Book Review – Yes, You can Get a Financial Life by Ben Stein and Phil DeMuth

Most people remember Ben Stein as the teacher in “Ferris Bueller’s Day Off” or from his show “Win Ben Stein’s Money.” However, he is also an accomplished economist, with a degree from Columbia and the valedictorian of Yale Law School. He worked in the White House in the 70s, and has written articles on finance for Barron’s and the Wall Street Journal.

Phil DeMuth was valedictorian of his class at the University of California, and has a master’s & doctorate degrees. He is a registered investment advisor and president of Conservative Wealth Management in Los Angeles. He has also written extensively for the Wall Street Journal and Barron’s.

This is the Fourth book in the author’s five part series on finances. In the previous three they showed how to use long-term trends to “time the market” in the long term (10 – 15 years +), how to set up an income producing portfolio in these low-yield times, and finally how baby-boomers can still retire even after the dotcom crashes, through using the right steps, savings and planning. This book is written more for millennials and Gen Xers, and discusses the steps and objectives individuals should be taking throughout their lives (their 20s, 30s, 40s….). The book is chock full of bits of knowledge and wisdom for specific points of your life, and is well worth reading for those just getting started.

The book starts off discussing the four parts of getting your financial life’s crises ironed out, which are no more than having a general idea of:

  1. How much predicable events will cost (marriage, house, car, etc.)
  2. How much you’re likely to earn at different stages of your life
  3. How much money to save and when
  4. Some grasp of when and how much to borrow

One of the key points of the book is the “life cycle” model of financial planning, where a person’s income starts out low, builds up, then plateaus, while their consumption level stays relatively flat. Thus, they’ll need to do some borrowing to start with (house, college, etc.) then pay it off as they peak, while saving for that period as they retire and their income drops. It is around this cycle that the book is based.

The book then goes into numerous chapters, focused around:

  • Your 20s (challenges, saving & investing in your 20s, housing for couples & singles, babies, etc.)
  • Your 30s (challenges, saving & investing in your 30s, insurance, career advice, etc.)
  • Your 40s (challenges, saving & investing in your 40s, being sinvle and 40)
  • Your 50s
  • Your 60s and beyond

Each of these chapters has detailed graphs/charts, tables for recommended savings rates, recommended portfolio allocations, and notes on personal purchases which are typical at that point of your lifeThe only critique I would make is that this is based around the standard “work till your 60” plan for life, which for many FIRE enthusiasts is too long. We prefer to accelerate our savings and become independent much earlier. Still, I think this book would be very valuable for folks just graduating (either High School or College), probably alongside Dave Ramsey’s book.

I would rate in 3.5 stars out of 5.


Mr. 39 months

Book Review – Yes, You can Still Retire Comfortably by Ben Stein and Phil Demuth

Most people remember Ben Stein as the teacher in “Ferris Bueller’s Day Off” or from his show “Win Ben Stein’s Money.” However, he is also an accomplished economist, with a degree from Columbia and the valedictorian of Yale Law School. He worked in the White House in the 70s, and has written articles on finance for Barron’s and the Wall Street Journal.

Phil DeMuth was valedictorian of his class at the University of California, and has a master’s & doctorate degrees. He is a registered investment advisor and president of Conservative Wealth Management in Los Angeles. He has also written extensively for the Wall Street Journal and Barron’s.


This is the third book in the author’s five part series on finances. In their first, they wrote about using certain metrics to be able to “time the market” in the long term (10 – 15 years +). In the second book, they discussed the steps to create an income producing portfolio, through the use of bonds, dividend stocks and REITs. This book, written in 2005, is mostly addressed to the baby-boom generation, who had recently seen their retirement money damaged in the dotcom meltdown. The book’s concept was that, with the right steps, savings and planning, and individual could still retire comfortably.

The book starts off with some of the basic rules for retirement (Maximize your abilities, start saving early, don’t spend more than you earn, etc.) and then flows into retirement planning by decade – what you should be doing in your teens, 20s, 30s, etc. It is all sound advice, and falls in line with other things the authors have written (like Ben Stein’s “how to screw up your life” book). It finishes its first part by discussing the coming baby-boomer retirement crisis. As many of you know, a lot of boomers have not saved anything like what they will need for retirement. They only really started to do it in the 00s and this decade. That is probably why the 2007-2008 meltdown go so much press – it hurt the boomers badly.

