Thursday, March 25, 2010

Book review: Stop Getting Ripped Off

So, I'm hosting book club tonight at my house, and as the host we appear to have a trend going where I have the last say on the book selection. Being the nerd that I am, this month I picked a financial literacy book for my group. All of us are pretty savvy ladies, so none of us "need" this book, but I heard good things about it before I picked it up, and it did teach me some nice tricks along the way. Here's the scoop.

Title: "Stop Getting Ripped Off: Why Consumers Get Screwed, and How You Can Always Get a Fair Deal"
Author: Bob Sullivan
Publication year: 2009
Now in paperback for $10.20 at Amazon


Why I liked this book:
  • It is well organized. Clearly this is going to resonate with me. There are three parts -- part 1, an overview; part 2 chapters about how you can "stop getting ripped off, one deal at a time," where each chapter focuses on a different aspect of our daily lives; part 3: how to implement your financial dreams by following the "pitfall-proof pyramid."

  • The book is filled with practical, clear advance. This is another huge plus for me. I love how-to books that are straight to the point. There is lots of information you can start implementing tomorrow.

  • The author's goals. Sullivan does not claim to have a perfect solution for everyone. This book is not about how to get rich quick. This is not even a book about how to get rich. Instead, he's trying to show how, in both big and small ways, we can all make sure that we're looking out for our financial selves. And you can pat yourself on the back for already doing so many of the strategies he outlines.

Some of the highlights:
Here's the wisdom Sullivan shares that I am happy to pass along. I have not applied this wisdom myself, but these practices may be adopted over here at some point.
  • Get an allowance checking account with no overdraft protection. This is his solution for anyone who shares a joint checking account. Sullivan recommends that there be one joint checking account from which you pay all the bills, and then each individual gets a certain amount of money each month in a separate account to spend as he or she chooses. Sullivan emphasizes the importance of making sure these accounts do not have overdraft protection, because then the possibility of high fees (even one time) defeats the purpose of using an account like this to avoid poor banking practices.
  • Get rid of cable. Growing up, it seemed like a few times a year my parents talked about the possibility of cutting cable because we were "poor," yet we always managed to keep this "necessity." Now cable seems like it's becoming less and less of a necessity. Case in point: "In 2009, complete episodes of nine in ten prime-time network-television shows and roughly 20 percent of cable shows were available online" (169). Most of us probably have friends who have cut cable -- I know I do. Check out CancelCable.com if you're interested in checking out this movement.
  • Raise your auto insurance deductible. Sullivan claims that raising it from "$200 to $1,000 will save you about 40 percent on the cost of comprehensive insurance" (186), and he believes in a little something he calls self-insurance, meaning you set aside money in an account (and I assume clearly labeled as well) that would cover the cost of your higher deductible if and when you need it.
  • Or you could straight up drop comprehensive and collision coverage. He says you should just be sure you have a savings account worth the value of your car so you could replace it. He is talking about those of us, like me, who have cars that aren't worth much anymore so that if  faced with the choice between a major, multi-thousand dollar repair, or a new car, we might opt for the new car (190).
  • You need life insurance when you have children. You've probably heard this before. I've heard it too, but I never really thought much more about it. Now I know about this Web site Sullivan suggests -- LifeHappens.org, which provides a tool for you to calculate how much insurance you should have should you die. (Can you imagine being a life insurance salesperson?) Also something I never thought of: the older you get, the less life insurance you need. It's totally intuitive now that I know it, but for some reason I always thought of it in reverse (as you get older, you're more likely to die, so you should need more insurance...WRONG!)
  • Find out what you're worth. As a teacher and government employee whose income is posted online for anyone to see, I always wonder about everyone else. What are they making? Here's a site that could at least fulfill my morbid curiosity: salary.com (simple, right?). So if you're looking to change careers you can get a realistic sense of what to expect, and if you're looking to negotiate a raise at your current job (except for us government employees) check it out.
  • Examine the annual fees associated with your investment accounts. I admit, here's an area where I am a bit of a financial idiot. All I know is that the numbers in this book are shocking when you see how much of your money can go to annual fees, and how in many cases if you have high-fee accounts you would be better off putting your money in a high-interest savings account (see pages 276-277).
There is also an entire chapter about paying for college. I shared it with my students. I think it made them depressed, but I am not sure. I hope it just made them realize that when they're the age of their hip journalism/English teacher, they would be really happy if they were debt-free like me. I hope they will listen.

Next up...a detailed look at how to tile (I know, I've been putting this longer post off, but it's been a busy week!)

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