Book Review and Giveaway

Today you have the treat of reading a review of the new personal finance book, “Your Money Ratio’s: 8 Simple Tools for Financial Security”.  Thanks to TLC Book Tours I am also facilitating a gracious giveaway of this book to one random DFA reader.  Are you feeling lucky? 🙂

To win a copy of the book just leave a comment here.  The winner will be chosen (using random.org) and will be announced on January 15th, 2010.  This book is a heck of a read, so go ahead and enter to win.

While you’re at it, if you haven’t already why not subscribe to daily DFA article updates by RSS feed delivery or email delivery – and no subscription pitch would be complete without mentioning the option to follow via Twitter.

What is Your Money Ratios?

This book is self-dubbed, “A groundbreaking and simple approach to tackling personal finance by applying formulas used by the most successful businesses.”

The book aims to instruct us in the ways of financial security by helping us determine:

1. How much total savings we should have accumulated at our age.
2. How much we should be saving each year.
3. What tax and investment vehicles we should use to maximize our savings.
4. How much mortgage and education debt we should be carrying at our age.
5. How to manage our investments for prudent growth and principal protection.
6. How to purchase the disability, life, health, and long-term care insurance necessary to protect our income and assets.

The author also applies a very wise “Unifying Question” to each of his ratios – “Will this financial decision help move me from being a laborer to being a capitalist?”

Sounds good right?  So what are these magical ratios, and just how simple are they to graft into the life of financial laymen?

What are theses simple money ratios?

The author is a total ratio/math nerd… which I love.  The cool thing is that he presents the ratios (aka tools) in a simplistic manner so we don’t need a doctorate in mathematics to understand and use his strategy.

Here are the 8 simple tools (ratios):

1. The Capital to Income Ratio – How much capital (savings) you should have at your age if you plan to retire at sixty-five.
2. The Savings Ratio – How much of your income you should be saving each year to help you reach your Capital to Income Ratio.
3. The Mortgage to Income Ratio – The maximum mortgage debt you can carry while saving sufficient capital to retire comfortably.
4. The Education Debt to Average Earnings Ratio – The amount of education related debt you can safely incur, based on anticipated average earnings after obtaining your degree.
5. The Investment Ratio – The fundamental split between stocks and bonds that you should consider at different stages of your financial life cycle.
6. The Disability Insurance Ratio – Why you need it and how much you should consider getting.
7. The Life Insurance Ratio – You buy life insurance not for yourself, but for your spouse and children.  How much you need to acquire at each stage of your life.
8. The Long-Term Care Insurance Ratio – How much of, and why you need this least loved, least understood, but very important form of insurance.

Should you buy this book?

If you are interested in a hands off, simple approach to preparing yourself for financial security… then buy and read this book.  Some people may think it a bit dry, but I found it entirely captivating since it addresses all areas of personal financial concern and attempts to master them with a non-emotional and simple solution.  You can pick it up on Amazon at a 34% discount off the regular price of $26 (at the time of writing.)

One sentence can sum up the philosophy of the book… the tortoise always wins.  It is the same concept laid forth in countless personal finance books – those who want to win at money exercise strategic and consistent self-control and self-discipline… which makes perfect sense to me.  This book helps you construct and implement your consistent and winning strategy using the simple ratios.

What could the author have improved upon?

The answer to this question is going to be different with every review you read, so take this with a grain of salt.  I would have liked to see the author address God, faith, or the bible.  Personally, I have a hard time fully trusting the advice of someone who can write an entire book and never even think to bring up the wisdom of the scriptures or the being who created all things.  Call me crazy.

About the author

Charles J. Ferrell, an investment adviser, lives and works in Denver, CO.  When he is not writing stellar personal finance books Charles enjoys writing the “Retirement Roadmap” column for the CBS Moneywatch site.

You can visit Charlies website at YourMoneyRatios.com.  The website has some cool features that allows you to input your data and get a simple report in reference to the ratios laid out in the book.  The ratios are only available to those who buy the book and use the secret code contained therein.  🙂

Don’t forget about the Giveaway!

To win a copy of the book just leave a comment.  The winner will be announced on January 15th, 2010.  This book is a heck of a read, so go ahead and enter to win.

While you’re at it, if you haven’t already… why not subscribe to daily DFA article updates by RSS feed delivery or email delivery – and follow me on Twitter.