The second part of the book goes into topics like how much you will need, how to setup a savings plan, and at what rate you will need to get your retirement money income. The charts in chapters 3 & 4 are priceless, as they show, based on typical returns, what you’ll need to save at whatever point you are at (5, 10, 15 years from retirement) and what your overall nest egg should be, based on projected lifetimes. The second section then talks about Monte Carlo simulations (to test your plan), income investing, and how to draw down your funds over your retirement. This is the heart of the book, and its best section. The only issue I have (and it’s a personal one) is that he relies a lot on bonds (his portfolio is 50% bonds, 50% stocks). In the 80s and 90s, bonds had high rates, and there were corporate bonds at 6% and 7% in the late 90s. Based on his knowledge there, I think he believed the bonds would return to that – but in our current low interest rate environment, they are only coming in around 3% – 4%.

The third section of the book discusses what to do if you haven’t got enough. It’s a bad spot to be in, but there are some alternatives:

  • Immediate annuities (to guard against outliving your money)
  • Relocation to a less expensive area
  • Reverse mortgages

The book closes with “25 big truths of retirement planning” another list of pearls of wisdom from the authors.

This was a good one, and I refer back to it occasionally to see if I am “on track” based on his numbers.


I would rate in 3.5 stars out of 5.


Mr. 39 months

Book Review – Yes, You can be a Successful Income Investor by Ben Stein and Phil DeMuth

Most people remember Ben Stein as the teacher in “Ferris Bueller’s Day Off” or from his show “Win Ben Stein’s Money.” However, he is also an accomplished economist, with a degree from Columbia and the valedictorian of Yale Law School. He worked in the White House in the 70s, and has written articles on finance for Barron’s and the Wall Street Journal.

Phil DeMuth was valedictorian of his class at the University of California, and has a master’s & doctorate degrees. He is a registered investment advisor and president of Conservative Wealth Management in Los Angeles. He has also written extensively for the Wall Street Journal and Barron’s.

This is the second book in the author’s five part series on finances. In their first, they wrote about using certain metrics to be able to “time the market” in the long term (10 – 15 years +). In this book, they talk about how to set up an income portfolio that will pay you dividends – something often used by folks for their retirement. There is also a school of investing that says that the only real stocks you can count on are ones generating dividends – all the other “growth” stocks are just hot stocks that can easily come crashing down.

Written in 2005, the book discusses how, in reaction to the stock meltdown, the fed dramatically dropped rates in the US. The risk-free T-bill of 2000 was 6.2 percent, while in 2005, it was at 1.7 percent. This affected a lot of folks looking for income generating investments, like dividend stocks, bonds, annuities, etc. The book starts out explaining how the chase for growth can lead to major stock drops (like 2000) – which can be very painful depending on the timing. Their alternative is income investing, where you put money in the market when it is too expensive. Their idea is not to buy into growth, but to buy into investments that produce a regular yield.

The key measurement for them is yield – both yield from stocks, and yield from bonds. The caution that you should get your yield information from the same source for all your investments (since some calculate yield a little differently) so that you are always comparing apples-to-apples. They also caution that some of the info in the book is time sensitive (like from 2005?) so do the analysis yourself to get up-to-date information.

The book spends several chapters discussing Bonds (a topic that many FIRE folks don’t spend a lot of time on).It discusses the risks and rewards, how to measure yield, essential bonds for fixed-income investors, and then higher yielding bonds. These chapters alone are a real benefit for folks, because most people are poorly educated on the bond market.

The book then moves into income producing stocks, including preferred stocks. Much of the info here has been covered before, but the emphasis on yield and dividends, over growth, is the key concept.

The book then covers Real Estate Investment Trusts (REITs) which are another key source of income. REITs are a special class of companies, dedicated to real estate investments. Because they have to distribute 90% of their earnings as dividends each year, they benefit from certain tax codes write offs. Since they distribute so much of their earnings via dividends, they are income producing machines, and a key part of anyone’s income portfolio.

The book closes by working up some sample income portfolios:

  1. A very simple one, consisting of four index funds (20% Vanguard REITs, 20% IShares Stock select dividend, 30% Vanguard Inflation protected securities and 30% Vanguard short-term bonds). Four funds, low expenses, no fuss. In 2005, this generated a 3.8% annual yield. In 2016, it was around 2.6%.
  2. A slightly more aggressive allocation (20 different REITs, 10 dividend stock, 10% in IShares, 30% in Vanguard inflation protected securities, and 30% in Vanguard total bond market). This increased the yield in 2005 to 4.3%
  3. A very aggressive allocation (20% in leveraged REIT fund, 20% in leveraged dividend funds, 30% in Inflation-protected securities and 30% in PIMCO corporate income fund – to get some emerging markets yield). This gets the yield in 2005 up to 6.9%, even with the bump up in expenses.

