Customer Reviews

Your Money Milestones: A Guide to Making the 9 Most Important Financial Decisions of Your Life

5 star:		(9)
4 star:		(8)
3 star:		(11)
2 star:		(3)
1 star:		(1)

 

 

The premise of this book is that understanding the larger context of a decision will help you make better decisions.

It considers each financial decision within the broader context of a person's life journey ... a journey that it characterizes as being all about converting potential human capital (your ability to earn) into actual financial capital (the fruits of your revenue generating efforts).

At the start of your journey, you are rich in potential, with all your finances tied up in your abilities (the analogy used is of an oil well). In a very shallow way, your progress through life can then be viewed as the process of converting your potential human capital into actual dollars and cents.

To make its case, it relies on two key principles - that of a 'holistic' balance sheet and that of 'income smoothing'.

The idea of a holistic balance sheet is one that considers not just your measurable assets and liabilities, but also a measure of your earning potential (your "human capital"). The idea behind "smoothing" assumes that you could use a combination of debt and earnings to even out your income as well as your expenditures for each year that you live.

What worked for me:

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The book provides a very clear reasoning as to why education is key, and how different career choices can have very different impacts on your earning potential. Needless to say, this was a chapter that I read together with my son. Obviously, while financial payoff is not the only criterion in the selection of a career, its still important for kids to learn how this choice has long term implications.

The idea of consumption smoothing is an intriguing concept since it not only implies that it is okay to take on debt early on in your career, when your consumption far outstrips your limited income, but also states that it's okay not to save much during this period of relative hardship.

What didn't work:

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It really bothered me that I couldn't find a significant correlation between the contents of the book and its marketing blurbs. For instance, I found nothing that would help me "learn how to diversify [my] marriage, pensionize my kids, and enjoy a greater retirement income." Likewise, the device of using basic arithmetic operations (add, subtract, multiply, divide) to help make financial decisions seemed to be "cutesy" and artificial - and something only a publisher would think up. The unfortunate part is that the book would have been a good read without relying on these marketing hooks.

The book approaches personal finance as an academic treatise rather than as a folksy exploration (a la Suze Orman). Almost every page in the book contains references to studies, surveys, statistics, research papers, articles, and the like. This results in a very information rich book, but it also makes it harder to extract the key nuggets of information from it.

There are also minor typographical/construction errors that you'll run into in the book (the use of "alternate" as a synonym for "alternative" being the most egregious), but nothing that's too distracting.

Conclusion:

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This book relies on the principle of teaching a man how to fish, and so it is neither a primer on personal finance, nor is it a workbook. It is not even an how-to manual. What it is, is a book that helps you understand the psychology underlying personal finance decisions.

In the end, however, everything boils down to there not being enough practical advice. For instance, the chapter on debt indicates that individuals who are ignorant of the basic principles of debt end up paying more, but it doesn't say much about those basic principles.

All that being said, there are some good rules of thumb that you'll find in its pages. For instance, avoid using higher tax withholdings as a form of forced savings; or that borrowing from your 401(K) is prudent especially when your expected rate of return on your 401K funds is lower than the interest rate that you expect to pay.

Would I recommend it to family? Yes, I would. But only after warning them about what to expect.

Hence my overall rating of 3 stars ("It's Okay").

The chapters that are particularly worth reading are: Chapter 1 - which will be useful in helping your child (or yourself) navigate career choices; Chapter 3 - which shows why you should consider raiding your 401(k); and Chapter 7 - which provides a unique way of looking at extended warranties.

Happy Reading!

~Damodar

Unlike many authors who write self help books, Milevsky is a university professor, not an advisor. As a result, this book, heavily influenced by the behaviorist school of economic thought, takes a very different tact when it comes to approaching important financial issues (milestones) in your life. Milevsky's most important contribution is to insist that one add "human" capital to any balance sheet of assets and liabilities. Such balance sheets are a common tool among advisors, but people often fail to include their most valuable asset: themselves. Doing so radically changes one's approach to financial issues.

Consider for example the issue of debt. Americans are heavily in debt, though less so in the wake of the recent financial crisis (savings rate are actually up from negative numbers to around 6%). Is this debt healthy? Most people who offer financial advice, including myself, would say no. Mortgages are a conspicuous exception. But Milevsky modifies these assumptions with two important points. The first is, when you assume the debt is at least as important as how you assume it, and second, the sources of the debt are equally important. Even consumer debt, the big no no of financial advisors is Ok, provided you take it in moderation and early in life. What you are effectively doing, the author suggests, is moderating your consumption over your life. Your future earnings are likely to be higher and you are trading some of those earnings for a slightly higher standard of living today.

