Review- Yes, You Can Get a Financial Life

We have always had reasonable financial plans, had good jobs, made good salaries, and we saved for retirement.  We lived within our means but tended to spend more than we probably should on things we really didn’t need.

Back before I found the Financial Independence community, I always had the notion I wanted to have a decent savings for comfortable retirement.  Our plans were more traditional with working till our late 50’s or early 60’s for retirement and wanted to ensure we had a solid nest egg for this phase of our life.

Along the way we read many financial books and a few I have kept on the shelf and periodically revisit.  “Yes, You Can Get a Financial Life” by Ben Stein and Phil DeMuth is one of these books. 

Yes, that Ben Stein, “Bueller?…  Bueller?….”, he is actually an economist!

“Yes, You Can Get a Financial Life” was originally published in 2007.  It provides a good “roadmap” from your 20’s to your 60’s and beyond for reasonable financial advice.  A companion book “Yes, You Can Still Retire Comfortably!” expands on the retirement planning in much greater detail.  I used both these books to help establish my initial retirement plans (before FI/RE).  The retirement book is a focused on the baby boomer but has very good good planning tools.

The Review

Most personal finance books have the same basic tenants:

  • Live within your means,  spend less than you make, don’t chase your neighbors spending,
  • Save early and often
  • Some variation of a diversified “Bogleheads” strategy of investing in low cost index funds
  • Manage your risks, don’t chase the latest stock or market guru.

This book also has the same message.  The authors have a very similar ethos as the Financial Independence community including the “coach Potato” investment portfolio, living within your means, and saving early and as much as possible.  Similar guidance to what you also find in JL Collins “Simple Path to Wealth” which we have recently read and helped Mrs. FoF get fully on board with our Financial Independence plans.

The books recommendation are geared towards the typical lifestyle of working to traditional retirement age (or slightly beyond for safety) and retire with a good next egg.  Many of the principles helped us on get to where we are today and for us to achieve an Early Retirement in our late 40’s (or maybe early 50’s).  Later than many of you but still awesome for us!

This book provides sound financial guidance, especially those just starting out on getting a handle on your financial situation.  It will help get you finances in order and focus you to plan for your future.  The book covers many financial life topics beyond retirement planning. 

Before you can take on Financial Independence you need to get your financial “house” in order, get out of debt, and then can focus on the future.   It provides a good baseline reference for financial planning across your lifetime plus has some additional tips to be successful in life beyond the numbers.

If you goal is Financial Independence you will need to go beyond this book, thought it a very good primer and personally helped me. Here are some aspects of the book that were valuable to me.

The Ten Commandments

Below are some the 10 “commandments” they list for coping with the things that may cause financial crises in your life, if you do not plan accordingly.   Many of these actually overlap our Top Five reasons for our own success we recently posted.  Here are just a few excerpts:

Leverage your Human Capital

1) Your first goal should be to increase your human capital by getting a solid education and developing excellent work habits, making connections, and cultivating a pleasant personality.

This was a key factor in our own success, if you are working a minimum wage job it is much harder if not impossible to reach Financial Independence.  Invest in yourself and build your human capital (also known as earnings potential). 

It’s never too late to look at what you can do to improve your situation.  This does not always mean going to college though that is likely the more common approach.  Going to trade school or learning a trade hands on is also a good approach.   In many of these trades you need to put your time in before you start seeing higher incomes but hard work does payoff. 

You need to work hard, but hard work does not guarantee success.  You need to set yourself in a good situation to leverage your full earnings potential.  It may not be romantic to choose a career based on your human capital, but you really need to consider it and it will pay off.

Save Early and Often

2) Start saving for retirement as early as possible. Set up an IRA or 401(k) and fund it aggressively, starting as soon as you hit the job market. Once this is in place, put some additional money aside until you have a modest reserve fund built up for emergencies.

The sooner the better!  If you haven’t started yet, the best time to start is now.  If you have a company retirement program the first thing is to save enough to earn any company match.  This is free money and whenever possible you should take advantage of it.  

We like the guidance in r/personalfinance for a savings road map.  After the company match start a small safety net emergency fund and then build a six month larger emergency fund before fully investing in retirement.  This allows you to weather challenges without going into debt.  Car needs a repair, no problem! you don’t need to charge the credit card.   Get laid off, no problem! you have six months or more to get things sorted and don’t have to panic.   Once this in place then max out your retirement options.

Find the Right Partner

4) Get—and stay—married to a sensible person.

7) Don’t make any financial moves that will either contribute to the likelihood of a divorce or make life unbearably hard if such an event were to occur. Don’t make major financial decisions in a marriage unilaterally you and your spouse both need to ”buy into” your plans together.

Four and Seven go hand in hand.  Mrs. FoF is awesome, and we are mostly aligned in our goals and objectives.   We also make room for each other in our plans so its not all or nothing.  Make sure this is something you both want and appreciate.  

