Targeting young professionals, blogger and author Kimberly Palmer has just released her new book titled Genereation Earn. Palmer is the creative mind behind the Alpha Consumer blog at US News & World Report. Her new book addresses issues such as spending, investing, and giving back.

There are obviously a wealth of books and authors telling us how to live, work, earn, and save. Palmer’s unique approach to addressing recent college graduates caught my attention though. Her optimism is contagious and advice sound.

Some praise for Palmer

Jim Wang over at Bargaineering.com says:

“Kimberly Palmer’s blog, Alpha Consumer, has an uncanny way of explaining many of the intricacies of personal finance in a way that everyone can understand. It’s one of my favorite places to go for money advice and commentary.”

And Will Chen of Wise Bread added:

“Kimberly’s book is the ultimate financial guide for a new generation. Bursting with savvy tips, this incredibly well-researched book will guide you through every important financial decision in your life–from picking the right life insurance to getting the best deals on major purchases. A must-read for anyone looking to master their finances.”

A few comments from Palmer based on Generation Earn

Many newscasters and pundits would have Americans believe that young professionals have ever spent and are living off credit card debt, or so says Palmer. She asserts that they actually have great earning power, advanced degrees, and “a more holistic outlook on financial success.”

Her book offers tips and suggestions for young professionals to secure their financial future, including: saving one-third of all income, cultivating their most ambitious dreams, not waiting to invest until you have “extra money,” and donating. One tip that I found particularly interesting is – Don’t scrimp on career-related investments. On the topic, Palmer writes:

“There’s one area where it’s okay to be a spendaholic, and that’s when it comes to investing in your future earning power. The category includes not only education expenses, but also voice lessons for an aspiring podcaster, how-to books for those with potentially lucrative hobbies, and even a new wardrobe for office workers who need to impress the higher-ups. Even hiring a maid service is an investment in your future if you use the time it creates to work on your writing, or website.”

Dispelling myths

Palmer has high hopes for young professionals and believes that we are more capable than maybe we even give ourselves credit for. Backed by studies, Palmer outlines a number of myths that exist about Gen-Yers. For example, she states:

“It’s true, we’ve had it rough: We’ve experienced two recessions before we’ve even hit our career strides (first from the dot-com bust, then from the real estate implosion) and unemployment is highest among young adults – an astounding 37 percent of people between the ages of 18 to 29 are unemployed or out of the workforce. But we still manage to stay upbeat about our futures, an essential skill if we’re going to ride out these challenges. According to the Pew Research Center, only three in ten young people say they earn enough money to lead “the kind of life they want,” while nine in ten say they believe they will be able to do so in the future. Only 76 percent of Gen Xers and 46 percent of Baby Boomers say the same thing.”

On sale today. You can buy Generation Earn probably at your local bookstore or online at Amazon or Barnes & Noble. I’m a Borders guy myself, but Amazon and B&N have it cheaper. Or for more information about the book, check out GenerationEarn.com.

I just finished reading Ray Bradbury’s best known work Fahrenheit 451. I was supposed to have read it in middle school, but never quite got around to it (sorry, Ms. Kolstad).

After reading the book and researching various statements that Bradbury himself made about it, I realized that there are several points that coincide with personal finance.

1. The effects of entertainment

First, Bradbury has stated that the purpose of Fahrenheit 451 was to examine the effect of television and mass media on the general population. Basically, he asserts that in lieu of reading, the population became uncontrollably obsessed with being entertained.

I believe that we often make the same mistake with our finances. How often do we forego saving money to be entertained? To purchase a larger TV? To have 500 channels? To have a bigger, badder stereo system? To eat out because we don’t feel like making dinner? To go to the movies when we could just put on a DVD we already own?

2. Choosing slavery

Second, the people in Fahrenheit 451 choose to become fat, dumb, and happy. The government didn’t mandate it. The book burnings started within the populous. They had they power to start down a road of destruction and ultimately, had the power to walk away as Guy Montag, the protagonist, did.

Similarly, our financial difficulties are often a result of our own actions or inactions. There are certainly circumstances beyond our control, but I believe too many people believe themselves to be that exception. Living without an emergency fund, for example, is the equivalent of choosing to burn.

3. Knowledge allows you to break the norm

Third, the thing that caused Guy and others to question their current condition and to challenge the norm was the acquisition of knowledge.