On the other hand, debt when you are older is quite dangerous.

A number of interesting points follow from this analysis. First, student loans, which represent a large burden, should be viewed as an investment in human capital. (Invest wisely. A history major may not be the best choice.) But a home may not be a wise investment before one is 40. It is not diversified and if future income streams are variable, or if you have to move often, renting may be the best solution for younger workers. In the final analysis, the author's main debt advice: don't diversify your debt the way you do assets. Too many people have debt on multiple credit cards with different rates (why not consolidate to the lowest one?) and make sure that as the income from your human capital increases, you give up debt and start saving for the future.

Viewing human capital as an asset also changes one's financial perspective when it comes to saving for the future. All too often, advisors suggest that "risk tolerance" and "time horizons" are the main features for deciding how much to invest and where. Milevsky recommends instead that you look at your income stream. Some people's income is already closely tied to the market and they should diversify into bonds. That way income and investments do not take a hit simultaneously. By the same token, some people with modest income, like teachers, tend to enjoy relatively small changes in income with changes in economic climate. These people are actually best suited to assume more risk in the stock market, provided, of course, that they can make up losses with additional work.

In short, this book does not offer so much "practical" advice (buy stock x!) as it does an outlook. Milevsky argues that when you construct your own balance sheet, you should not forget the value of your human capital. And when you include that figure, which is actually quite large for younger people, decisions about money become much easier to understand and navigate.

I usually enjoy reading books on finances and financial decisions and thought this particular entry into that niche looked very interesting. To cut straight to the bottom line - I wanted to like this book more than I actually did. It wasn't a waste of time for me, but I didn't get out of it nearly as much as I had hoped. The subtitle is "A guide to making the 9 most important financial decision of your life" and the blubs on the back talk about this being a "practical roadmap to a financially sound future". That's what I was expecting, but that's not what I got.

On the plus side, this is a more holistic view of financial decisions than many other published books provide. Really thinking about your income stream over the course of your lifetime and thinking about smoothing things out rather than looking at your earning years separate from your retirement years was very helpful. I also thought the author did take on the sacred cow of homeownership (sort of) as not necessarily being the absolute right answer. I have actually done the math and by the time you pay property taxes, maintenance, and repairs, plus and remodeling or update necessary prior to sale, homeownership isn't necessarily all it's cracked up to be. He talks about renting may be a better solution for many people, but doesn't do very well at explaining much about the costs of ownership including is mowing the grass or repairing the toilet how you want to spend your weekends (and your life energy).

He has a good discussion about people spreading their debt over multiple instruments and the high cost of doing that, but doesn't get into that people who max their credit cards, then take out a home equity loan (or other lower interest rate device) only to rack up the credit card debit or other consumer loans really is worse off than before. The academic side of this particular discussion totally ignores people's propensity to continue doing what they have always done even when it gets them in significant trouble.

Overall - some good bits and pieces and some nuggets worth reading but it fell short on many fronts.

I agree with Damodar's review: the hype (and title) of the book doesn't really match the content.

I bought this after reading a book review on a blog. I'm now suspicious he was paid to write such a glowing review, and I don't read that blog anymore.

Most of the ideas weren't really new to me, except for: considering children as a form of diversifying your pension. I had never considered that before. That's the one takeaway I got from this book.

Behavioral psychology of how people are likely to spend their money isn't really that useful to a consumer like me, but I suppose it could be to a personal finance professional or product marketer.

I have since passed the book onto a relative, who is just graduating from high school. That is who I would recommend this book for, a nerdy high school or college graduate who is beginning to think (or should be beginning to think) about managing their money.

A much more valuable and practical book for personal finance knowledge would would be Ramit Sethi's "I Will Teach You to be Rich."

Moshe A. Milevsky's, career as an award winning, author, public speaker, corporate advisor, and tenured finance professor at the Schulich School of Business at York University, Toronto, Canada adds an extra measure of professionalism and credibility to his book "Your Money Milestones." The book is written to provide a useful guide to making financial decisions. Milevsky discusses nine money milestones and four basic principles necessary to better understand and evaluate your financial decisions throughout the life cycle.

The book is well organized. Each chapter becomes a step in building a broad foundation, however since the chapters each explore a different financial milestone, which can stand alone and can be read separately as well.

