Sunday, March 4, 2012

The Real Cost of Living Book

This book was in the new section of the library which I saw after I checked out a pile of other books but I decided I had to have it so I walked all the way back to the check out computer and got another book.  I guess it was a good trip because The Real Cost of Living: Making the Best Choices for You, Your Life, and Your Money by Carmen Wong Ulrich was an interesting read.  The chapters were broken down into the real cost of different items which were home, marriage and divorce, family, college, bad habits, being your own boss, credit cards, saving, and investing.  It was fascinating to see the world from a psychology perspective (could be because that was my major in college) and not just an economist (which is sometimes impossible to follow and hard to read).  I can't say that there were a ton of concrete ideas for everyone to move forward with but there were some big concepts discussed that raised my interest.

There were examples of real people throughout the book which helped illustrate her points.  I thought the best point for the story of the man who put all his money into his house and then the housing market tanked and left him with a house that he bought for $800,000 (put $400,000 down) and it dropped to $400,000 which he still had to pay the bank.  I hope that our area doesn't drop that low but I know that it has happened across the whole country.  I have always thought of carrying debt as a bad thing and it took me forever to not want to pay everything that I could on my mortgage so that I didn't have the debt hanging over me.  I know that many people work to pay off their mortgages early and save all the interest payments which are HUGE over the life a 30 year fixed mortgage.  In this case and many others, the burden and risk was all on the homeowner and the bank feels none of the pressure in the downturn.  The great news is that you aren't underwater on your mortgage but you just lost a life fortune.

There is a chapter about how parents shouldn't do a second mortgage on their house to pay for their kids education (sorry mom and dad) because they are still going to be paying it into retirement and then their kids are going to have to help pay for their retirement.  It is better to have the student take out loans and use the low interest (and deferred payment) to pay for school.  My parents were doing exactly what many parents did against this advice, making a better life for their children then they had (quote from my dad).  I will work my whole life to make a better life for my son because that is the values that I was raised with.  I understand that there is a fine line of taking for granted college education when it is paid for by their parents and appreciating the opportunity.  I know that I worked as hard as humanly possible because I know that it was my parent's expectations.  I can't say that I appreciated it as much as I should of while it was going on but I certainly do looking back years later.  I had some student loans which I paid off shortly after graduation but not nearly the amount that other classmates would have had and if my parents needed help in their old age, I would gladly jump in and help.  I hope that I can use the advice better when it gets time to send my son to college in 15 years but as the author points out, emotion wins out over logic :)

In addition, this was the first book that actually said that credit cards were a good thing :)  Most finance books tell you to get rid of all of them and go with only cash or debit cards.  I once used my debit card at a hotel and it screwed up my bank account for weeks and months.  They reserved double the cost of the stay TWICE!  How much money do you keep in your checking account?  I don't keep that much and then I didn't have any money to spend on anything else.  I had countless phone calls with the hotel and the bank to try to get the money released.  Of course, this happened during a big construction project so I was busy with other things but luckily I kept at it or I might have the hold to this day!!!!  The book also says that sometimes gas stations hold $100 on the debit cards.  These things often make it hard function with other bills coming out of the same account.  Plus, I have a card (found by my husband) that gives you points which are used for money off your bill.  Who doesn't like free money applied to their bill so that they have less out of pocket? 

I think that this is a recommended read if you are interested in learning about any of the things above and the other chapter topics.  I read it from start to finish and thought it raised a lot of great points but it was also a good read that wasn't nearly as bound in technical jargon but using lots of facts.  Can't figure out how you have both, pick up the book and check it out :)  Hope that you like it!!!  Let me know!

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