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Book Review: Smart Women Finish Rich

I think book reviews will be a helpful way for me to 1) Let you know which money books are really worth your time and 2) Learn a whole bunch about investing. I started with David Bach’s Smart Women Finish Rich because two of my friends mentioned it to me. My friend Cynthia said it taught her everything she needed to know about investing and quelled any ignorance or anxiety she had on the subject. My friend Keshia thought it was okay but not “actionable,” meaning she didn’t feel like she could immediately go make an investment decision based on reading the book.

My verdict: skip straight to the chapter called “Step 5.” In my paperback version, this starts on page 106. If you don’t have kids or don’t plan on having them for awhile, just read through the end of Step 6 (up until page 234 in my book). If you have kids and want to read about raising money-smart kids and saving for college, read Step 7. (My personal view is that saving for your kids’ college education is just silly, but that’s another story—scandalous, I know.) There, I’ve just saved you about 4-6 hours of reading.

The “meat” of the book covers such useful topics as estate planning, retirement investment vehicles, the ins and outs of disability insurance, life insurance, stocks and bonds (very basic here, from defining a stock and a bond to explaining the difference between large-cap, mid-cap, small-cap, etc.), mutual funds and index funds, and different types of health insurance. Based on this section of the book, I came to the following 5 conclusions (among others):

1. My husband and I need to set up a living trust instead of a will, to avoid higher estate taxes, legal fees, the publicizing of our financial affairs, and possible claims on our assets by people we don’t like or don’t know.

2. I need to look into my company’s disability insurance policy to see if it offers “owner occupation” or “any occupation” coverage. If it’s “any occupation,” I should complain to my benefits department, raise hell, and get all my colleagues to complain too.

3. If they’re offering a good rate, municipal bonds might be worth looking into at some point because of the tax advantages, after all your tax-advantaged retirement accounts (401Ks and IRAs) are maxed out.

4. Exchange traded funds (ETFs) sound sexy, but they are not the right investment for me – too much active trading. With an index fund, I can buy the same bunch of stocks as what I would buy with an ETF, and just hold them with little time and effort.

5. I should ask my parents whether they are considering buying long term care coverage, and strongly encourage them to do so once they are in their 60s.

What does the rest of the book cover? The first part of the book is meant to be “empowering,” I guess, but it’s just a bunch of scare tactics about how women live longer than men and earn less, so they need to invest more or they’ll end up penniless. Or how husbands who manage all the money get the upper hand during divorce settlements, because the wives don’t know where the money is.

Bach also spends a lot of time explaining the importance of spending less than you earn (duh) and organizing all your information so you know where all your money is. The first one is a no-brainer and the second one can happen in 5 minutes with mint.com.

Quick recap: parts of this book are really worth reading if you’re new to investing and want to learn the basics. Enjoy!

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