If you ever hope to defeat anything in life, especially debt and an average lifestyle, then you must obtain the knowledge and know how which propels you away from the norm. You must read books, blogs, and articles. Socialize with smart individuals you can help explain unfamiliar financial concepts and practices. Learn!

4. Have and use a support network

Lastly, and this may like a bit of a stretch, but to save knowledge (and by extension mankind) from being snuffed out of existence, a network of individuals memorized bits and pieces of books and collectively formed a library. In other words, they created a support group that became essential to the very existence of society (the book ends in war).

Being frugal and money smart all of the time is hard business. Even those you have been at it a long time have temptations and weaknesses. Therefore, create a support group. Your network may be online through blogs, Facebook, or Twitter. Or maybe it’s close friends and families. Either way, share your goals and how you are working to achieve them. Having someone ask how you are doing can be just enough motivator to make a good decision today.

I had the opportunity to interview Jane White, author of America, Welcome to the Poorhouse. In this post, I intend to offer my review of the book as well as analyze her arguments and statements made in the interview.

Analysis of White’s Argument

Although White does an excellent job of raising the right red flags, there are several flaws in the changes proposed in her book. For the most part, I found that her argument lacks a strong understanding of economics as well as a false sense of entitlement.

For example, White proposes that companies be required to match 9% of an individual’s annual salary into a 401(k) plan. However, she fails to calculate the economic impact on companies. Further, she believes that any company with slim margins should layoff part of the staff in order to pay the 9% to others. Effectively, White will have slowed corporate growth and increased the unemployment rate.

Further, White strongly believes in the social contract or that the wealthy are responsible if not obligated to subsidize expenses such as college education for lower income tax payers. Why am I entitled to a part of the earnings of another individual? Now don’t get me wrong. It is my personal belief that individuals with excess income should seek out good opportunities to help others. However, I do not believe that the government has the right to dictate how that excess income is spent especially when you consider the inefficiencies in our government.

Further, White asserts that primary and secondary schools are free so college should be too. That comment is wholly unfounded in truth. For example, I paid my property taxes this past November. Approximately 90% of the bill went to the local primary and secondary schools. In fact, I will more than pay for the expenses associated with my children (especially since they are both under two).

White also asserts that corporations deceive Americans. She repeatedly refers to credit card promo offers and loans such as ARMs as bait and switch tactics by banks. Bait and switch assumes that an individual believes that he or she is receiving Good X when in fact Good Y is delivered. A credit card promo offer does not satisfy that condition. A promo offer is just that, a temporary promotional offer. There is no false representation. I do agree that too many individuals fail to fully appreciate the cost of the interest after the promo period, but that is the fault of the individual. Besides, the larger issue is why someone is using a credit card to begin with. If you do not use them, then a promo period is not really an issue.

Last, though certainly not least, White fails to estimate the financial and economic impact of the large tax burdens that she is proposing. In fact, she fails to recognize in several instances that a tax burden will even result from her proposed legislation. Case in point: She suggests that the government fund the 9% match for small companies. However, she denies that tax payers will have to fund the match. If that is not the case, then the government will have to simply print more money and cause inflation.

My Conclusion

I agree with White that change is greatly needed in America. We must change our spending and saving habits. White does a fine job laying out how we arrived at the situation in which we find ourselves. I also agree that there are bills that Congress should pass. However, I do not agree with what White is proposing. I believe that there are too many unresolved issues surrounding her suggestions that could be potentially detrimental to our economy and society.

I do not believe that the government is responsible for my or anyone else’s retirement. I believe that we as individuals need to make the necessary changes in our homes and not blame corporations or require the government (i.e. other tax payers) to bail us out.

Further, White suggests that we should expect the government and other tax payers to pay for our college education. Yet, she never suggests that families adequately save by using 529(b) accounts for example. As I mentioned at the beginning, White believes that the government, wealthy citizens, and corporations are responsible for our financial well-being and that we are mere victims without any power to prepare and pay for identifiable financial events ourselves.

In summary, this book speaks as if Americans are incapable of making good decisions and that we are constantly being lied to by corporations and politicians. While I am not so naive to think that either group always has my interest at heart, I do firmly believe that I am responsible for my own decisions. If I decide to use financial instruments such as credit cards or ARMs, then I am responsible for understanding the terms. If I do not understand, then I’m the fool for not asking more questions. I do not need the government to coddle me as White suggests.

