Investments have not performed well at all in the past year, thanks to the financial crisis and other factors. Because of this, it isn't surprising that many books are being published about the crisis and about ways to make better, savvier investment choices. One of the many books published on investing is this, Put Your Money Where Your Heart Is. It was written by a woman who has made a name for herself for picking winning stocks and she feels that, with the right guidance, you, too, can pick tomorrow's star financial performers by taking a slightly different approach than that commonly recommended by other investment professionals.
What makes this book's plan so special? Well, most of what the book recommends is actually nothing new or earth- shattering. The book recommends buying low and selling high, seeking out companies who are leaders in their respected businesses and loved by their customers, not putting all of your investments in the stock market, etc. These are all sound strategies for investing, and many others have recommended exactly the same things. Where the book moves in different directions from conventional wisdom is when it offers advice on investing in things you love and when it offers advice on how to allocate your income among different categories. The first piece of advice is to invest in what you are most passionate about. The author's theory is that the things you love and enjoy most are going to make great choices for investing because, if your heart is already in the right place, then great things will follow. This is different from what most financial professionals recommend, and it isn't necessarily the soundest advice on making the best investments.
With personal finances, this book once again deviates from the advice normally offered by investment professionals. The author recommends dividing money up as follows: Ten percent to charity, ten percent to education, twenty percent toward entertainment and recreation, ten percent on investments, and fifty percent spent on ALL living expenses (debts, food, gas, clothing, and other essentials). Instead of paying the bills and paying down debts with high interest rates before doing anything else, this book recommends the opposite: Spending the money on yourself first, and paying the bills and essential expenses last. The book also recommends downsizing or finding new ways to earn income if living expenses are presently greater than fifty percent in order to get below this threshold and enjoy life.
Author Natalie Pace is certainly enthusiastic as she writes and she does seem to have a genuine desire to help others succeed. But the advice in Put Your Money Where Your Heart Is cannot be taken completely seriously by most individuals. The allocation of money mentioned in the previous paragraph is one good example. This proposed breakdown is certainly something that many should strive for and I can agree that her formula for spending and saving is one that would make most people feel very happy and content. But it seems a little unrealistic to me. Most people already spend more than fifty percent of their take home pay on basic expenses and there is little or no way to reduce these expenses very much. The author, however, makes it sound relatively easy- like anyone can do this. She doesn't offer an alternative plan, so I can only assume that she is sticking to her theory that anyone can adjust their lifestyle to fit this allocation model. She mentions, for example, moving into a smaller home or getting a roommate to share expenses, but these options are not practical for every person. I also question her advice on giving ten percent of take home pay to education and ten percent to charity. Again, this sounds nice and it is very generous. But this seems like a little bit too much to me. I don't know many people who can afford to give up ten percent of their income for education and another ten percent for charity. Most families would be forced to take the money from essential living expenses if they tried to accomplish these goals.
In addition to the problem I have with the advice on personal finances, some of the material in this book is over- simplified and a little misleading. For example, there is one section in the book where the author is talking about what an investor with one hundred thousand dollars in debt should do if they inherited one million dollars. One could pay off the debt, but the author recommends that instead the person invest the money because if they can earn ten percent, they would gain one hundred thousand dollars which could then be used to retire the debt, leaving the one million dollar principal intact. Anyone with minimal experience working with debt knows that this is a misleading statement because it fails to consider the interest on the debt. In reality, most consumer debt demands greater than ten percent interest. And if that is true, then paying off the debt would actually be better than investing now and paying the debt later.
Another thing I do not like about Put Your Money Where Your Heart Is would be its tendency to scatter its material. Others have criticized the book for the same reason, and this is certainly a valid criticism. One moment, the book is talking about options investing. Then, it is giving a rundown on the warning signs that Enron's management was involved in shady practices. Then, it talks about investment in times of war and terrorism. Some more continuity and organization would have made this a better book. It would also benefit from some more specific guidance on investment choices, and how to make the best possible choices.
In spite of the flaws mentioned above, there are, however, some good points to mention with this book that make it worth a look. First, I like the book's writing style and its advice on having fun and not pinching pennies when it comes to enjoyment. I can also agree that many people have over- extended themselves when it comes to debt and their personal residence. Many should try to find ways to cut back, but what I don't like is how the author makes all of this sound so easy. If it was really this simple, I think people would already be doing many of the things she mentions in the book.
Many want to dispense Investment advice and hundreds of authors are certain that their method is the best for choosing stocks and enjoying a lifetime of prosperity. This book does, indeed, offer some good advice, but the good is partially cancelled out by the book's several misleading statements. Investing in what you are passionate about does not guarantee great returns and the financial talk in this book seems to be a little too geared toward emotion than practicality. However, I did like some of the general advice in this book enough to give it a slight recommendation. It isn't the best book in its class, and a rewrite and reorganization would make it better. But it does offer some good general tips on investments and other related topics.
