The audio book, Money Management Skills, by Professor Michael Finke, is a very thorough introduction to personal finance and financial planning. It has easy to understand explanations for listeners newer to financial planning and investing. Though it wasn’t always a smooth read from the author/professor, the ideas were logical and gave the audience much to think about when looking down their own financial path. 

Just like the last book I (M) brought up on the blog, this one was more centered around Americans and thinking points about choosing a financial path if living in the States and able to take advantage of the opportunities and systems there. But again, though American-centric, it covers a wide scope of all things finance that could be useful for anyone getting started in understanding each area of finance and understanding how they are connected.

One thing that was different about this book was that the author focused on where we are on the life cycle model. This model suggests that the individual should plan their finances based on the season of life they are in. In many ways, this strategy makes sense and encourages the consumer to think of the longer term goals and overall picture of finance. In other ways, it somewhat seems to leave out the possibilities of disasters and personal situations in the life cycle. It also seems to have some assumptions that the reader would either be on the path of the life cycle model already or that the audience needs to be consoled for bad decisions. Perhaps they are and perhaps they do… 

One specific area that I found interesting was when the author talked about emotion in relation to the life cycle model. Specifically, when insurance was mentioned and the risk retention logic. Professor Finke talked about the emotional response to disasters and happenstance, but also suggested taking a step back and thinking logically about risk and loss. The suggestion here was to think about how much the reader is willing to spend over a lifetime and looking at the limit of the deductible and how much could be saved through something like compound interest. $10,000 as a deductible was the magic number for Finke to take responsibility for insurance, but this assumes that this is cash that the individual has saved up for just such cases. 

Another helpful idea for any reader, not just the American audience, was the idea of figuring out cash flow in order to build a budget. While I’ve heard this presented by different finance books before, I thought that this description was very clear and easy to follow. Professor Finke encourages us to find our fixed (same every month like rent) and flexible (food, clothing, etc.) spending by keeping track of them for a bit. From here, the individual should consider and write down their total income through income and also 401k (as this increases our saving potential and is part of net worth). From here, the reader is encouraged to split the difference to see what net savings (and investments) and deficits (borrowing/credit) currently are. After all of this is when a budget comes into play. Once the individual can see their financial path, with priorities in place for goals and long term spending, a budget allows smoothing of spending overtime and for money to go to where the individual feels it should. 

One thing that kept popping up within the narrative was first an explanation of what the most basic thing to do was, but then the author saying, most readers are probably in a higher pay bracket or something similar. Personally, I felt like this marginalized the experience of the individual before saying what each progressive step is. The difficulty in savings and planning in a lower SES seemed glossed over, but it also probably wasn’t the focus of this teacher. 

Final thoughts: I would come back to this book to listen to sections as starter points especially for bigger purchases like housing or ideas and terms for refreshers on investments, but again these are more applicable to the U.S. American market, resident and first steps before starting in-depth research in the area of finance. Who knows, it could help us all grow our own wealth.