The last thing they note is tax strategies. Specifically, tax sheltered accounts (401Ks, IRAs, etc.) is where you want to stock your Treasury Inflation-Protected securities. It helps avoid having to pay taxes on income that is one of the major hassles of TIPs bonds. Also consider putting REITs in your tax advantage accounts, for the same reason.

Overall, I found the book to be interesting, and I’ve used my father’s remainder IRA to setup something similar. It has produced some good yield for me (around 3.42%).

I would rate in 3.5 stars out of 5.

Mr. 39 months

Book Review – Yes you can time the market! by Ben Stein and Phil DeMuth

Most people remember Ben Stein as the teacher in “Ferris Bueller’s Day Off” or from his show “Win Ben Stein’s Money.” However, he is also an accomplished economist, with a degree from Columbia and the valedictorian of Yale Law School. He worked in the White House in the 70s, and has written articles on finance for Barron’s and the Wall Street Journal.

Phil DeMuth was valedictorian of his class at the University of California, and has a masters & doctorate degrees. He is a registered investment advisor and president of Conservative Wealth Management in Los Angeles. He has also written extensively for the Wall Street Journal and Barron’s.

The book was written in 2003, after the dot-com crash. It came out of a series of lunches and bike rides in Santa Monica from 1997 to 2000, where the two argued/discussed how the market appeared to be overpriced. However, since conventional wisdom was that you couldn’t “time the market” what were you to do? Market timing “had been the province of short-term fortune-telling cranks” and has had a justified bad reputation in investing circles. What the two authors wondered (and set out to research) was that, in the long-term (10+ years) were their valuation metrics that could be used to determine when to buy, and when not to buy, stock funds. Note that they were using stock mutual funds (S&P 500 Index) for your purchasing decision here, because individual stock analysis is something completely different.

The authors then set out to look at various metrics for determining the time to purchase, compared them, provided their strengths and weaknesses, and then judged them over various time periods (5, 10 and 15 years). They also provided methods for the reader to do similar analysis in the ongoing years, so you could continue to use the methods. The list of metrics they came up with were:

  • Price vs 15-year moving average of price
  • Price-to-earnings ratio (PE) vs 15-year moving average
  • Dividend yield vs 15-year moving average
  • Fundamental value (can’t use this now, their source no longer provides the data)
  • AAA bond yield vs stock “yield”
  • Price-to-Cash Flow and Price-to-Sales (can’t use this now, their source no longer provides the data)

Each of these metrics provide a point where the investor should start purchasing stocks, or should stop purchasing (but continue to let the stocks sit and reinvest the dividends). Again, this is long-term timing, so there is nothing in here to show when to exit the market completely and put it in bonds or your bank.

They end by showing that, by combining each of these metrics, rather than using just one, and using that to determine your time to purchase, you can enjoy even greater stock.

Price: This metric is just a comparison of the current S&P 500 (adjusted for inflation) versus the 15-year moving average. When the current price is above the 15-year average, you should stop purchasing and let your stocks ride. When it dips below, you can begin purchasing again. As you would expect, since it has been climbing steadily for many years, this one doesn’t provide a signal to purchase as much. In fact, using this metric, it suggests you shouldn’t have been purchasing from 1985 to 2008 (one of the great run ups of stocks). The only time it wanted you to buy recently was from 2009 – 2012.


Price chart

Price-to-Earnings: This one seems to be a little more accurate, in my opinion. Many folks have used the P/E ratio for their investing decisions. Here you are measuring the current S&P500 P/E ratio versus the 15-year moving average. Again, when its above the average, you shouldn’t buy, when it is below the average, you should buy.

PE chart

Again, if you look at the chart, it recommends not continuing to buy in 1985, and only starting back up again in 2004. The book provides documentation to show that, as of 2003, this method rewarded the investor better than continuing to purchase during the great stock run up. Perhaps if t went past 2003 (when the book was written) it wouldn’t be valid. Something for me to check out in the future.