A unique feature of the book is the inclusion of links to various capital calculators to assist the reader in establishing a holistic personal balance sheet and financial strategy. The life cycles begin with education and take the reader through the regular cycle life events which influence and become a part of every financial journey through to the retirement years.

The format of the book is reader friendly and uses charts, graphs, and tables to reinforce the comprehensive well articulated narrative. I appreciated the topic headings within each chapter and the balance of white space, print, and shaded areas called "detours." Other features of the book include: chapter summaries, references for additional study or future reading, and a complete index.

The subtitle "A Guide to Making the 9 Most Important Financial Decisions of Your Life" clearly defines the essence of "Your Money Matters." This is more than "Money 101" for college students but should become an ongoing resource for every family or individual in establishing a strategy for the cycle of lifetime financial decisions. An important and powerful resource for navigating your personal financial journey.

The book is very interesting in its concepts of managing your money through mathematical concepts based on how your personal balance sheet looks currently in your life. The nine most important financial decisions you will make in your life are:

1. Your human capital:How you invest in education early in life.

2. Smoothing your spending over your lifetime:Do not be a tightwad and miss enjoying your early years, but also don't get yourself in so much debt that you retire poor.

3. The right amount of debt: How much debt is to much and how much is to little.

4. Your children: They start out as liabilities but can become assets for you as you age.

5. Taxes: Pay your legally required amount but no more.

6. Home ownership: Contrary to popular belief, it does not make sense for everyone.

7. Insurance: Insure against situations that will effect your standard of living, not an electronic device that does not manner.

8. Portfolio construction: Diversify based on the volatility of your employment income, if you have a risky job, invest conservatively. If you have a safe job you can invest aggressively with more risk.

9. Retirement: A defined pension plan puts retirees at ease. If your employer does not provide one you can buy your own.

The book presents the mathematical principles for decision making:

ADDITION:-Identify the true value of all your financial and human capital resources. You must add your future ability to earn wages to your personal balance sheet. Through out your life you convert your human capital to money and add it to your financial assets.

SUBTRACTION-Recognize and budget for all the hidden liabilities in your future. Don't add assets without subtracting any corresponding liabilities. You must account for the hidden liabilities on your personal balance sheet. You must identify, hedge, and bridge all the liabilities you encounter in life.

DIVISION-Plan to spend your total resources evenly and smoothly over time. It makes little sense to starve yourself for decades so you can enjoy life life in middle age, or to live it up today without any consideration for tomorrow. Think long term and avoid foreseeable disruptions by budgeting for all predictable liabilities and have a balanced standard of living through out your life based on your long term human capital.

MULTIPLICATION-Prepare for many alternative and unexpected universes. Your life circumstances could take multiple financial paths, make sure that you make decisions that help smooth your consumption over all possible paths and not just the expected or hoped for path. Insure against all catastrophic and unforeseeable disruptions.

This book is outstanding, it approaches personal finance from very thought provoking angles. This is not your run of the mill or boring personal finance book, it is an education on making thoughtful decisions when your milestones occur. I highly recommend.

Your Money Milestones is a good book about some of the many important financial decisions that individuals make at different stages in their life. It offers different approaches to personal finance that emphasize human capital, smoothing of earnings, improved net worth, etc.

Personal finance books are one of my more common reads and no matter what knowledge level I feel I have achieved, I still like to read more books on this subject, both to discover different perspectives and hone my skills. This particular book is a little different from the rest. It doesn't dispense practical advice as much as other personal finance books and in many ways, it is more a behavioral guide than anything. For this reason, it will likely turn off some readers. Many will open the book and immediately look for direct advice, but this is not that type of finance book. It is intended more as an overview of ways to approach the subject of personal finance from a new perspective.

Looking at the nine different money milestones presented in this book, I find that I agree with most of them, but I have reservations with others. One is the emphasis on future human capital. The book recommends creating a personal balance sheet to calculate net worth with the inclusion of what the book claims is your largest asset- your human capital. This futuristic number, which represents the discounted value of your future potential for earnings, will greatly increase current net worth, but I question the author's wisdom on this matter. To list this as an asset would imply that I can sell it, but future paychecks and future work cannot be sold. Another reason I don't like this concept is because it greatly inflates one's personal balance sheet. This could give individuals a false sense of security and lead them to make poor decisions regarding investment and debt management, due to their inflated level of net worth.

