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Book Review – If I’m So Smart Where Did All My Money Go?

by Mike

Are you one of those people who believes that in order to save money and invest for your future you have to deprive yourself of your morning dose of Dunkin Donuts coffee and all of the other little things that give you pleasure throughout the day?  Well I have news for you…frugality does not mean deprivation.

It is possible to achieve your financial goals without depriving yourself of all the things you enjoy.  You just have to learn to balance your various objectives.  Learning how to achieve that balance is where Doug Warshauer’s recently published If I’m So Smart Where Did All My Money Go
comes in (I was lucky enough to receive a free review copy).

Warshauer argues that you should set up a budget in which 10% of your income goes to savings and the rest is allocated among different spending categories.   His suggested expenditure budget looks like this:

Housing – 35%

Transportation – 15%

Food – 14%

Entertainment – 6%

Household Furnishings – 5%

Clothing – 5%

Household/Personal – 5%

Medical Expenses – 3%

Miscellaneous – 2%

Total – 90%

So as you can see, ten percent of your income is allocated into savings and the remaining 90% is spread out over various expense categories.   What you need to do is sit down and categorize all of your expenses to see what percentage of your income is going towards each expense category.  Then you can adjust your spending as necessary so it falls within the guidelines above.

But what if you can’t (or don’t want to) make cut spending in some categories to meet the guideline?  No worries!  These guidelines aren’t set in stone…they can be adjusted as needed as long you remain balanced.  For example, if you really like to splurge on food you’re free to spend 16% of your income on that category instead of the recommended 14%.  But in order to remain balance you’ll need to cut that 2% from another category.

More About the Book

One of the things I liked best about this book was the writing style.  Rather than simply stating one fact after another like a dull textbook, Warshauer uses a handful of fictional characters to make his points.   He tells the story of a personal finance seminar in which the instructor helps people with all sorts of financial issues learn how to best achieve their own specific objectives.    This method allows him to easily offer differing opinions and even play devil’s advocate when discussing his points.  I find this writing style suits personal finance topics particularly well since there are so many differing opinions and viewpoints.

To learn more and order If I’m So Smart Where Did All My Money Go just click here now.

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{ 9 comments… read them below or add one }

Jenna

What to do with the extra 10%? Donate it, save it, spend it?

Reply

Mike

The last 10% goes to savings. Retirement, college, home fund…whatever your priorities are.

Reply

Kevin @ Thousandaire.com

I’ve never really liked a book that gives you a list telling you what percent you should spend on each category. What if I’m in debt and have to spend money on loan payments? What if I’m charitable? What if I have a passion for traveling the world? None of those scenarios fit this model. Each one of these alone could take up more than 10% of your income, so it can’t be accounted for by the leftovers.
Kevin @ Thousandaire.com´s last [type] ..Kevin McKee Buys a Car

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Mike

That’s a valid point, but keep in mind the categories provided are just suggestions. In real life you would adjust them as needed to fit in a World Travel category.

I do agree about the debt though. For many people ten percent is just not enough to cover their required payments. But the overall goal is to achieve a balance so you aren’t spending more than you’re earning.

Reply

WellHeeledBlog

I find it tedious to keep track of where every penny goes, but it’d be cool to see all the statistics that you can run that good record keeping!
WellHeeledBlog´s last [type] ..Becoming Debt Free is About Passion and Intensity

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Mike

I’ve never been one to sit down and track all my spending either, but many people are good at that and I can see how it would help you identify problem areas in your spending.

Reply

Bret @ Hope to Prosper

In my opinion, it’s the first 10% that should be saved and invested, not the 10% that is left over, after all of the other categories. And, after the 10% is saved, who cares about the rest of the categories? As long as you are saving and not going into debt, it’s all good.

Reply

Mike

I agree with the principal of paying yourself first. i guess its just the chicken or the egg as to which way you’re looking at that 10%, but as long as that much is coming out you’re doing good.

Reply

Save Money

I agree that the 10% should be taken first and then you should just make do with what you have. Get it taken from your wages automatically or taken from your bank account, so you never really had it.
Then pay your bills and buy your food with the left over. Start your budget thinking that 90% is the 100% you have now.
Save Money´s last [type] ..Tips on How To Budget Your Money

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