Book Review - Living Rich for Less by Ellile Kay
Personal Finance author Ellie Kay has a new book out called Living Rich for Less - Create the Lifestyle You Want by Giving, Saving and Spending Smart. After reading one of her other books I was anxious to get my hands on Living Rich for Less and borrowed it from my library. While I found it to be a good book, I do question how realistic her plan is for most people.
The main principal of the book is The 10/10/80 Rule. According to Kay, The 10/10/80 Rule means that you give away the first 10 percent of your income save the second 10 percent of your income and live on the remaining 80 percent. I think this is great in theory, but realistically how many people can live on just 80 percent of their salary?
Don't get me wrong, I am all for tithing and sharing our income with those in need. But for most people giving 10 percent would be virtually impossible - if they even wanted to. We have all heard that we are supposed to be saving 10 percent of our income, but most of America can barely keep their head afloat and hardly saves anything at all. In fact recently Americans had a negative savings rate for the first time in a long time. Of course if you can manage to save 10 percent of your income, then you will probably be set for life as for as retirement savings go, and that would be very nice.
I guess one of the reasons I disagree with the plan is what she thinks should be a part of the 10 percent of savings. On page 153 Kay says this about the savings portion of her plan.
"Savings: 10 percent to savings accounts, 401k funding, Roth IRA, or other IRA investments, regular savings for upcoming bills (insurance, taxes, etc.) and emergencies."
If I were to include the amount we save each month for irregular expenses around the house and taxes and such then we would certainly be at the goal 10 percent. However, I don't really think those savings should be included because they are really already earmarked to be spent on something and are not being saved for our future.
Ellie Kay and her family dug themselves out of a lot of debt early in their marriage and used The 10/10/80 Rule to help them, and it did work for them. However I do question where debt repayment falls in her plan. She thinks that we should be budgeting 5 percent on education/miscellaneous things and this is where she includes debt repayment. I don't think that is nearly enough. Honestly when a person gets serious about paying off their debt I think they should stop saving money for the most part (as well as trimming other areas of the budget) and use that money to go towards debt repayment too.
Another principal Ellie Kay covers in Living Rich for Less is the R.I.C.H. principal, which she covers on pages 112-114. R stands for Redemption: "Claim financial redemption, and admit you have a problem." I stands for Instruction: "Submit yourself to wise instruction." C stands for commitment: "Absolutely commit to put any unexpected income toward debt repayment." and H stands for Hope: "Befriend a companion named Hope."
This is a good start to changing your life and working your way out of debt and on the path to Living Rich for Less. I guess I just disagree with some of Kay's numbers and think they wouldn't work for most people. Striving for her 10/10/80 Rule would still be a very good goal for people to work towards though. We should always try to improve where we are at and I do think Living Rich for Less will help you improve where you are at.
Kay does have a section at the beginning of the book call The Cha Ching Factor Index about how you can save $30,000 this year. While some of her ideas are goods one, many do not apply for me and wouldn't apply for most people. Take for instance that you can save $4644 per year by refinancing a mortgage from 9.28% interest to 5.48%. Well my mortgage is at 6.25% interest and it wouldn't make sense for me to refinance. Not to mention that many people don't even own a home. Or by following her tips in chapter 10 you can pay just $199 per person for a cruise and save $2500 per couple. That is assuming you were going to take a cruise to start with, which is assuming a lot of most people. So many of her savings tips wouldn't fit for most people, even though they are good tips.
I know I am being pretty critical of Living Rich for Less, but I was disappointed that her ideas didn't make more sense for most people in America (in my opinion). I am glad I read the book and if you like reading personal finance books then this is a new one out there for you to enjoy. I don't believe that someone can follow one person's entire plan completely, but I do feel like we can all learn something from lots of different people and come up with a plan that works the best for us. Reading Living Rich for Less will certainly give you some ideas to think about and hopefully incorporate into your plan.