But maybe you’ll disagree. I recommend reading White’s America, Welcome to the Poorhouse for yourself and arriving at your own opinion and conclusions. To purchase the book, visit Amazon.com.

Disclosure: I received a free issue of this book in order to write a review. I was in no other way compensated nor was I given any instructions per my review.

I was a little surprised to receive as a gift a financial planning book from an author who writes feel good, inspirational stories. Though just like everyone else, Evans has faced the same financial decisions that each of us have to make.

A brief read, Evans focuses on five lessons that he learned as a very young man from an individual that he would not have suspected to be a millionaire. Each lesson has helped him and his wife ensure financial security.

The Five Lessons

Listed below are the five lessons from the book, none of which will some as a large surprise I’m sure.

1. Decide to Be Wealthy
2. Take Responsibility for Your Money
3. Keep a Portion of Everything You Earn
4. Win in the Margins
5. Give Back

Analysis

Evans preaches a simple and straightforward way to approaching saving and spending, though offers little that is unique or not already frequently discussed in financial planning texts. If anything though, his book is motivational and may help give you more enthusiasm to continue to be frugal.

My one issue with this book is Evans’ suggestion to begin saving by buying gold coins. I could not disagree more. The growth rate in value of gold is historically very low and you can find better returns in other relatively safe investments. Further, Evans made the suggestion to help satiate cravings to shop and buy something. Even though buying gold is better than blowing your money on stuff, this method has not changed your habits. Rather, you will have only substituted one thing for another. In my opinion, put in the effort to control spending.

Similar to Dave Ramsey, Evans has provided resources, which include forms for budgeting, in the back of his book. The section titled Winning in the Margins with Extra Income caught my attention. Basically, Evans has compiled a list of ideas to bring in extra income. I appreciated that Evans mentioned selling plasma. I sold my plasma for nearly two years to help my wife and me to finish college.

All and all, not a bad read, especially since it’s a short book. If you’ve read it, let me know what you thought in the comments below.

To buy a copy for yourself or to read additional reviews, check out The 5 Lessons a Millionaire Taught Me by Richard Paul Evans on Amazon.com.

In America, Welcome to the Poorhouse, Jane White sounds a strong warning to the nation’s citizens that change is needed in order to retire with enough in the bank. White uses this book in order to promote specific political changes and bills that she is sponsoring in Congress.

While other financial planning books address what we as individuals need to do in order to retire comfortably, White approaches the issue by placing the fault and needed change at Congress’, corporations’, and wealthy tax payers’ doorstep. She firmly believes that political reform creating a USA that mirrors other nations is what we need in order to climb out of the retirement poor nation we currently live in. While I do not disagree with the need for reform, I disagree with certain tenets of White’s argument as well as the bill that she is sponsoring in Congress right now.

About the Author

From the book, “Jane White is Founder and President of Retirement Solutions, LLC, which promotes 401(k) reform and provides investment education. In 2007, at the U.S. Department of Labor’s invitation, White presented recommended 401(k) contribution rates to the ERISA Advisory Council…A Congressionally appointed delegate to the 2002 National Summit on Reitrement Savings, White first observed the 401(k) savings crisis in 1993 as associate editor of Standard & Poor’s Your Financial Future. A former syndicated personal finance columnist for Gannett News Service, White first observed the housing bubble and the risk of adjustable rate mortgages in her 1991 book, The Cost Conscious Homebuyer’s Guide. Her articles have appeared in The New York Times, Barron’s, and Employee Benefit News.”

Tenets of the Book

The book is divided into five tenets or sections.

1. 401(k) Reform
2. Mortgage Industry Reform
3. College Grants and Loans Reform
4. Credit Card and Other Borrowing Reform
5. Creating a Citizen’s Lobby

Each section aptly describes the current situation in America and how we arrived here. At the end of each section, White prescribes her solution to each problem.

The Interview

I had the opportunity to ask Ms. White several questions. I selected the most salient responses.

RabbitFunds: You advocate in your book that employers and financial institutions should be required to recommend the amount of money that consumers should be saving in order to have sufficient funds upon retirement. How do you plan to address the legal ramifications of employers, who are not licensed, acting as certified financial planners?

