Swedroe: Finance Is Important; So Is Life

Swedroe: Finance Is Important; So Is Life

Life goals and finance goals are intertwined.

Reviewed by: Larry Swedroe
Edited by: Larry Swedroe

Tim Maurer’s new personal finance book, “Simple Money,” isn’t just about how to improve your financial situation for the sake of making more money. While it does contain a helpful chapter on a simple, winning investment strategy that’s virtually guaranteed to outperform the vast majority of investors (both individual and institutional), the focus of the book is ultimately about how to live a more fulfilling life.

Maurer, my friend and colleague, does an outstanding job of providing a road map with simple, practical tools and techniques you can use to help achieve your most important financial and life goals.

The theme of “Simple Money” is that personal finance is more personal than it is finance. In the first chapter, titled “Enough,” Maurer explains the importance of defining wealth in a way that leads to a meaningful life, one that focuses not on accumulating the most wealth but rather on your values and life goals. He notes that, all too often, financial decisions are made without giving consideration to what truly motivates us—yet those motivations should serve as the foundation of your financial plan.

A Philosophy Of ‘Enough’
The reality is that most of our life goals aren’t simply financial goals, they are life goals that have financial implications. In other words, the book is really about getting you to focus on what Maurer refers to as the “intersection of money and life.” The book’s succeeding chapters center on providing a framework that will help you achieve “enough,” and how to do so in a manner that will reduce the stress in your life.

Maurer not only addresses issues such as maximizing your current cash flow, building emergency reserves, investing, planning for educational expenses and retirement, developing an estate plan that includes durable powers of attorney to address medical and financial matters and protecting your family with insurance against all types of risks, but he also explains how and why focusing on them will improve your life.

In the chapter on investing—in which he recommends building a globally diversified portfolio of equities using low-cost, passively managed funds (such as index funds)—Maurer points out: “The real point of investing is not actually to make money but to have a better life and facilitate Enough.”

However, he also observes that the primary objective of investing, at least in stocks, is to make money. On the other hand, he makes an important distinction when it comes to the primary objective of investing in bonds, which is to help you stay invested in stocks when the inevitable bear markets arrive.

And that leads to his conclusion to invest the fixed-income portion of your portfolio in only the safest bonds (such as Treasurys, FDIC-insured CDs and municipals rated AAA/AA). He writes: “The net effect should be that investing adds value to your life, in accordance with your priorities and in pursuit of your goals.”

Achieving Simplicity

If you find checklists helpful, “Simple Money” contains a number of them that provide the action steps necessary to make your life, well, simpler. And for those of you who determine you could benefit from professional advice, Maurer provides a guide that will help you to find the right kind of professional, one who will help you make the most both of your money and, more importantly, your life.

Whether you are first beginning your financial journey or you are well on your way but need help in developing a financial plan, I highly recommend “Simple Money.” I am confident its simple messages will resonate, as well as assist you on your path toward achieving your financial and—even more critically—your life goals.

Larry Swedroe is the director of research for The BAM Alliance, a community of more than 140 independent registered investment advisors throughout the country.

Larry Swedroe is a principal and the director of research for Buckingham Strategic Wealth, an independent member of the BAM Alliance. Previously, he was vice chairman of Prudential Home Mortgage.