Dividend Yield: Companies can elect to distribute some of their excess earnings to their shareholders, and these take the form of dividends. Nowadays, companies don’t like to give out dividends – their CEOs think they have a better use of the earnings to grow the business. In the book, they track the S&P500’s dividend yield versus the 15-year moving average. When the current yield is below the 15-year average, the assumption is the stocks are overpriced, and you should not be purchasing new stocks (but you should continue to reinvest the dividends). Again, based on this, the book shows how, over a long period (15-20 years) the investor beat out the others (in the case of 20 years, it was almost a 50% increase in overall returns). This is also the third metric in a row which says to stop buying new stocks n 1985 (?)

Dividend yield chart

Earnings Yield vs AAA Corporate Bond: In this fourth and final metric,  the book compares the yield of a AAA corporate bond to the S&P500 Earnings Yield (you get this by dividing 1 by the P/E ratio). The earning’s yield has always been a short-hand way to compare bonds to stocks. The idea here is that if someone can earn more “yield” from a bond than a stock, they should invest in bonds. Except for a dip between 2008-2010, this metric was also suggesting investing in stocks for the past several years.

Earnings vs bonds

The book concludes with an analysis of how to use all the metrics together to significantly increase your returns. It compares using 1, 2, 3 or 4 of the metrics together, and their returns over 5, 10, 15 and 20 years, as well as comparing them with other strategies (asset allocation, other investments like real estate, etc.) In the end, this long-range market timing was shown to be more successful.

However, the authors note that this strategy is not for the faint of heart. It is a true contrarian strategy, where people will be purchasing stocks when there is “blood in the streets” and refusing to buy, when the market is going up like a rocket. It is also, very much, a long-term strategy, where you are not looking to capitalize on the investments for 15-20 years.


By the way, as of August 1, 2017, three of the four metrics have turned to “don’t buy” additional stocks. Only the S&P500 earnings yield vs bond yield still is pointing towards buying more, and even that is pretty close (S&P500 yield was 4.05%, AAA bonds were 3.75%). Also remember that this metric does not say to sell your stocks, just don’t buy any new ones (and continue to reinvest your dividends).

Overall, I liked the book, and may keep the metrics in mind for my “fun money” accounts. For my 401K/IRAs I plan on sticking with my asset allocation strategy.

I give it 3.5 stars out of 5


Mr. 39 Months

Book Review – The Little Book of Value Investing by Chris Browne

For those of you who have read some of my previous comments on investing, you know that I have a “fun money” fund which I use to invest in individual stocks. You also know that, for the most part, I haven’t been able to keep up with my simple Index fund investments in my IRAs and 401Ks. Imagine that, a stock picker who doesn’t do as well as the Index, who would have thought?

However, the purpose of this “fun money” is for me to learn about investing, stock picking, and what works (and what doesn’t). To do this, I’ve taken to doing some reading, looking at articles on the net, and planning my future purchases.  In that area, I took the opportunity to review the Little Book of Value Investing by Chris Browne. The book seeks to go through the concepts for value investing in a short amount of text, but still provide sufficient “value.”

The book starts off with a couple of chapters going over the basics of value investing, basically discussing the concept of “intrinsic value” for a stock (what it is truly worth, without hype or negative news). It provides some basic history of the concept, based on Benjamin Graham’s initial work, and the author displays his “credentials” with it, due to his father’s company being the firm that did most of Graham’s trading (they were located in the same building).

The book then dives into the various places to seek value stocks (large cap, small cap, international, etc.) The author discusses his early work with his father’s firm, where he searched through documents the old fashion way, before the advent of computers. This enabled them to find good bargains, because there weren’t many firms willing to do the deep research necessary to find the bargains. For example, back in the day, the firm was able to find a large number of companies selling for less than the cash the company had available!

Today, with modern computers and data, it isn’t as easy to find bargains like that, but it also is easier to get a list of companies with some of the criteria for value, and then do additional research to find the one you want. The book’s final chapters go through the process of how to do that:

  1. Create list of Candidate stocks
    • Price to book value below 2/3
    • Price to earnings
    • Price to net current assets
    • Buying of shares by insiders
    • Visit competitors data
  1. Determine why are they cheap
    • Too much debt?
    • Didn’t make earnings estimate?
    • Cyclical?
    • Competition?
    • Obsolescence?
  1. Review the Balance Sheet (especially trend over last 5-10 years)
    • Current assets 2X current liabilities
    • Long term assets vs. liabilities – is ratio increasing over time?
    • Debt-to-equity ratio: less than 1 (or company being funded by debt) – compare with other companies in the industry
  1. Review the income statement (again looking at trends
    • Revenue growth
    • Expense growth in line or less than revenue growth?
    • Gross profit percentage (revenue – expenses / revenue). Is it growing?
    • Earnings per share, and diluted earnings per share (which take into account stock options). Trend?
    • Look at trends over last 5-10 years. Here is where you are going to find how the company is doing
    • Return on capital ratio & trend (should be rising)
    • Net profit margin & trend (should be rising)
  1. Research other factors of company (products & their outlook, Can it be as profitable as it used to be, One time expense that affected price, unprofitable operations that can be shed, competitors, etc.)

