The book gives an insight into the relation between money and couples and how to go about money related issues. The book also talks about different financial concepts and financial planning. It is oriented towards the United States but is a guide for any couple from any country to stay on track to become rich.
Here is a summary -
Myths and Facts
David Bach first separates myths from facts. He busts myths such as
If we don't talk about money, everything will be okay – He says the couple will be broke if they don't talk about money. Wealthy couples spend time talking about money, aligning their goals and planning to make their dreams a reality.
It takes money to make money
He talks about how his not-wealthy grandparents invested bit by bit and became wealthy. It is a matter of systematic saving and investing .
Couples can take a financial quiz in the book to understand their financial knowledge and current net worth. They can use it to break communication barriers regarding money.
Purpose of Money
The couple is encouraged to think about the true purpose of money for them using an exercise. The exercise aims at aligning money goals and guiding decision-making.
When you do not plan, you are planning to fail. The couple has to understand each other and plan their finances such that -
Their goals are articulated. The goals are SMART (Specific, Measurable, Agreed Upon, Realistic and Time based).
They create a system to maintain financial records.
The book provides resources for budget maintenance; filing system and net worth determination.
The Latte factor is a concept that talks about small items of frivolous expenditure that we make regularly which snowballs into a big figure. If this expense was instead; saved and invested, it would make a big difference to the couple's financial kitty.
Retirement Basket, Security Basket and Dream Basket
Plan your retirement. He has given US (United States) centric steps. He has asked to set aside 10% of your income in retirement plans. But the idea can be reused in other countries based on the retirement products available.
We all know that we need to save for a rainy day. He reiterates the fact here and suggests that about three months of expenses should be available as an emergency fund. Couples should speak to each other about handling unexpected circumstances like loss of job. He talks about getting the right amount of insurance and writing a will.
The couple should save and invest for realising their dreams as well. It should be separate from the retirement basket. Bach suggests to keep 3% of your after-tax income for your dreams.
He talks about ten big financial mistakes that couples make. Some of them are
- Pursuing “Get Rich Quick” schemes
- Not Teaching Kids About Money
- Not Getting a Financial Advisor
- Not taking credit card debt seriously
This section deals with increase in income. There are tips on asking for a raise, knowing the value of your services and products, raising the prices of your services/commodities etc.
It is a good book to read if you are a couple who need some guidance on how to tackle money conversations or want some guidance on how to organize and manage finances and financial goals.