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Your Money Ratios – Review and Giveaway

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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.

Comments

  4. Mike Piper says

    “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.”

    As someone who a) writes books, and b) never mentions religion or faith in any of them, I have about a million questions to ask in reply to this statement. I’ll keep it to just one though. 🙂

    What if the author had brought up faith, and it became apparent that his beliefs were dramatically different from your own? Would that increase or decrease the author’s credibility?

    • Matt Jabs says

      If the author didn’t believe like me I would probably call for him to be tarred and feathered! 😉

      All kidding aside, as I said just before that statement… “take this with a grain of salt”, because this is a personal preference of mine.

      It’s just that spirituality is a very real and pertinent part of my life, so I always prefer to see an author at least address the existence of a spiritual component, regardless of topic.

      To answer your question honestly, if an author did not share my beliefs it would not necessarily discredit him in my eyes, but I am proud to say that I appreciate when an author relates his topic to the scriptures. Take you for example… I would place your knowledge of investing far above my own and would go to you for advice, but I would LOVE to see you address the topic of spirituality and investing in one of your books.

      Whether we believe in Christ or not, we are all spiritual beings, so although it is viewed as a bit of a faux pas, it is nice to see this very real variable addressed in the equation. I hope this answers your question. 🙂

  5. Tammy C says

    Pick me! Pick me! My family needs more financial help than you could possibly imagine. Thanks!

  7. David H. says

    While I have not read the book, it certainly sounds interesting. One thing I am cautious of though is the many “rule of thumbs” that sometimes books try to setup. I feel like for the average person having a certain capital ratio within some range is appropriate but it is all about personal circumstances. A struggling grad student trying to get married versus a married person in his 30s with 2 kids will likely require different percentages for each of the ratios mentioned above. His ratios do seem interesting especially since I myself have not considered disability, life insurance or long term care yet. I may have to check it out when I finish with The Tipping Point which I got for Christmas. Can you post a few of his recommendations for the ratios above specifically how much life, disability he recommends. Saluti.

  8. ponderingtings says

    I would love to read this book so I hope I win. I will check it out anyway. From your brief review I hope it is not discouraging with the focus of what should be done by a certain age but gives help in correcting the stituation. Heck if I had everything that I needed financially by my age, I would not need to learn anything more financially speaking.

  12. Financial Samurai says

    Hi Matt – Good review. Where are them scriptures?!

    Count me in. I’d love to read it again and give it to a 22 year old just out of school who will benefit greatly from this book!

  13. Jasmine N Blanton says

    Sign me up. I plan to be comming into some money and I don’t want to throw it away. I know you know what I mean 😉

  14. Jeff says

    Ratios are so much fun, ok maybe not. I still would like to read more about them thought. In my house my wife has a great ratio when it come to money. It’s called the Mrs. DeliverAwayDebt Ratio– How much of our blow money gets split between us (0 she gets it all).

    Hope I win so I can teach her about setting better ratios in our house.

  15. Carolyn says

    It sounds like this book just might shed some light on where to go from here. Our investments have pretty much tanked over the past couple of years, and we need to reexamine what to do with the little we have coming in. Please enter me in the running for the free copy.

  16. SailboatFamily says

    A ratio is the relative magnitude of two quantities, with the key word being relative. I’d love to win the book to learn the authors take on what the “right” ratio is for the masses.

    I could then compare the author’s “masses” numbers with our ratios. Given our life goal and lifestyle is so different than the rest of the world, it would be fascinating to compare and contrast them.

    As a cheap sake, unless I win, I guess I will never know!

    Thanks for having the contest.

  17. Krista says

    Thanks for all of the great advice. Loved the post on the importance of character in success.
    Sounds like a great book for keeping your finances on track.

  18. Robert Espe says

    Always kind of been against long-term care insurance, mainly because I’m against nursing homes. But I wouldn’t say a little thing like that has to spoil what sounds like an interesting read otherwise.

  20. Betty says

    My husband and I got a late start on retirement savings. I would like to get all the help we can to retire comfortable…I’m very interested in what the author has to say.

  21. Allison F says

    Please include me in the drawing. Hubby and I will have our credit cards paid off this month, and I need to look into the best allocation of the cash freed up for investing. . . 🙂

    Thanks for all your great posts. I love catching up on them when they hit my inbox.

  22. Richard says

    Thanks for the review. I saw the book online but there wasn’t enough info to make my purchase decision. Based on your review, I defintely want that book.

    • Matt Jabs says

      Ask him to commit to an hour each night of reading time together where the TV is shut off and the books are opened. My wife and I just had our time… we love it.

  29. Ernest S. says

    Sounds like the perfect book to start the New Year. Thanks for giving us the opportunity to win a free copy!