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All Your Worth:
The Ultimate Lifetime Money Plan

Authors:   Elizabeth Warren & Amelia Warren Tyagi
Publisher:   Free Press / Simon & Schuster (2005)
ISBN:   074326987     (hardback, 273 pages)

(NOTE: This review also appeared in the October 2005 issue of Cheapskate Monthly.)

“You need to write a book on handling money,” television’s Dr. Phil told Elizabeth Warren on camera last year. “People need to hear this. Really.”

Warren must have needed to hear that, too. As the author (with her daughter / coauthor Amelia Warren Tyagi) of the 2003 bestseller The Two-Income Trap, Elizabeth Warren hitched up her writing tools and impressive credentials and turned out a worthy follow-up in 2005: All Your Worth: The Ultimate Lifetime Money Plan.

Consider the question: Why are so many middle-class families struggling with money? Warren and Tyagi wrote Two-Income Trap to answer that “why” as best they could. Now, in All Your Worth, the authors hope to give families something even more important: a financial plan that alleviates those money struggles.

“The rules of the game have changed,” All Your Worth tells us early on. Money-handling methods which worked fine for our parents and grandparents were based on guidelines and guarantees that no longer exist. “In today’s world, you can get a mortgage that is too big for you – and the banks will help you do it. You can get a car lease that chews up half your income. You can rack up credit card debt without blinking an eye, even if you don’t have 50 cents to make the payments.”

Tough to argue with that. In fact, it might be tough to argue with Warren on much of anything. She is a Harvard law professor who has spent much of her professional life researching the causes and ramifications of personal bankruptcies in the U.S. In All Your Worth, she and Tyagi call upon this research — and their personal experiences with everyday folks — to lay out what they call the “ultimate lifetime money plan.”

If you’re looking for complicated financial advice, you won’t find it here. The book’s message boils down to a few simple admonitions: Get out of debt. Get your spending in balance. Live by three numbers:   50/30/20.

Three numbers. What’s the significance? Well, they indicate the “money balance” to which All Your Worth (or AYW, for short) devotees should strive. Warren and Tyagi advise readers to keep their spending within the following boundaries: Spend 50% or less of after-tax income on Must-Haves, 30% on Wants, and 20% on Savings. And if you thought there was no way in the world someone could write a 273-page book that revolves around three round numbers, you were wrong.

While exactly what constitutes a “Must-Have” expense is well-detailed in AYW (yes, there are worksheets to help you along), it’s worth noting that the definitions of “Must-Haves,” “Wants,” and “Savings” aren’t what you might think at first. There’s a bit of shiftiness to them, but that’s forgivable. It doesn’t interfere with the knife-sharp simplicity that is the 50/30/20 plan. I can’t think of any other authors who’ve offered financial plans of this sort — dropping all spending into three categories, setting a few simple boundaries, and letting things roam from there.

Understand that there is nothing easy about 50/30/20. The number of folks out there whose legitimate Must-Have expenses total 50 percent or less of their after-tax income is probably miniscule. But when you’re talking about a society bloated with debt — as ours certainly is — then the mere fact that 50/30/20 is so tough means that it just might be precisely on target.

Such clear guidelines are what set AYM apart from other financial books. When asked the question, “How much should my family be spending on XX?” most gurus would likely respond with, “It depends.” But not here. Warren and Tyagi actually give us something concrete. They don’t get bogged down in details, preferring instead to give 50/30/20 an inherent flexibility. And it makes a lot of sense. (So long as you’re saving 20 percent of your income, AYW tells you it’s good to spend 30 percent of your money on Wants. What more could the Spender in you ask?)

No, it's not earthshattering stuff. But the 50/30/20 setup is a gem ... and the integral part of a larger AYW framework. While there are actually six steps (you knew there had to be “steps,” right?) to achieving the authors’ hallowed “money balance,” there’s not much else in those six steps that’s earth-shattering. Instructions such as “See where you are,” “Change how you think,” “Overcome debt,” and “Grow your savings” are what you’ll find, and those are about as common as Mastercard commercials on daytime TV. (Common for a reason, though.) To its credit, AYW does take time address a few special situations — home buying, financial emergencies, and money in marriage — that commonly dynamite even the best-intentioned financial strategies.

In the end, Elizabeth Warren’s research into financial struggle and bankruptcy is too valuable and too immense to allow her thoughts on personal finance to be discounted. If there’s anyone out there able to devise a basic roadmap to help families steer well clear of a financial cliff, it should be her. She likely has sifted through into more bankruptcy and other financial data than most of us will encounter in our lifetimes.

For anyone who ever wanted tangible, measurable guidelines to work with in regards to his or her household budgeting, All Your Worth fits the bill.

Michael | November 23, 2005

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