What I like best about this book are its chapters on topics such as education, kids, and marriage because they offer some fresh and interesting perspectives on these subjects. The education chapter is good because it offers some factual information on the value of an education and the tremendous impact it can make on one's financial potential. The chapter on kids and marriage is interesting because it offers some financial food for thought about the institution of marriage and child- rearing that many people have likely never considered. What this book says on these important matters could impact many long- held beliefs, and that is what makes them so interesting to read.

Personal finance is an important topic that affects everyone. Your Money Milestones isn't the greatest book on this subject, but it is still a good book with some good things to offer. I can see the author's point about such concepts as human capital, renting vs. owning, etc., but I don't necessarily agree with all of it and I know I am not alone in my thinking. Still, this is a good book and while it may not offer much in the way of personal advice, it is still good for the different angle it takes on the subject.

This is more of an overview to make you aware of things to consider, but it lacks practical advice. There is a psychological element which describes people's basic behaviors in certain situations. For example, the receipt of a large sum of money initially goes toward some debt, but people's spending habits ultimately don't change. This was exemplified by looking at lottery winners and military personnel. This might be good for college students to make them more aware of their spending habits, but it's not so good if you're 30 years old looking for advice on how to prepare for retirement.

I have read many books on Money management....some good and some bad. This book falls into the very good side. It is an interesting take on money milestones instead of money phrases. Mr. Milevsky approaches money as a whole concept......i.e. your money worth not just actual, concrete assets.

This could be read by any age person. A young person could use it as a blueprint. Middle age could use it to tweek areas to stay on the right path. Older persons could validate and make adjustments, if needed.

I am the middle age part. I found it very useful to validate my money management techniques. Overall, I agree with Mr. Milevsky and his comments.

If you want a solid, well-written, money management book with today's issues used to make points........this is the book for you.

Enjoy.

I was impressed by 'Your Money Milestones', and I believe it would make a valuable addition to any financial library.

Written by Moshe Milevsky Ph.D., 'Your Money Milestones' contains enough sound advice and information to set it apart from the hundreds of financial books that are written every year.

A few of the nuggets I took away from the book include: net worth calculations (assets minus liabilities) neglects what the author calls 'human capital', which is the earning potential that an individual possesses; maximization of shareholder value (the business mantra for 20 years) neglects communities and employees; and 'smoothing the consumption stream' urges individuals to not stint so much when times are tough, but save when times are flush, so that there is no major departure from a standard of living.

Another important idea is that Milevsky urges us to consider the federal and state governments as 'business partners' in any monetary transactions. For example, let's say you have a balance of $250,000 in a 401(k) plan. But what a minute! You really do not. Depending upon your tax bracket, Uncle Sam owns up to 40% of that money. He's a silent partner, to be sure, and he doesn't make you save more, or tell you where to invest. But 40% is his, no matter what you do. So, $100,000 is not really yours. Never was, never will be. So you don't have $250,000 in the bank. You have $150,000. Act accordingly, Milevsky says.

I do have a couple of grips about the book. For one thing, Milesvsky is a product of the Eastern establishment, with a bias towards Ivy League colleges. He teaches at Canada's York University, and his students obviously don't come from the wrong side of the track. Their attitude is summed up in one thought experiments that Milevsky runs with his students. Let's assume, he says to his students, that a rich, eccentric uncle that you barely know dies, leaving you with $25 million. However, you have to wait 25 years to collect, at age 50. He posits the question: what do you do between here and then. Live like a pauper, waiting for the big payoff? Or live it up, knowing you can pay the bills when you're 50?

Now here's the illustrative part. His students often come up with a solution: hire a top attorney to 'break the will' so they could have the money right away. So this kind old uncle gifts you $25 million, makes you wait for 25 years (presumably because he knows you can't be trusted immediately) and yet you are determined to thwart him? Not nice!

A couple of other problems I see with the book, more serious. He keeps telling us to assume you can borrow money at zero interest rate. That means that with the above dead, rich uncle, you could just borrow against that $25 million, and spend, spend, spend until you pay back the loan with the money. But he neglects to point out that loans are NOT free, and interest in going to need to be paid while you are waiting for the money. And he says, ignore the possibility of serious illness or death. Need I remind everyone that unfortunate things DO happen? You just can't spend it up while you are young, thinking you'll be healthy, wealthy and wise, when your income finally catches up with your spendthrift habits.

I think he should really re-think that advice. You-know-what can and does happen!

Minor complaints about elitism aside, this is one excellent tome about investing that will definitely give you a new perspective about how to value financial and human capital, at every age of your working (and retired) career. Highly recommended. Milevsky has hit a homer on this one!