Finally, the book goes into one of the key parts of value investing – the fact that it is a Marathon, not a sprint. To invest for value means you are going to purchase a stock that is worth more than it is currently selling for – and then wait for the market to realize that fact. It may take a month, a year, or several years. To be a value investor is to be  a patient investor. If you don’t have the patience, then maybe this strategy is not for you.


Of course, that is something that I’m struggling with.


Mr. 39 Months

Book Review – The Millionaire Next Door by Tom Stanley and William Danko

I have a confession to make. I love this book. I really love this book. I have it in soft cover, hardback, and as a book-on-CD. I always go back and re-read/re-listen to it once a year. If I would say I aspire to anything, it would be a representative of the people is this wonderful tome. I think everyone should read it, and the world would be a better place if more people followed the lessons in it, instead of just consuming like crazy.

I picked the softcover of this up in 1999 on the remainder shelf of a Border’s bookstore. Read through it while Mrs. 39 months and I enjoy coffee at their snack area. Couldn’t stop reading it, and eventually bought it before we left. It truly was the “kick in the pants” that I needed to start getting serious about living frugally and saving money. Before that, I was only doing the minimal (only put the matching $ in my 401K, no IRA, etc.). After going through this, my savings went into overdrive (see my April 2017 post “A little context” for my timeline).

Written in 1996, the book covers information on Millionaires that the two PhD’s have collected over the previous 20 years. When it first came out, the data surprised a tremendous number of people, and dramatically altered how many companies marketed to the wealthy. For the most part, the lessons learned here, and the millionaires (and they’re habits) remain valid today.

The typical millionaire, according to their research:

  • 57 years old, married, with 3 kids.
  • About 2/3 of those working are self-employed, in “dull-normal” businesses (contractors, pest controllers, rice farmers, etc.)
  • Median household net worth around $1.6M
  • About half have occupied the same house for over 20 years
  • Live below their means (inexpensive suites, drive older cars, etc.)
  • Invest nearly 20 percent of household realized income, on average

The book also gives the reader a “goalpost” where they can see how they measure up. Take your annual realized income, multiply by your age, and divide by 10 (example, $55K a year for you and your wife, 34 years old = $55,000 * 34 / 10 = your net worth should be $187,000 or more. To be considered “wealthy” you should be twice that (i.e. $374,000)

The book then breaks down the seven factors that they believe contribute to individuals being able to accumulate over a million dollars in their lifetimes. Their chapters go into details on each of these seven factors.

  1. They live well below their means (Frugal, Frugal, Frugal!)
  2. They allocate their time, energy, and money efficiently, in ways conducive to building wealth
  3. The believe that financial independence is more important than displaying high social status (they don’t try to keep up with the joneses)
  4. Their parents did not provide them economic outpatient care (i.e. no money from Mom & Dad, or major inheritance)
  5. Their adult children are economically self-sufficient
  6. They are proficient in targeting market opportunities
  7. The chose the right occupation

The biggest takeaway I got from the book was the importance of being frugal. The book classifies it in football terms. If someone makes a lot of money at their job, they play good “offense”. But if they spend it all, they are playing lousy “defense.” As it is often said in sports, defense wins championships – or frugality makes you a Millionaire Next Door.

I would rate it 5 out of 5, because I just love this book.



Book review – The Total Money Makeover by Dave Ramsey

This classic book, written in 2003 and then updated after the crash of 2008/2009, often gets disrespected amongst the FIRE community. Many note that the math doesn’t exactly add up on his investment advice, or that his debt snowball isn’t the most efficient way to get rid of debt (see below). My opinion is that the book isn’t written for folks who are in the midst of following the FIRE philosophy; instead, it is written for those who haven’t embraced it yet, and it shows them why many of the tenants we all believe in (eliminate debt, invest, budget, plan, etc.) will help pull folks out of a money spiral and set them on the path to a debt-free, happy life.

