Money 101

Since many planners generally prefer that their clients don’t mess with buying and selling stocks on their own, my first recommendation may surprise you. However, You Have More Than You Think: The Foolish Guide to Personal Finance, by David and Tom Gardner of The Motley Fool fame (Fireside Books, 2001), is an excellent place to start for those who are ignorant of, or intimidated by, their financial situation.

While the Fool’s well-known “do-it-yourself” mantra has grated on the nerves of many financial professionals, much of the information herein is sound. The Gardners take complex financial concepts, break them into bite-sized pieces, and then feed the reader with those pieces in a non-threatening and highly amusing fashion. And since you, the planner, will be recommending the book to your client, you can have a few words to say about the section on how to do it all yourself.

The idea here is to help a client understand the process and learn to feel comfortable with the concepts of stocks, mutual funds, and the need to balance a checkbook. This book can accomplish all of these goals without boring your client to the point of abandoning the process

The book has a great deal to say about basic money wisdom, such as being wary of carrying balances on high-interest-rate credit cards, spending too much on unnecessary junk (or even on necessary items), and understanding the importance of investing versus saving. For someone who has put off understanding her money because she finds it threatening, boring, or incomprehensible, this is a painless and informative introduction to the basics.

Another excellent book that will help young women who “don’t know where the money goes” is financial writer Deborah Knuckey’s Ms.Spent Money Guide: Get More of What You Want With What You Earn (John Wiley & Sons, 2001). Knuckey deals forthrightly with the problem of what she calls “unconscious spending”–a common symptom of far too many people today, not just young women flashing credit cards.

With advice on how to recognize whether a purchase is a necessity or just an impulse buy, and how to determine if a prospective investment is wise or just a waste of money, Knuckey addresses the lures of marketing that encourage young people to buy the newest, fanciest, or fastest of whatever is being advertised. She also points out the need to save for the future and to put aside money to fund one’s dreams.

Knuckey uses a pyramid approach not unlike the food pyramid, dividing her “Conscious Spending Model” into seven categories: Security (the foundation of the pyramid), Shelter, Sustenance, Self and Family, Social, Society, and Soul. The reader is asked to consider all her expenses and categorize them according to the divisions of the pyramid, considering as she does so whether she is getting enough satisfaction out of them to justify the money she’s putting into them. If not, Knuckey suggests a number of strategies for shifting, eliminating, or even increasing expenses in order to balance the categories and make the money spent cost-effective. In the course of this self-discovery exercise, she says, people will often be surprised to find that money disappears in directions they had never expected–hence “unconscious” spending. It’s much easier to plug financial leaks once they’ve been identified, and Knuckey points out a number of ways in which to do just that without feeling deprived.