Monday, July 14, 2008

Am I Going to be OK?

Most people would rather not think about money. They’d like to have more of it, but failing that, they would just like to know if they will be OK financially. Francis D’Andrade’s book Am I Going to be OK? deals with this emotional side of money.

Apart from a few commercials for some high-priced financial products, the book does a good job of explaining our fears. Unlike financial books that preach advice that just makes most people feel worse about how they handle their money, many readers will feel that the author understands their fears.

The book offers no real magic for a better financial life. If it’s possible for a book to listen to the reader without leaping to solutions, this book does it. D’Andrade steers readers to the standard sensible money strategy of spending less and saving more, but with a much gentler approach than you’ll find elsewhere. If other money books make you want to stick you head in the sand, then this might be the book for you.

The best part of the book is the discussion of ten mistaken beliefs that many of us share. Among these are:

The government will look after me.
My kids will look after me.
My kids will get a scholarship.
I’m going to win the lottery.

On the negative side, this book has a few paragraphs here and there that seem out of place. They remind me of the mandatory nude scene that adds nothing to the plot in some movies. These paragraphs speak positively about critical illness and disability insurance, life annuities, and investment wrap accounts.

I don’t have anything in particular against the insurance and annuities discussed, but they do pay salespeople nice commissions. If costs are reasonable, then critical illness and disability insurance and life annuities carefully matched to your needs can be good to have.

The investment wrap accounts mentioned are another matter altogether. Wrap accounts add an extra layer of fees on top of the already very high fees charged by most mutual funds. All told, some wrap accounts charge as much as 3%, which may not sound high until you realize that this gets charged on all your money every year. After 25 years, fees will eat up more than half of your money! Fees can be 10 times lower with some well-chosen index exchange-traded funds.

An amusing bit of logic was the explanation that because you can’t tickle yourself, you need a financial advisor. Huh? The author gets full marks for creativity, though.

Another section claimed that differences in product costs are slight and don’t matter. This is clearly not true. Sometimes the fee differences among financial products are huge. Only someone who collects such fees would advise people to ignore them.

The commercials for high priced financial products and services definitely dampened my enthusiasm for this book, but as long as the reader is wary, the rest of the book is worth a read.

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