This post is by staff writer Honey Smith.

There are many personal finance books out there, useful to people in all stages of personal finance. I have a lot to learn before reaching financial independence, and the editorial elves thought it would be useful if I shared some of what I learn with you. So for the foreseeable future, I will be reviewing one PF-related book per month.

I won’t necessarily be reviewing the latest bestsellers in this category (though I may, if my local library has a copy). Instead, I will be concentrating on some of the mainstays in personal finance. If you have suggestions regarding what I should read (whether it’s something you’ve read and think the GRS audience would benefit from, or something you’re curious about), let me know in the comments below. I’ll be happy to work in what I can!

My first review is of “All Your Worth: The Ultimate Lifetime Money Plan” by Elizabeth Warren (she helped bring the Consumer Financial Protection Bureau to life and is now a senator from Massachusetts) and Amelia Warren Tyagi. J.D. originally reviewed this book in 2007, and he further talked about the main idea of the book, the balanced money formula, in 2008.

The balanced money formula has become a guiding principle for many at GRS (El Nerdo is a huge proponent). It’s constantly referenced in the comments section of many GRS posts. I decided to start my review series here both to see what all the fuss was about as well as to see how the book stood (or didn’t) the test of time.

Honey’s take

J.D.’s review gives a good idea of the structure of the book and its main premise, so click through to get that information in detail. Here’s a quick visual reminder:



I agree with J.D.’s observations about the book, but will add a few of my own. First, it’s insanely obvious this book was published in 2005 (eight years ago!). For example, there is an entire section about how to factor in budget items you pay for by check (I think I may write one check per year).

For another, the discussion about resisting the temptation to “tap your home equity” and some of the other housing advice seems a bit ridiculous now that we are post-Great Recession. The rules have changed considerably and many now have no home equity to tap even if they wanted to. Similarly, a lot of the advice about not letting banks, mortgage brokers, and Realtors talk you into buying more than you can afford doesn’t ring as true now that mortgages are much harder to get. While it does seem the authors saw the housing bubble for what it was (though they don’t call it that in the book), it would be nice to see a new edition of the book updated to reflect today’s reality.

Finally, they are anti-credit card to a degree that I found irritating after a couple of hundred pages. While I know credit card debt is a huge problem for a lot of people, I do think it’s possible to use credit cards effectively. But then, I don’t have any credit card debt; it’s possible that if I did, I’d see this theme as a lot more important.

I did really like the book’s focus on forgiveness. The authors state repeatedly that it isn’t really helpful to blame yourself or others for a situation. What matters is identifying problems and working to improve your life going forward. That aligns pretty closely with my own philosophy.

In fact, they at one point suggest signing a contract with yourself, and one of the clauses states, “I am willing to forgive myself and others (my spouse, my ex, my parents) for past financial mistakes, and to work from this point forward to make my future secure” (page 68).

There was also a reference about not worrying about how much you spend on bagels with cream cheese that made me laugh.

Where I stand in terms of the Balanced Money Formula (BMF)

When I plugged my income and expenses into the BMF, I found out that I am spending 63 percent of my income on Must-Haves, 9 percent of my income on Savings, and 28 percent of my income on Wants.

Must-Haves. The BMF counts payments beyond the minimum monthly payment to things like credit cards and student loans as Savings. However, the minimum monthly payment to my student loans is considered a Legal Obligation, and therefore goes in the Must-Have category. Currently, then, I’m in the “Must-Have Danger Zone,” but not quite the “Crash Zone” (though I’m close).

Savings. According to the BMF, a 9 percent savings rate puts me in the “Solid Saver” category. The authors say, “You need to push a little harder, but the good news is that you’re already on the right path” (page 47).

Wants. Technically my Wants category is ideal, “Wants in Balance.” This was a pleasant surprise, since this was my first time analyzing my money this way. My instincts for how much it’s healthy to spend on myself are dead on!

Out of balance

However, the fact remains that my money is out of balance by about $300 per month. Not coincidentally, my minimum student loan payment is $402.67 per month. The book has lots of suggestions for cutting your Must-Haves. In my case, however, the thing that would have the biggest impact would be paying off my student loans, which would bring me into balance almost immediately.

The book’s solution when your money is out of balance because of your Must-Haves is to 1) pay all your Must-Haves, regardless of the percentage; 2) direct the next 20 percent of your money into Savings, and 3) spend the rest of your money on Wants, guilt-free. So the day after I calculated my money, I made a $300 payment to my small student loan balance.

I have been making extra payments to my student loans for some time now (I’ve paid off almost $800 since January). However, it’s very helpful for me to have a benchmark to shoot for, to know I’m making the progress that I should be. And while it makes my Wants budget tight for the foreseeable future, redirecting that $300 is the best thing for me in the long run, and I’m happy to do it!

Who should read ”All Your Worth”

Everyone who hasn’t plugged their own income and spending into the BMF would probably benefit from giving it a try. It certainly gave me a new and helpful way to think about my money! That’s the first three chapters or so, and worth a library check-out.

Newcomers to the world of personal finance may find enough value in it to read the entire book, especially if they will be house-hunting or refinancing in the near future (there are some great lists of questions to ask of yourself and lenders, even if some of the information is out of date).

Have you read ”All Your Worth?” What did you think? What other books would you like to see reviewed on GRS?

GRS is committed to helping our readers save and achieve your financial goals.Savings interest rates may be low, but that’s all the more reason to shop for the best rate.Find the highest savings interest rate from Ally Bank, Capital One 360, Everbank, and more.