Jane White: Actually CFP’s know absolutely nothing about saving for retirement. Incredibly, they are not obliged to learn the ten times final pay formula from pension actuaries nor the savings rate needed to achieve it. That’s why the editor of Investment News, a publication that circulates to 65,000 financial planners, asked me to write an op-ed about it. Pretty incredible, huh? Employers would hire pension actuaries to calculate the formulas and personalize them based on individual savers’ current assets and investment time horizon.

RF: Typically, 401K or defined benefit plans are offered as a benefit above and beyond the normal salary or wage. As benefits, they are a mechanism for employers to attract superior employees as well as show additional appreciation. Why do you believe that employers should be required by law to fund an employee’s retirement?

White: There is no other country in the advanced world–that I know of–where neither the government nor the employer is obliged to provide deferred compensation. It’s called a social contract. The same thing is true with health care coverage–it’s utterly unconscionable that 15% of the U.S. population has no health care. The U.S. was able to muddle along until the 1980s because we were a “fortress economy” where everything consumed here was made here so that employers offered benefits as a way of competing for employees. So we’re not used to social contracts and if the right-wing gonzoes in Congress gets their way we won’t have any.

RF: Is not the employee responsible for funding his or her own retirement through prudent planning and living?

White: Please see above. What’s more, if it is our responsibility we should be told that. What’s unconscionable is that when employers dumped defined benefit plans and replaced them with 401(k) plans, they didn’t disclose that nobody could retire from a 401(k) plan. What’s more, all the Democrats will do is to automatically enroll people in an inadequate plan and then “automatically annuitize” an inadequate balance.

RF: If your retirement act were to pass, have you estimated the economic impact of imposing the equivalent of a 9% payroll tax on all employers with more than 10 employees? If so, what is that financial impact?

White: Not a single Australian employer went out of business as a result of having to adopt Superannuation. As I mentioned, if we are still facing recessionary times, we can do a phase-in: start with 4% and gradually raise it to 9%. On the other hand, any company that’s paying out obscene executive bonuses and executive pensions and health benefits and/or repaying TARP money less than a year after they took the loan is not facing any recessionary times.

RF: How will companies with slim margins still be profitable?

White: Here’s the deal.  A company that’s facing financial stress should address that stress by reducing the workforce, not keeping the workforce on the job and then screwing them. As I mentioned, this immoral behavior pretty much started in the 1980s when the notion of “right-sizing” took over from down sizing. Employers decided that laying off people and then training new hires was more expensive than keeping them on the job and getting rid of their benefits and taking away raises.

RF: For employers with fewer than 10 employees, you believe that a government fund or entity should pay the 9% 401K contribution. What is the estimated tax burden to taxpayers to adequately fund this initiative?

White: I’m rethinking this one. Small employers aren’t necessarily cash-strapped employers–think of medical practices or law firms or accounting firms. I’m considering instead saying that companies who have been in business for less than five years don’t have to offer the plan but they must disclose to employees that they don’t offer coverage.  I chose the five years because half of all startups go out of business within first five years of startup. So there would be no taxpayer burden.

RF: Under the 9% contribution system, does Social Security dissolve after paying out to current retirees and everyone over the age of, for example, 50?

White: Most people still need Social Security. A defined benefit plan only covers 30 to 50 percent of final pay and the goal is to replace 70% of final pay so most people except the truly wealthy will need a supplement. As I mentioned in the book, in a logical world, investors would be told that they can’t time or beat the market and the vast majority of businesses in that oxymoron known as the financial services industry would go out of business–from TD Ameritrade to Fidelity.

RF: Your book compares the % of federal budget spent on education in America to that of other nations. Using a percentage can be very misleading when we are talking about vastly different GDPs and population sizes between countries. Have you calculated a more meaningful and insightful statistic such as the $ spend per capita? And if so, how does America rank?

White: So far as I can tell the OECD is the only organization that measures spending so I have to rely on them. On the other hand, I think it’s safe to say that if you were to measure our country’s wealth by median wage or household assets: savings, home equity, etc., we would rank at the top or near the top of OECD countries. What’s more, if we were to measure the median income of say, the top 5% of the population compared to these countries we would definitely rank near the top, if not number one.

RF: You wrote, “Why should we expect our citizens to foot most or all of the bill’s cost for higher education…” I ask, why wouldn’t we? What entitles an individual to something for nothing?

