Review: The Cure for Money Madness
[UPDATE: An interview with the author can be found here.]
General overview:
Spencer Sherman is a financial advisor who underwent a transformation early in his career that amounted to somewhat of a revelation. This book is a product of that, intending to convey your own transformation in how you view money.
He refers to common fears and behavior around money as “Money Madness.” He goes through several steps in allowing the reader to analyze their own financial upbringing where he ultimately wants to reform the reader and have them eliminate debt, stop over spending, resolve disputes with significant others, and basically end the worrying that so many of us do about money.
In addition to a battery of self quizzes, he does provide some level of advice in what we should be doing for long term investments which will help in dissolving the angst that we feel. His recommendation is the Rainbow Portfolio which has a healthy amount of diversification and basically encompasses the wide range of financial vehicles and products while limiting the amount of risk exposure. It’s a good guide for a basic, automatic long term investor who would like to “fire-and-forget” and leaves the investors portfolio on autopilot, which isn’t necessarily a bad thing!
Excerpt:
If you had put $10,000 into the equity portion of the Rainbow Portfolio in 1973, you would have earned $920,180 by December 31, 2007. That’s more than twice as much as the S&P 500 index and more than three times as much as the average stock fund.
Pros:
Sherman does a really nice job of presenting the reasoning behind how we think about money and presents a few ways of going about reining in the monster we have inside ourselves in order to get ahead. This is a major point that everyone should reflect on and he talks about some of the ways to do this. From the book, “[…] The result is that money madness impairs our income. It undermines our net worth. It deprives us of joy-not just joy in the wealth we have in life, but in the life we are living.”
As a retired science major in college, I also enjoyed his insight into neuroeconomics which is the study of brain activity that takes place when we make economic choices. Neuroeconomists are today imaging the brain and mapping brain waves to monitor what happens physiologically when emotional responses over power rational thinking in financial decision making.
I can relate to this, and I think many of you can as well. There are times when I have felt a strange compulsion to purchase something I don’t need from time to time and I have to seriously talk myself out of it. Some of it might be a simple path where it is something that goes towards things I enjoy while other times it is simply because sometimes spending money quenches some strange thirst. Frank is really good at being logical in making purchases and its one of the reasons I am proud to work on things like this with him. I am able to talk to him before making purchases and it helps quite a bit to rationalize the best course of action. We should all take the time discuss with our friends and family that exhibit this sort of support and remember that it is realizing when someone make sense that we should come back to them and lean on them when deep down you know that what you are about to buy is unnecessary. I am not saying that you should always go to the naysayer but keep a short list of those that have a healthy amount of rationality in what they buy. Being open with your spouse is also key in this.
Cons:
One major gripe I have with this book is that I feel that there are far too many self tests and places to make notes. At times it feels like a Cosmo where you take a quiz to see where you stand on a particular subject. A few of these that are well done would be fine but this book seems full of them. At one point I remembered making a note in the margin asking myself if this was all filler to make the book seem longer or more in-depth then it really was. Sherman also selects a certain topic and after tackling it he returns to it over and over and over again. I would like to have felt that the author would trust me as a reader that I could hold the thesis of the book for a little while he navigates through some important issues.
The tone of the book does not seem to come from a great deal of experience in writing and by that I mean that there is a fair amount of language that comes across as too conversational. I am looking for data and information and insight, and trying to convey that in a tone where you have to sort of know the person and their mannerisms, makes the presentation fall a little flat.
Summary:
Its hard to come right out and recommend this book but I would also say that you shouldn’t avoid it either. There is a fair amount that has merit, but the presentation is some labored. If you don’t mind a little hand holding and are interested in some self reflection, then take a look at this book.
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