August 4, 2008

Good Book : The Money Book for the Young, Fabulous and Broke

This is a review of the book The Money Book for the Young, Fabulous and Broke by Suze Orman. I read the first edition from 2005 which I believe is the only version thus far.

The book is by Suze Orman. If you don't know who Suze is then you might check out her show on CNBC and browse her website at Many people love Suze's distinct style and personality but I've heard of others who are turned off by her. I'd recommend watching a segment of her show first to see what you think of her. If you do or don't like her style in general then you'll probably also think similarly of this or other books by her.

As the title indicates The Money Book for the Young, Fabulous and Broke is targeted at young people who are "broke". Since the book is focused on young people the topics and answers are geared towards people in their 20's or 30's. She covers topics more applicable to younger people like student loan debt, buying your first house and getting started in a career. She also covers general topics like credit scores, saving money, investing in general and working towards retirement. All of the information and advice is geared towards younger people in general. While there is a lot of good advice here that applies equally well to everyone (like raising your FICO score) since the book is targeted at younger people, if you are middle aged or older then theres probably better books out there for you.

The book is very easy to read and the information is presented well. She discusses topics in general and then has several question and answer sections addressing typical situations young people might find themselves in. There are online resources at her website that the book points you to such as calculators or worksheets with more in depth information on specific points.

I thought the first chapter on credit ratings and your FICO score was very informative. Suze discusses how your FICO score impacts your financial situation and why its so important to try and keep your score as high as possible. For example she shows how different FICO ratings will impact the rate you pay on a home loan:

720-850 700-719 675-699 620-674 560-619 500-559
30 year fixed rate mortgage 6.00% 6.10% 6.70% 7.80% 8.90% 9.50%

In general if you have a good FICO score this makes the rest of your financial situation easier. Suze frequently stresses making your debt payments on time and working to improve your FICO. This is very helpful and practical advice that you don't often see emphasized.

One point of the book that I'm not so much in agreement with is when Suze approves of using credit cards to pay for basic needs if needed. She is only saying that you could use credit cards if you really need to pay basic necessities. But I think its probably not the best advice in general. The last thing most people need is advice saying its OK to use credit cards and accumulate debt even if the advice is qualified and only meant for real needs. Most people have difficulty with credit cards and its very easy to fall into the trap of rationalizing to yourself why you 'need' something that is really a luxury or frivolous. So I disagree with Suze's advice there in general. If people really do NEED to use credit cards to pay for groceries or and they're responsible enough to do so then they'll do that without Suze's advice.

I was pleased to see that in the section on saving money Suze gave some advice on cutting back on sports hobbies (golf & skiing) by using cheaper or used equipment and scaling back your fees payments. That advice echoes what I discussed in my own previous post on saving money on hobbies. Even though the book was written in 2004 there were at least a couple points where Suze was cautious about real estate market. She seemed wary early that the housing boom at the time was not going to last.

Overall The Money Book for the Young, Fabulous and Broke is a good book and I'd recommend it for someone who is in their 20's and looking for some practical financial advice. Look for it in your local book store.

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