Throughout the book are testimonials and stories of various people who started out in bad shape, but are using Dave’s steps to build a better life. Chances are you will see someone who is similar in one of them.

The first chapter of the book details Dave’s personal journey. Many folks don’t know that he and his family went bankrupt about 30 years ago. While he doesn’t go into too many details, it appears he got overextended and couldn’t pay his bills. The timing of it (late 80’s) makes me think it was due to real estate investing – changes in the laws in the late 80’s killed a lot of real estate investors. He does take responsibility for screwing it all up, and having to dig himself out and learn some painful lessons. He relates that he felt he had let his wife and family down, and wasn’t doing his job as a provider.

The next four chapters, he uses to explode a lot of money “myths,” and many of them have been shared on the FIRE blogs for years:

  • College graduates graduating not just with student loan, but with credit card debt
  • Used cars paid for in cash vs. new cars paid with a car loan
  • Get rich quick schemes
  • Cash value life insurance vs Term
  • Keeping up with the Joneses

He then spends the next seven chapters going through his 7-point plan for digging yourself out of the hole and creating a successful financial life.

  1. Create a $1,000 emergency fund. Folks often get into trouble because they don’t have ready cash to deal with life’s emergencys (dryer breaks, car repair, etc.). Dave says do whatever you need to (sell items, 2nd job, etc.) and build up a $1,000 emergency fund. If you have to use it for an emergency (sale at the shoe store is not an emergency) then stop subsequent steps till you rebuild the emergency fund
  2. Get your credit paid off
    1. Cut up all your credit cards (or if you have to have one, freeze it in a block of ice so it will take a while to get it).
    2. Now that you won’t be adding to your debts, figure out all your debt, and rank order them in quantity owed, from small to large. Example would be $1,800 in credit cards, $9,000 for car loan, $30,000 in student loan debt, and $150,000 for home.
    3. Figure out what the minimal payments are for all of them, and make sure you pay the minimum for all of them regularly from now on. If necessary, sell items (car, exercise equipment, etc.) or take a 2nd job to help with this
    4. Now take any excess money and put all of it to paying down your smallest bill. Not the one with the highest interest rate, but the smallest amount owed. Note: this is where many FIRE folks have issue with Dave. If you look at the numbers, the smarter play is to pay down the one with the highest interest rate. Psychologically, Dave wants people to get early wins, so they pay off the smaller ones first, and start eliminating debt accounts as soon as possible.
    5. Once you get rid of a debt account (i.e. the first credit card) take that money and immediately apply it to the next debt, along with that debt’s minimum payment. This starts Dave’s “Debt Snowball” where you keep feeding the money into each account as you close them up. This accelerates over time and gets the debt paid off. Again, this has shown to be successful with normal folks, though FIRE people may not choose to follow, because they are already paying off debts.
  3. Finish the emergency Fund. As you get your debts paid off, you eventually may end up with only the home loan left. Rather than going whole hog paying that down, Dave suggests you build your emergency fund up higher with the money you used to pay down your credit card, car and other loan payments. He typically recommends 3-6 months in the fund, in something that is fairly easy to liquidate (savings account, short term notes/bonds, etc.)
  4. Maximize retirement spending. Now with debt eliminated (except for home) and emergency fund fully funded, you want to maximize any retirement spending you have. Max out the 401K, and any IRA you can (in US). Dave suggestion, like so many others, is a minimum of 15 percent should go into saving for retirement, and he does emphasize  Index funds. Again, many FIRE folks are saving significantly more than that (30%, 45%, 55%, etc.). Again, the book is written more for folks just starting on the journey.
  5. College funding for the kids. An important item of note here. Make sure you are fully funding your own retirement before you begin saving for kid’s college. If worse comes to worse, the kids can pay for their own, but you need to save for retirement now. Dave isn’t a fan of student loans, he wants folks to pay cash for college, and/or have the kids work jobs to pay for it. He hates having folks graduate with a mountain of debt hanging over their heads
  6. Pay off the home mortgage: If everything else is funded sufficiently, then put extra money towards the home mortgage to pay that off and become truly debt free. One thing most FIRE folks can agree with Dave Ramsey on is that, when you are debt free, it is a truly liberating experience! It also dramatically increases your chances of retiring early.
  7. Build wealth like crazy: Here is the final step on the journey, and the one most in line with FIRE folks. If you have no debt, are fully funding and investing for retirement, then push additional funds into investments, build them up, and enjoy life. Which is what many of us are either doing or planning to do.