Remember it’s not always about the bank account values, you need to balance living a fulfilling life now with Financial Independence in the future.  Don’t put off life for 10 or 15 years thinking once you hit your FI goal everything will be great.  Don’t get me wrong, being FI makes many things easier but you should make sure you have some fun along the way.   Having the right partner makes the journey towards Financial Independence fun and exciting.

Live Within Your Means

9) Don’t expect that you have the right to live luxuriously as you enter middle age and beyond. People can afford to live as well as their finances allow not as well as they feel entitled to live.

As all proponents of this lifestyle recommend, always live well within your means today and in the future.  We are not entitled to anything and keep your expectations grounded.  Don’t get caught up in trying to keep up an image, many people are so in debt trying to keep up appearances it is not even funny. 

Getting #4 right also helps in this, having a partner who appreciates the ideals of Financial Independence and living well within your means makes this journey so much easier.

Don’t Take Unnecessary Risks

 10) Don’t swing for the fences with your investments, for risk and reward are joined at the hip. Use low-expense index funds to broadly diversify your holdings so that you get returns commensurate with the amount of risk you’re taking. Then stay invested through thick and thin.

I wish I learned this one much early in my life, spent too many years listening to the talking financial heads and chasing the latest hot stock.  The authors recommend their coach potato index fund strategy which is very similar to the approach JL Collins also recommends.  You probably only really need 2-3 index funds and adjust allocation depending on where you are in life. 

Top Five Factors in Our Success Towards Financial Independence (FI/RE)

Savings Rate Tables

Being a geek, one thing I really appreciated are the Savings Rate table recommendations.  They provide hard data points to check your progress which was not available in most other personal finance books. 

The Assumptions

For any point in your life, they provided a check if you were on track for your savings.  These tables used the following assumptions (Not these are not Retire Early assumptions):

  • Used historical averages for investment mix (stock/bond)
  • Assumed a 1% expense ratio
  • Did assume income growth
  • Need 84% of your income post retirement
  • No assumption of Social Security
  • No Pension
  • Retire at age 70 (Yikes, but it is geared for a traditional savings approach)
  • Assumes a 25-year retirement

For those on the path to Financial Independence, not all these assumptions work so the tables would not directly apply.  Back when I started planning for retirement over ten years ago these tables provided some confirmation I was on the right path. 

Table 3.1: Recommend Savings Rates

For example, in table 3.1, they recommend by age 25 if you have no current retirement savings you should plan for a minimum of 7%, and if you are 30 with no savings you need to start at 10%.  Interesting to note, at age 25 if you had already saved up 2 years of your current salary your investment growth would be such you would not need to add any more to your savings! Compounding at work! 

Does this work for FI/RE?

These are pretty low numbers by FI/RE standards but enough to ensure a reasonable traditional retirement.  In the companion book, “Yes, You Can Retire Comfortably!” they also offer more scenarios with other tables and assumptions.  They did not consider the case to retire in your 30’s or 40’s with a 50+ year retirement.  Again, their savings guidance is geared for those looking for a traditional retirement, so are a little low  for those looking for Financial Independence.

They also take a reasonable approach to investing, allocating a 60/40 split for investing in US Stocks /. International low cost index funds for someone in their twenties.  This maybe a little overweight international especially given the last ten years favored US stocks.

The advice in this book was extremely helpful for our own financial planning.  It is valuable for anyone who needs to get started on their financial path or who is focused on a more traditional retirement path.

Additional Topics

They also cover many financial topics related to

  • Issues facing single people.
  • Issues facing married couples, and they really are proponents for having a partner.
  • Saving for a home and how to balance this with retirement savings.
  • Financial aspects of having children, paying for college and their ideas on who should pay!
  • Insurance etc… 

They really do cover key financial decisions across a typical person life in addition provide some life coaching and career guidance. In the later pages they alos cover a little about safe withdrawal rates as well with similar data of a 4% withdrawal rate has a 90% probability of success for 35+ years. 

Note:  Other studies including our own simulation show the 4% SWR has an even higher probability of success. 

The 4% Safe Withdrawal Rate – Validation with Monte Carlo Simulations for Our Scenario

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Book Recommendation

If you are starting out and looking for a good primer on financial planning for your life this is a good place to start. 

If you just want to make sure you will have enough savings for a traditional retirement, then this may be all the information you need.  In that case, I also recommend the companion book, “Yes, You Can Still Retire Comfortably!” (see next review).  The companion book digs in a little deeper on just the retirement aspects and helped refined our initial retirement planning strategy.

Once you get you basic finances in order, you may want to get more aggressive in savings and planning and pursuit your Financial Independence.   You will probably need to get more aggressive than the advice in this book and will need to look at other authors such as JL Collins “A Simple Path to Wealth” which is very popular in Financial Independence circles.

Reference and Links

#Retirement Planning and Simulation Tools

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