the end of the chapter titled, “Wealth is Earned, Not Acquired”:

“In my experience, I can tell you that most of my clients are too busy working toward their goals to do as good of a job as my firm can do for them. Their time is too valuable and too precious to be spent perfecting an asset allocation model or mulling through the tens of thousands of funds that exist to create the optimal investment portfolio. They find value in working with a professional to help them make the best decisions, because they can reinvest that time into work or their personal lives. What it comes down to is, what is your time worth to you?”

There are times when it makes sense to hire a financial advisor, so I don’t fault the authors for mentioning it as a possibility. But if your goal is to help the average millennial find their financial footing, it seems disingenuous to advise them to do anything other than open a brokerage account or IRA and invest in low-cost index funds.

Also, it’s a little ridiculous for the author to imply that he has the ability to find “perfect” funds and create “optimal portfolios.” Investing professionals such as Boneparth often don’t even beat the market once their fees are factored in, which is why market-weighted index funds have become so popular.

I checked out the author’s website, and learned that annual financial plans with his firm start at $1,950 per year. I’d steer my friends clear of any advisor charging that much when there’s so much they can do on their own.

Summing Up

This book does its best to come across as a labor of love, a project started by Heather Boneparth based on a lifelong passion for educating millennials. And that may be true.

Unfortunately, it reads more like a dry encyclopedia of terms sprinkled with some personal anecdotes and icky-feeling mentions of the author’s wealth management services. When a financial advisor writes a book and plugs his own services, especially when marketing to a crowd that he knows is already deeply in debt, it can leave a bad taste in the reader’s mouth.

If you’re looking for a classic book on money management to give a millennial, I believe there are better options. There’s still nothing that would captivate my skeptical and easily-distracted sister, but you can’t go wrong with classics like “Your Money or Your Life” or the “The Boglehead’s Guide to Investing.”

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