All Your Worth by Elizabeth Warren and Amelia Warren Tyagi is my all time favorite financial book.  Now if you know me at all, you know that I read a lot of non-fiction, mostly in the areas of finances, parenting, decorating, organizing and living your best life.   

Why is this my favorite finance self-help book of all time, you ask?  Well, I guess because it just plain makes sense.  The authors have looked at the big picture, distilled it down to the root causes and come up with a one size fits all, easy to understand, easy to follow plan that will get you through your life from cradle to grave.  How amazing is that!?!

The premise of the book is simple.  Life requires balance.  Get out of balance and things get funky.  Work your way back to being and balance and life gets pretty easy and enjoyable.  Balance is the case of money is having enough money for each of three categories: must-haves, savings and wants.  Go heavy on one area and you automatically throw off the other areas.  Stay in balance and financial success is pretty much a sure thing.  The balance they suggest isn't arbitrary.  It is based on research as well as common sense and they fully explain the reasoning behind it and the consequences of not following it.  They don't tell you what is important, they leave that up to you.  They don't have an ideology that you have to subscribe to.  There is no guilt and no preaching.  You get to decide what is important and what your own financial ideology is.  You just need to keep it in balance.  



First things first; Must-Haves.  They recommend your Must-Have be at 50% if your take home pay.  They are pretty specific on what constitutes a must-have.  It's something that is necessary for basic human health, safety and dignity.  It is something you would still spend your money on even if you lost your job.  It includes things you are obligated by contract to pay as well.  The list is fairly short and sweet: housing including basic utilities & homeowners or renters insurance, your transportation costs including gas, insurance and a payment, basic medical costs including insurance, life insurance, disability insurance and long term care insurance, a certain amount for basic food, and anything you have signed a contract to pay for, such as student loans, cell phones, a gym membership or furniture, as well as child support and alimony.  Aren't clothes a need?  Well, truly, most people could get by for quite some time with what they already have.  At least 3-6 months.  What about debt payments.  Well we'll get to that in a minute.


What if you have more than 50% in must-haves, like Family currently does?  Then it is time to start trimming.  Not your wants.  It might work for a little while, but eventually you burn out.  You need to work at getting you Must-Haves to 50% or you really don't have much of a chance long term.  Re-shop your insurance.  Can you turn things you are renting back in? 

In our case, our biggest Must-Have expense is what throws us out of balance; our house.  We don't have car payments.  Our cars are older so our insurance costs are quite low.  We don't have anything purchased on time.  We aren't renting anything.  We have too much house.  But we aren't moving.  So we have to find someplace to trim.  For now it is groceries.  We have a lot of food storage built up so for the next few months we are going to try to keep grocery costs to a bare minimum.  But that isn't a long term solution and I know it.  So, if you can't or won't trim your Must-Haves much lower, you have to make more.  Basically, I've got to get a job that at least covers the difference between what our Must-Haves are and what they should be.  Since I've got both kiddos in school full-time, I think that is doable.


The second part of the equation is Savings.  Savings should be at 20%.  Inevitably the question always come up of whether one should build their emergency fund first or pay off existing debts first.  There is a lot of debate in the financial community about this. The authors go the route of Dave Ramsey.  Save $1000 for emergencies first.  This should cover things like a broken washing machine or needing new tires. Then take any existing savings and your monthly 20% and throw it at your consumer debt until it is paid off.  If you end up using your $1000, replenish it with your 20% and get going on the debt again. Most people if they get really serious, and quit amassing any new debt, will pay things off faster than they imagined possible.  It takes a major commitment and focus on the end result though.


Once the debt is vanquished (love that word) the 20% should go to building up a larger emergency fund of 3-6  months Must-Have Expenses.  More if you want or are self-employed.  I think for Family V 9-12 months is a better goal.  The real estate market is still pretty topsy-turvy.  Better to be on the safe side.


After you have amassed your emergency fund it is time to diversify a bit.  10% to retirement, 5% to paying off a house if you have one and 5% towards your dreams, such as major vacations, kid's college funds, going back to school yourself, a Porche 911 Turbo, whatever floats your boat.

They do go into how to invest as well but I won't get into that here.  Like the rest of the book, it is simple as logical.



The last 30% is for Wants.  Wants are what make life worth living.  Wants are what keep you putting your 20% toward your future.  Wants are important and shouldn't be short-changed.  But Wants can't be anymore than 30%.  Wants are cable TV, DSL, clothes, music & karate lessons, electronics, jewelry, vacations, food over and above a basic necessity to live & stay healthy etc.  They may be so important you are tempted to call them Must-Haves, but if you would ultimately cut them if things got really tight, it's a Want.  Mr. Man's karate lessons are expensive and they are also very important to him and therefore to me.  They keep him fit, increase his self-esteem and teach him great values.  But if we had to, we could do without them for a while.  That makes them a Want.  


Some people are heavy on the Wants.  Some people are heavy on the Must-Haves.  Either way you are out of balance and need to do what it takes to get your finances back into alignment.


The most obvious thing about getting yourself back on track is to stop incurring ANY new debt.  Otherwise you may as well just forget it.  For me this is going to require going to using cash for our everyday expenditures.  I find swiping a card, even a debit card to be too convenient.  Usually I don't even know what the total was, I just swipe and go on my merry way.  By counting out the money and watching my stash dwindle I am forced to really thing about spending wisely.  They also recommend having some totally FREE money to quell arguments and give each person in the family some freedom.  It doesn't have to be much but it does have to be no questions asked money that isn't accounted for in the budget.  It goes without saying that it comes from your Wants category.  For R and I, we've agreed on $20 a week for each of us.  This is enough for lunch out or a pair of earrings but not so much that it will throw us off track.


If you are looking for common sense answers to how to handle your money, I highly recommend this book.  It pretty much has it all.  Like most couples, our biggest source of contention is money.  We are optimistic that following this program will address all of our concerns, thus ending the money arguments.  This will most certainly benefit the whole family and improve our marriage.  Can't go wrong there, no?


Read it.  Love it.  Live it.