Book Review: “All Your Worth” by Elizabeth Warren

I’ve heard wonderful things about Elizabeth Warren and I was intrigued by the concept of this personal financial husbandry book. The title of the first books I read, “All Your Worth”, made me cringe as it makes me think of a misspelled contraction. But it’s not a pronouncement or a discussion of what you are worth. Instead, it is a suggestion that you might be better off if you built some net worth.

The basic breakdown of this book is that you should set up your personal financial situation so that your “must haves”, non-discretionary stuff that you couldn’t cut back on if your paycheck went away for some reason – should be no more than 50% of your income. Savings and other things to build net worth should be 20% of your income. And, voila, now you have 30% for fun money. See, wasn’t that easy? Don’t try to arrange your budget by cutting out the fun stuff, arrange it by cutting out the FIXED NECESSARY stuff. Get a room-mate. Drive an old car. Don’t send your kid to private pre-school. Don’t buy a house you can’t afford on just one salary.

The premise here is that if you stay in these guidelines you won’t have problems with debt or feeling deprived. It’s a workable budget. I like the premise and have loosely followed it my entire life, although we did it slightly differently: I always saved 10%, not 20%, and we more or less set up our finances so that the fixed stuff was covered by my husband’s regular salary and all the intermittent (and largely discretionary) stuff was covered by my intermittent income (combine with occasionally discretionary extra hours).

It’s a nice idea. I liked this book, although I felt a lot condescended to by the crooning voice. (I listened to it as a book on tape as well as read the hard copy, depending on my location as I read/listened to it.)

Then I went on to read her “Two Income Trap”. It’s more the research version that lead to her upbeat positively framed prescription of how to live your life in “All Your Worth”. The “two income trap” is the results of her in depth multi-year research project into why people declare bankruptcy. What went wrong? Why are the middle class in such awful shape?

Her conclusions are that we raised the ante on what we wanted and expected when we had two available workers, and therefore went off and bought higher priced homes and more effective (and expensive) health insurance and paid through the nose for expensive education. And at the end of the day we have less savings and less discretionary spending than ever because more of the expected income is dedicated towards these big three things and now we’re more vulnerable because we need BOTH workers to be working and we’ve doubled the chances that one will be injured or die or be laid off in any given year. At the same time we’ve lost the safety net of having a spare worker that can swing into action and/or provide necessary care-giving and home economics chores. This is the main insight into this book and is an interesting concept worth pondering.

But she doesn’t just illuminate, she pontificates. Her solution is to suggest that women should stay home and live a reduced lifestyle because if something happens then they will have to live the reduced lifestyle anyway.

I boggle at this conclusion at many levels. So, since there’s a 1 in 7 chance of financial failure from this arrangement we should make it a 100% chance of failure by not engaging in it at all? Does this make sense to anyone? And where is the acknowledgement that we are actually spending our money on extra things we WANT? Buying more effective health care, larger more comfortable houses and more specialized education are actually things we WANT! Want bad enough to send the second spouse into the workforce to get!

And why must the WOMEN stay home? We live in a world where men’s skills and strengths are not as valued anymore, where the majority of the good jobs are more in line with women’s skills and education. Where in all of her points does she make the leap that suggests that stay-at-home spouse should be the women? This really bugged me at a very deep level: it’s not just the weird sexism, but also the total lack of grasp of the nature of the 21st century workforce and/or distribution of educational achievements.

A lot of the book is designed to push policy objectives, some of which make sense. I found her to be fairly independent-minded politically – she said things that would piss off both Republicans and Democrats – but even though I largely agreed with her main points (regulate interest rates that banks can charge) I still found myself irked with the conclusion that people are stuck because of the system that leads them astray. It’s like blaming McDonald’s for obesity. Her refrain of “there oughta be a law” started to bug me. (Perhaps, to be fair, it bugged me because of my own personal belief that our political system is completely incapable of effective solutions to any problem and you just waste time and energy by pursuing that. I acknowledge that my cynicism isn’t universally shared.)

I like her compassion. I like her scholarship. I like most of her common sense advice. But in the end I find her solutions to be annoyingly flawed primarily because they ARE so close to the truth. No, you should NOT pledge all your income to fixed expenses precisely BECAUSE stuff will come up that you didn’t expect. I think she would have done well to devote more attention to outlining for people the things that they should attempt to put in their budgets rather than just wave hands and say, “shit happens”. In my experience a whole lot of the shit that happens can be reasonably predicted: cars will need repairs, dogs will need vet visits, Christmas presents will probably be purchased again this year. Intermittent expenses creep up on people and a decent budget accounts for them. She just called for 50% for fixed, 20% for savings and 30% discretionary and done. It has beauty in simplicity, but also stupidity in simplicity.

But, still, it’s a reasonable concept and worth consideration. I like rules of thumbs for people with thumbs, i.e., they do tend to work most of the time.

All in all, “All Your Worth” was a lot more useful than the “Two Income Trap”.

Originally published June 2, 2011 at