White: As I point out in the book, we don’t expect people to foot the bill for elementary or secondary school, why should we do so for college? As I also pointed out, before Reagan took office, Pell Grants accounted for the bulk of college expenses, as opposed to loans.

RF: You refer to ARMs and Introductory Promo Rates on credit cards as bait and switch schemes. However, the documents that accompany both accounts contain all of the information about the pending change in the interest rate. Why is the individual not responsible for understanding something as important as a mortgage or innocent when he or she spends too much on a credit card and is then hit with high interests that were fully disclosed when the account was opened?

White: For the same reason that we’re not expected to assume that cars shouldn’t blow up on this when we buy them, thanks to Ralph Nader. You can sue a merchant if they sell you a damaged good or a doctor if he or she damages you when they operate on you. It’s the concept of assignee liability.

Read my review

For a review of the book and my analysis of Ms. White’s argument, please see REVIEW: “America, Welcome to the Poorhouse” by Jane White.

I decided to take Dave Ramsey’s Financial Peace University. My work was offering to pay for the course and I’m always anxious to learn something new about financial planning. As part of the class materials, I received Dave’s book Financial Peace Revisited. Having now read the book, I’d like to offer my observations.

Pros

First, if you are unfamiliar with many financial planning techniques or why you should be budgeting, saving, or getting out of debt in the first place, then this is an excellent guide. The range of topics covered are not exhaustive but an excellent start to cleaning your financial house. If you are already budgeting and investing, then consider this book a re-motivator or a little “pick me up.” I was able to find several areas where my wife and I are improving our financial situation as a result of this book.

Second, I’m a Christian and I appreciated the religious tone that Dave uses. I personally believe that we will be held accountable for our money management and Dave uses scripture frequently to illustrate his points. If you are not a Christian, don’t be scared off. He keeps the religious comments to a minimum.

Cons

First, the book was originally written in the 1990s and updated and released again in 2003. The concepts and principles that Dave teaches are certainly timeless. However, I believe that some of the techniques that he teaches are outdated. For example, all of the budgeting is completed by hand on paper. Fortunately, his book comes with convenient forms to use. However, this is 2009 and budgeting software packages are readily available and inexpensive. I can understand that many people didn’t have computers in the 1990s and that budget software wasn’t that advanced. But Quicken and Mint.com are both excellent options. Or heck, you can even use Microsoft Excel pretty effectively if you don’t mind updating your spreadsheet manually. Either way, some of the information and approaches could and should be updated.

Also, there are two chapters that in conjunction raise an issue that I have with the book. The chapters titled “Only Buy Big, Big Bargains” and “Career Choice” are good chapters touching on important points. However, they both suggest that you need to find a career where you can make lots of money and then go buy lots of nice, potentially expensive stuff with cash. I don’t think there is anything wrong with nice stuff, especially if you are paying cash and not going into debt for it. But Dave suggests that that path is the right and only one. I disagree and here is why. My wife and I are considering several graduate school options. One route would land me in a lower paying job that provides much higher satisfaction while the other option we are considering offers much more money but may be less satisfying. According to Dave, picking the satisfying career (so the first option) will generate more money. In my case, that’s just not true. Further, just because I can afford a $100k car, doesn’t mean I should buy one despite how good of a deal I get on it. I think Dave still has a focus on a lot of material things. Fortunately, he teaches you how to pay cash for those things.

Last, Dave gives a basic overview of the mechanics and fees of mutual funds. I was surprised that he didn’t cover passively managed index funds or how to construct a simple, diversified portfolio (which he could write a whole book on). Also, I personally believe that the average investor never needs to purchase a fund that has a load (fee to purchase it). Dave suggests that there are certain load bearing funds worth owning but never describes the criteria for knowing when a load bearing fund is worth owning. Again, I believe that unless you have a reasonable understanding of the market, mutual funds, and how to construct a strong portfolio, then stick with no load funds. In fact, stick to index funds from companies like Vanguard or Fidelity.

Summary

All and all, the book is a good, an easy read, and offers practical suggestions. Even though it appears that I had more negative than positive to say, my negative points are minor issues. On a scale of 1 to 5, I’d give it a solid 3.5. If you’d like to see additional reviews and comments or to purchase the book, check it out on Amazon.com.