While I don’t think this book is good for folks who are already on their financial independence journey, I do believe its good for folks who are just starting, or as a gift from one of us to explain to others how to get started on their own move towards independence.

I would rate it 3.5 out of 5, mostly because it doesn’t apply as much to FIRE folks.



Book Review – Work Less, Live More by Bob Clyatt

Bob Clyatt wrote this book in 2007 to detail his journey through early retirement (at age 42) back to semi-retirement. His definition of “semi-retirement” seems to be in line with a lot of FIRE writers – a part time or temp position that allows you to earn additional hours performing work that you generally enjoy. He is another individual who achieved financial independence, but after retiring early, he found that his worry about money and his desires to stay involved led him back to the work world – but only partially.


The books starts out with working on the “whys” of early/semi-retirement (stale work, new ideas, etc.) and then goes into how to prepare for it. He covers some of the difficult steps of moving from work to semi-retirement. A significant portion of the book is dedicated to setting your spending plan and living beneath your means (determining annual spending, retiring outside the US, etc.)


He then goes into investing strategies for the semi-retired, including portfolio theory, rational investing and rebalancing. He provides concrete examples of various portfolios, based on the individuals he interviewed. He also discusses the 4% safe withdrawal rate, and provides backup for the data and results.


Finally, he goes through other aspects of early/semi-retirement. He talks about the advantages of part-time/temp work, volunteer work, health care, etc. In the end, he urges everyone to take simple steps to make their life well-lived.


One of the best parts of the books  are the numerous resources, links and web pages  for the various topics covered. It is here where the  book really proves its value, and it becomes a good read for those of us seeking financial independence and an early or semi-retirement.

Rating 4 stars out of 5

Financial Independence Reading List

Here are the books (physical and electronic) that I’ve managed to accumulate over the last 15 years, as I’ve made my way towards Financial Independence.

In the months ahead I hope to be able to give book reviews on them and other books, so you can have some idea of their potential use for you.

Area Title Author
Business Street Smarts Brody and Burlingham
Business The $100 Startup Chris Guillebeau
Financial Planning Fast Forward MBA in Financial Planning Eugene McCarthy
Financial Planning I will teach you to be Rich Ramit Sethi
Financial Planning Multiple Streams of Income Robert Allen
Financial Planning The fast forward MBA in Finance John Tracy
Financial Planning The Simple Dollar Trent Hamm
Financial Planning The Total Money Makeover Dave Ramsey
Financial Planning Your Money: The missing Manual J.D. Roth
Frugality Living Large in our Little House Kerri Fivecoat-Campbell
Frugality Scratch Beginnings Adam Shepard
Frugality The Autobiography of Benjamin Franklin Benjamin Franklin
Frugality The Millionaire Next Door Stanley and Danko
Investments A Random walk down Wall Street Buron Malkiel
Investments Fail-Safe Investing Harry Browne
Investments Safe Money in Tough Times Jonathon Pond
Investments The Intelligent Investor Benjamin Graham
Investments The little book of Value Investing Christopher Browne
Investments Value Investing for Dummies Janey Haley
Investments Yes, you can be a successful Income Investor Ben Stein and Phil DeMuth
Investments Yes, you can get a financial life Ben Stein and Phil DeMuth
Investments Yes, you can supercahrge your Portfolio Ben Stein and Phil DeMuth
Philosophy A place of my own Michael Pollan
Philosophy Chop Wood, Carry Water Rick Fields
Philosophy How to win friends and Influence People Dale Carnegie
Philosophy Life 101 Peter Wallace
Philosophy Shop Class as Soulcraft Matthew Crawford
Philosophy The Four Hour Workweek Tim Ferriss
Philosophy The Right Way to Hire Financial Help Charles Jaffe
Philosophy Think and Grow Rich Napoleon Hill
Philosophy What color is your Parachute Richard Bolles
Retirement Retire Early and Live Well Gillette Edmunds
Retirement The WSJ Complete Retirement Guidebook Ruffenach & Greene
Retirement Work Less, Live More Bob Clyatt
Retirement Yes, you can still retire comfortably Ben Stein and Phil DeMuth



Book Review – Retire Early and Live Well by Gillette Edmunds

This book could be classified as one of the earliest FIRE books I have seen. Written in 1999 (right before the dot com crash), the author details how he retired from financial journalism in 1981 at the age of 29, with a wife, two kids, and $500K in investments. In his first year, he suffered through a serious market downturn, and then the “flash crash” of 1987. Still he and his family were able to survive and prosper, and then participate in the great investment boom of the 80’s and 90’s. When he wrote the book in 1999, he had managed to triple his investments while living off them.


The first part of the book covers how to determine if you can retire today. He goes through the process of determining your current living standard, tax multipliers, future spending and debt. He provides a chapter on the issues that might pop up with an early retirement (emotional issues, fee based investment advisors, life expectancy, etc.) In the end, he provides a formula for determining whether you can retire now, or how much more you need to save before you can, including suggestions on speeding up the process. It’s a good first start.


The second part of the book assumes you are ready to retire early, and works on how to set up your investments to supply you with the funds you need for the long term. He doesn’t assume a “4% rule” (it may not have been completely accepted in 1999) so his process is more along the lines of:

  • You need $60,000/yr. to live, including taxes
  • You have $1,000,000 in investments
  • You assume a 3% inflation rate
  • Thus you need investments that make 9% return historically (6% for your $60,000/yr. plus 3% to offset inflation)
  • Design your asset mix to make an average of 9%


This is a key plus for this book versus many other investment manuals. Most information available concentrates on the “accumulation” phase of life, where you are building your wealth. Very few cover what to do once you have achieved financial independence and just want to live off it.


Mr. Edmunds then takes the time to explain each of the asset classes, their strengths and weaknesses, and how they fit in with a retirement portfolio. One of the more interesting points he has in when talking about real estate. For most folks, they think of getting real estate with no money down or with 20% down payment at most – using leverage to maximize gains. What the book points out, though, is that you are now retired and don’t need to increase wealth; you need to generate cash flow. Thus, Mr. Edmunds suggests purchasing real estate with 50% down and 50% leverage, so that the property generates a good 10%+ case flow from day 1 (instead of waiting years). This fly’s in the face of current real estate planning, but it does have merit!


Edmund suggests you figure out the investment return you need, and then create a portfolio of 3-5 different asset classes that don’t move in sync with each other (ex. US Bonds and foreign stocks often vary year to year in returns). He provided what the average returns were for each of these asset classes are, based on the longest studies he had available at that time (1999). He does caution not to use the returns from 1984-1999 as he recognized they were an anomaly.


In the final part of the book, Edmunds helps you design your retirement portfolio. Here is his chart and a corresponding list of Vanguard Index funds and their returns over the last ten years (in case you want to do comparisons). You will note to start that his returns are higher for most items vs the last ten years (especially for bonds):

No Description Book Return 10yr return Vanguard
1 Emerging Markets 14% 2.42% VEMAX
2 US Small Company 12% 8.01% VSMAX
3 US Large Company 10% 7.30% VLCAX
4 Foreign Company 10% 5.68% VTIAX 5 year
5 US Real Estate 10% 5.00% VGSLX
6 US Oil & Gas 8% 1.26% VGENX
7 Corporate Bond 7% 5.75% VICSX As of 3/2010
8 Foreign Bond 7% 4.50% VTIAX as of 11/2010
9 Treasury Bond 6% 6.79% VLGSX as of 3/2010
10 Municipal Bond 5% 2.59% VTEAX as of 8/2015
11 Money Market/CDs 4% 0.76% VMMXX
12 Treasury Bills 3% 0.68% VMFXX
13 Gold 3% -5.62% VGPMX



Using his format, if you wanted to get a 9% return for the situation above, you could go with:

  • 40% Large Company stocks @10% return = 4%
  • 35% Foreign Company stocks @10% return = 3.5%
  • 25% Treasury Bonds @6% return = 1.5%
  • Total of 9% return, on average


I think the process has merit, but I’d like to see more studies post-1999 on long-term returns.


The epilogue of the book is possibly the most useful part for those of us retiring early. In it, Mr. Edmunds details his story and “How to live through a crash without putting a bullet through your head.” He had many ups and downs, made some mistakes, but eventually came out alright (even today, he is doing well, 35 years after retiring at 29). He talks about steps to take when the market is crashing, life planning for after retirement, and what lessons he has learned. If nothing else, look at it for this chapter.


Overall, I think it is an excellent book, though some of the percentages might be dated. Grade 4 stars out of 5


Mr. 39 months